Jet Airways seeks to rework vendor contracts to cut costs2 min read . Updated: 08 Jan 2019, 12:26 AM IST
Jet Airways is in talks to defer or reduce payments to vendors including aircraft lessors and those providing engineering, spare parts, credit card and airport services
Mumbai: Debt-laden Jet Airways India Ltd. is trying to renegotiate contracts with its vendors as lenders demand a revival plan by month-end from India’s second-largest airline by passengers, according to people with knowledge of the discussions.
The Naresh Goyal-led airline is in talks to defer or reduce payments to vendors including aircraft lessors and those providing engineering, spare parts, credit card and airport services, said one of the people, who asked not to be identified as the discussions aren’t public. Lenders have said any short-term loan to keep the carrier afloat would be based on the plan proposed by Jet Airways and its equity partner Etihad Airways PJSC, according to the people.
The beleaguered Indian carrier missed an interest and principal repayment at the end of last year, giving it about 90 days to clear the dues and avoid being declared a non-performing asset. State Bank of India, the nation’s largest lender, is hosting another round of meetings with the Jet Airways management and vendors on Tuesday to find common ground, the people familiar said.
When contacted, a Jet Airways spokesperson said: “As a company, Jet Airways remains optimistic about outcomes with regard to discussions with its Lenders. The talks are progressing well and we hope to reach a positive resolution at the earliest."
Credit assessor ICRA has cut its rating on Jet Airways’s loans and bonds to D, a score that signifies that borrowers are in default or are expected to be soon. The downgrade came after the airline missed a payment due on December 31 to a consortium of Indian banks led by State Bank of India “due to temporary cash flow mismatch."
The Mumbai-based Jet Airways hasn’t seen a profit in nine of the past 11 fiscal years owing to intensifying fare wars that worsened a cash crunch. The company reported its third straight quarterly loss in November with surging liabilities that signaled a deepening of financial distress. It has fallen behind on payments to staff and lessors.
The carrier has been talking to its foreign equity partner Etihad Airways and a clutch of financial investors to avoid potential defaults to lenders and lessors. It has also sought a short-term loan of 15 billion rupees ($215 million) from State Bank of India for working capital and the bank is currently conducting a forensic audit for possible approval of such a facility.
In the last couple of months, Jet Airways Founder and Chairman Naresh Goyal, along with Etihad Airways Chief Executive Officer Tony Douglas, met Rajnish Kumar, chairman of State Bank of India, multiple times at the lender’s Mumbai headquarters to explore a resolution mechanism.
The Indian carrier’s stock dropped 67 percent last year and was among the worst performers in the S&P BSE 500 Index.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.