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Boeing comes to Jet Airways rescue
August 24th 2018
It is widely known Jet Airways faces a severe liquidity crunch. Read More » According to reports, the airline only has enough cash to sustain operations for up to eight weeks. At the same time, India’s corporate affairs ministry said on Tuesday that it was probing the carrier for siphoning off funds.
Last week, Orient Aviation reported Jet Airways was in talks with several private equity funds, including Blackstone and Indigo Partners, to collect up to US$400 million in a new share issuance. The carrier’s market capitalization is US$450 million at this stage so issuing US$400 million in fresh shares would lead to a significant dilution of shareholders’ equity.
It appears this may no longer be necessary, at least not on such a large scale. This week, India’s Business Standard reported Boeing has agreed to return a portion of the pre-delivery deposits Jet Airways paid when it ordered the first 75 of its 225 B737 MAXs on order. It goes without saying Jet Airways would need to return the funds to Boeing at a later date.
Aircraft lessors, including SMBC Aviation Capital and GECAS, are reported to have agreed to concessions to support Jet Airways through its stressed cash situation. Also, Airports Authority of India has extended the carrier’s credit terms and conditions.
Jet Airways has vehemently denied it is on the brink of collapse. Earlier this month, it issued a statement that rejected “speculative comments” from third parties “who are making deliberate attempts to undermine Jet Airways’ transformation efforts”.
Unfortunately, the airline subsequently 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”. This week, the carrier said its board would meet on August 27 to deliberate on the quarterly performance.
Jet Airways has been struggling financially for years. For the financial year ended March 31, the airline announced a net loss of INR6.36 billion (US$90.3 million), down from an INR15 billion net gain for the previous year. Jet Airways has posted losses in nine out of the last eleven fiscal years.
On Tuesday, India’s Business Standard reported India’s Ministry of Corporate Affairs was investigating the airline allegedly for using bank loans for purposes unrelated to its operations.
