Jet Airways’ future hinges on bank debt settlement

Stuck in a quagmire of losses resulting in 42 of its fleet of 114 aircraft being grounded and some 200 flights canceled a day, India’s Jet Airways faces a grim future if stakeholders do not agree to a plan resolution to convert growing debt into equity. The airline owes more than $ 1.25 billion, of which $ 300 million came from the government-owned State Bank of India (SBI). The approval of the bank-led interim resolution plan “is an important step” towards the rescue of the country’s oldest private carrier, Jet Airways chairman Naresh Goyal said in a statement late last month.

Jet Airways sellers have called a meeting on March 11 with the carrier and representatives of minority shareholder Etihad Airways to determine and decide on the way forward. “It’s hard to say if there will be any closure,” airline official said AIN.

“The situation is very critical and any further delay will create challenges for Jet,” said Kapil Kaul, CEO of the CAPA Center for Aviation for India and the Middle East. As revenues continue to fall and costs rise, “the gap is widening,” he added.

At least seven aircraft lessors have claimed pending payments for lease and maintenance reserves since October. “As we get closer to the deadline, towards the end of the year when Jet will likely have to file for bankruptcy, lessors will want their planes to leave India on time,” said one lessor.

At a recent CAPA summit in Delhi, Air Lease Corporation Executive Vice President Kishore Korde expressed concern that India had yet to fully implement its participation in the Cape Town Convention. “The proof is in the pudding,” he said. “You never know how the application scenario will work. The Cape Town Convention exists as a means of facilitating the financing of aircraft by offering creditors a set of internationally recognized rights in the event of default or insolvency of the debtor.

“Insurance companies also stand to lose a lot as unused planes require more maintenance as they deteriorate over a longer period of time,” said Amit Mittal, director of Delhi-based consulting firm AeroIntellect Aviation Capital.

As if to reassure, the International Air Transport Association said earlier this year that it is “closely monitoring the situation of Jet Airways … as the airline is on its bill settlement plan.”

“Jet Airways continues to be in good standing with IATA’s settlement systems,” said Albert Tjoeng, IATA official. AIN. “We are in regular communication with the airline to review its position. ”

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