Jet Airways to sell six Boeing 777 planes to reduce debt
Jet Airways will also finance the purchase of its 225 Boeing 737 Max aircraft through the sale and leaseback mechanism
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Mumbai: Jet Airways (India) Ltd plans to sell six Boeing 777 planes, a top company executive said, as the cash-strapped airline aims to clear most of its aircraft-related debt, which stands at about ₹ 1,800 crore. “The airline has identified six Boeing 777 aircraft, which it will sell to lessors under sale and leaseback and use the proceeds to pay most of the aircraft debt," Jet Airways chief financial officer Amit Agarwal told analysts at a post-earnings call on Tuesday.
Jet Airways had a net debt of ₹ 8,052 crore at the end of the quarter that ended on 30 September 2018. It had a net debt of ₹ 7,364 crore as of June-end. While 60% of the airline’s debt is dollar denominated, its aircraft debt stands at ₹ 1,800 crore.
Jet Airways has 124 aircraft, according to its website. Of this, it owns 16 aircraft, mostly wide-body planes, while the rest are on sale and leaseback from lessors.
A sale and leaseback is a transaction in which the owner sells the aircraft and then takes it back on lease from the buyer. This kind of deal typically removes the aircraft, and its associated debt, from the carrier’s balance sheet.
Jet Airways will also finance the purchase of its 225 Boeing 737 Max aircraft through the sale and leaseback mechanism. It will also evaluate the sale of 10 remaining aircraft that it owns.
The airline will also phase out 75 older Boeing 737 aircraft by 2025 and take delivery of 15 new Boeing 737 Max aircraft in fiscal 2020, Agarwal said.
In 2015, Jet Airways had placed orders for 75 Boeing 737 Max aircraft. It ordered another 75 earlier this year. In a regulatory filing in June, it had said that it would acquire 75 more, taking the total order size of its Boeing 737 Max fleet to 225.
The airline has already taken delivery of five Boeing 737 Max planes during the first half of the current fiscal, and will take delivery of another six more such planes before the end of the fiscal.
Country’s second-largest airline has a long-term growth projection to increase its capacity by 8-10% a year, on back of the additions of Boeing 737 Max aircraft.
Going ahead, Jet Airways will rationalize its operations in unprofitable routes, the airline’s chief executive officer Vinay Dube said, adding that the airline expects fares to rise in the short term.
Naresh Goyal-led Jet Airways plunged to a net loss of ₹ 1,297.46 crore in the three months ended 30 September, excluding its units, its third successive loss. It had a net profit of ₹ 49.63 crore in the same period a year earlier.
The airline, which had a 14.2% share of the domestic aviation market in September, needs to urgently raise cash to stay afloat as sharply higher fuel prices and a weak rupee have eroded its financial health.
In the past year, Brent crude has gained 13.71% while the rupee has weakened 9.97% against the dollar.
Mint had on 13 November reported that Tata Group is conducting due diligence of Jet Airways as the nation’s largest conglomerate explores the purchase of a controlling stake in the cash-strapped airline. Jet Airways, however, called the news report “speculative".
Agarwal said that while the company doesn’t comment on speculation, the company will inform if “something materializes" in future.
Jet Airways has appointed an investment banker to help raise funds through sale of its stake in its frequent flyer programme Jet Privilege Pvt. Ltd and a consultant to achieve operational efficiencies, Agarwal said.
On Tuesday, Jet Airways shares rose 5.21% to Rs254.65 apiece on the BSE while the benchmark Sensex rose 0.95% to 35,144.49 points.
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