After India’s airline major Jet Airways announced an agreement with Air France-KLM on India-Europe routes, veteran industrialist Naresh Goyal said that the deal will help Jet Airways to improve its cost structure. “We have signed an MoU (Memorandum of Understanding) to be able to carry goods between India & Europe. 106 European, 40 Indian and over 200 North American destinations to come under the agreement,” Air France-KLM said in a statement to CNBC TV18.
“Enhanced cooperation agreement with Jet Airways will be in effect immediately. We currently carry 1.2 million passengers from India to Europe per year, will ramp this up by 40% in 2018,” the company added. The agreement will help Jet Airways to effectively utilise its Boeing 777 aircraft and improve its profitability. It will also help the combined entity to compete with Gulf carriers and expand its market share in India’s international traffic.
Jet Airways is looking to find ways and means to reduce its debt burden. In an interview to CNBC TV18 last week, Amit Agarwal, CFO of jet Airways said, “Jet Airways for the last two-and-a-half years has been focused on the cost reduction drive,” adding that currently the debt in the books stands at Rs 8,000 crore. “Going forward, as you can understand, the upgrade of Moody’s rating is also going to help us for sale and leaseback, in terms of the various aircrafts which we are going to get.”
In the same interview, Amit Agarwal said that the company will be able to reduce its financing costs due to the upgrade. “With the Moody’s upgrade, the new fleet which we are going to buy, the 75 firm orders which we have placed, the aircraft deliveries will start from June-18. We are not taking a debt on balance sheet, rather it will be sale-and lease-back.”