News: Problems grow at Jet Airways

March 7, 2019

At least 28 aircraft operated by Indian carrier Jet Airways are currently grounded, although the Directorate General of Civil Aviation says that only 70 out of 120-strong fleet are operational.  The airline has also defaulted on lease payments and employee salaries are overdue.  Local media report that Jet is operating only two thirds of its normal schedule and this is impacting its ability to turn the situation around.

 

Jet Airways has been struggling for some time.  Its problems have been caused by high taxes, a weakening currency, and aggressive fare competition.

 

Jet Airways is struggling with a quarter of its fleet grounded and its schedule slashed by a third.  (Timothy Dauber)

 

The airline's largest creditor, State Bank of India, has backed a rescue plan intended to ensure the long-term viability of the company which involves cash injections and changes to the board.  The deal also involves restructuring the business, and selling and leasing back aircraft that are owned.  However, some lessors have increasingly demanded that their assets are grounded due to payment defaults. 

 

The Indian authorities require airlines are majority owned and controlled by local interests.  The SBI plan requires clearance from the central bank and the DGAC, as well as the airline’s board and all of its creditors.  Etihad Airways, which holds 24% of Jet's equity, is insisting that Jet's chairman Naresh Goyal steps down and cuts his stake from 51% to 22% before it provides a cash injection of $35m and buys more shares.  Etihad's board meet later this month to decide whether to continue with its involvement in the restructuring.  Meanwhile  Goyal has said that he is willing to invest 7bn rupees ($98.48 million) in the airline but wants to retain a 25% stake in the carrier.  

 

Jet Airways is the largest domestic carrier in India.  It operates a mixture of domestic and international services with a fleet that includes ATR-72s, Airbus A330s, Boeing 737NGs and Boeing 777s.  It has also committed to take 205 Boeing 737MAX aircraft.  Last year the airline flew more than 200,000 services and carried 27.2m passengers.  It has made losses in seven of the last nine years.  IndoGo has the largest share of Indian domestic traffic although Jet has almost one sixth of the market - Spicejet, Air India and Go Air are the other major players.

 

It is reported that the problems at Jet Airways must be resolved before the end of June in order to avoid a shutdown.

 

Text c The Aviation Oracle

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