Jet Airways brings Goldman, BCG on board in revival efforts | Mint
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Business News/ Companies / News/  Jet Airways brings Goldman, BCG on board in revival efforts

Jet Airways brings Goldman, BCG on board in revival efforts

Jet Airways has appointed Goldman Sachs to scout for fundraising and Boston Consulting Group to help improve its operational efficiency

Jet Airways, controlled by Naresh Goyal, needs to urgently raise cash to stay afloat. Photo: Abhijit Bhatlekar/MintPremium
Jet Airways, controlled by Naresh Goyal, needs to urgently raise cash to stay afloat. Photo: Abhijit Bhatlekar/Mint

Mumbai: Cash-strapped Jet Airways (India) Ltd, which is seeking to raise fresh funds and boost operational efficiencies, has appointed Goldman Sachs Group and Boston Consulting Group (BCG) as advisers to achieve these goals, said two people familiar with the matter. The carrier controlled by Naresh Goyal needs to urgently raise cash to stay afloat, as a rally in jet fuel prices and a weak rupee have eroded its financial health. This is primarily because most of Jet Airways’ payments are dollar-denominated like those of other domestic carriers.

Jet Airways, essentially a full-service carrier, also faces stiff competition from budget airlines. It posted a standalone loss of 1,323 crore in the June quarter due to high fuel costs and a foreign exchange loss.

“Jet Airways has appointed Goldman Sachs as investment banking adviser to scout for potential parties to infuse funds into the company," the first of the two people cited earlier said on condition of anonymity as the talks are private. Goldman Sachs would also scout for potential bidders for a Jet Airways stake sale, the person added.

The airline had roped in BCG to help improve its operational efficiency, the second person cited before said on condition of anonymity.

On Monday, Mint reported that Jet Airways’ struggle to raise capital had led Goyal to reach out to Reliance Industries Ltd chairman Mukesh Ambani and chairman emeritus of Tata Group Ratan Tata.

“As communicated earlier, Jet Airways is already engaged in implementing the various elements of its turnaround strategy. Such initiatives typically require inputs from external advisers/specialized consultants," said a spokesperson for the Mumbai-based airline. “While the airline will make due announcements at the appropriate time, it is unable to comment on specific instances due to reasons of confidentiality."

Goldman Sachs declined to comment. An email sent to BCG remained unanswered.

The troubled airline has been working on ways to raise capital to honour its debt obligations and meet operating expenses.

Mint reported on 28 September that Jet Airways had informed overseas lenders led by Mashreqbank PSC that it would raise about 3,500 crore over the next six months through a stake sale in its loyalty programme and infusion of fresh funds into the company. The airline has also told lenders it will shave off costs by as much as 2,000 crore over the next two years.

The management of Jet Airways, which had a 14.2% of share in the domestic market in September, has drafted a turnaround plan for the airline, which includes a cost reduction programme of more than 2,000 crore over two years, a plan to improve pricing, better inventory management, leveraging the Jet Privilege Pvt. Ltd loyalty programme, capital infusion and fleet simplification.

Analysts tracking the sector are, however, cautious about the carrier’s ability to cut costs significantly over the next few quarters.

“The airline has been trying to bring down its non-fuel costs in the past few quarters, but has found only limited success in this endeavour," said an analyst at a foreign brokerage, who did not want to be identified.

The depreciation of the rupee against the dollar posed a stiff challenge for Jet Airways’ plan to reduce its non-fuel costs, said the analyst.

In the past 12 months, Brent crude has gained 34% to $77.55 a barrel, while the rupee has weakened 11.74% against the dollar during the same period.

Last week, India’s largest domestic carrier, IndiGo, reported its maiden quarterly loss since it went public. The InterGlobe Aviation Ltd-run airline plunged to a loss of 652.13 crore in the September quarter from a year-earlier profit of 551.56 crore, on the back of higher jet fuel prices and a weak rupee.

The other listed Indian airline, SpiceJet Ltd, is yet to report its quarterly results.

ALSO READ | Expect IndiGo Q2 results to rub off on Jet Airways, SpiceJet as well

On Monday, Jet Airways shares fell 1.41% to 213.95 on the BSE while the benchmark Sensex rose 2.1% to end the day at 34,067.4 points.

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Swaraj Singh Dhanjal
" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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Published: 30 Oct 2018, 05:27 AM IST
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