News
Jet Airways is seeking US$400 million in fresh capital
August 17th 2018
There is never a shortage of news and speculation concerning India’s Jet Airways. Read More »
For weeks, Indian local media have reported that the airline is facing a severe liquidity crunch. According to the reports, Jet Airways only has enough cash to sustain operations for up to eight weeks.
This week, India’s Economic Times reported that Jet Airways is in talks with several private equity funds, including Blackstone and Indigo Partners, to collect up to US$400 million through a new share issuance.
The carrier’s market capitalization is US$450 million at this stage, so issuing US$400 million fresh shares will lead to a significant dilution of current shareholders’ equity.
Jet Airways founding chairman, Naresh Goyal, retains a 51% stake in the airline, Etihad Aviation Group holds a 24% stake and the remainder is publicly held. Etihad Airways is fighting for its own survival and is thus unwilling to inject additional capital into Jet Airways. Having said that, both Etihad and Jet have told Orient Aviation they are happy partners and no equity changes are planned.
Bringing Indigo Partners on board would be an interesting move. The U.S.-based private equity firm has large stakes in low-cost carriers Frontier Airlines, Volaris, JetSMART and Wizz Air. Indigo Partners is still lacking an Asian airline and a full-service carrier in its portfolio. Jet Airways could fill both those gaps.
Jet Airways is ferociously denying reports that the airline is on the brink of collapse. Last week, it issued a statement saying it rejects “speculative comments” from third parties “who are making deliberate attempts to undermine Jet Airways’ transformation efforts”.
Unfortunately, it did not help that the airline subsequently – and indefinitely – postponed the release of its first quarter operating results. In a stock exchange filing, Jet Airways said “the audit committee did not recommend the said financial results to the Board for its approval, pending closure of certain matters”.
Local media reports also suggested that Naresh Goyal has told shareholders he felt “guilty and embarrassed” to have “lost” their money.
Jet Airways has been struggling financially for years. For the last financial year ended March 30, the airline announced a net loss of INR6.36 billion (US$90.3 million), down from an INR15 billion net gain the previous year. Jet Airways has been posting overall losses in nine out of the past eleven fiscal years.
Nevertheless, the Mumbai-headquartered carrier has continued placing large aircraft orders. This year, the airline increased its order backlog for the B737 MAX series to 225 aircraft.
