Jet Airways seeks loan moratorium to ease cash crunch

Mumbai

JET Airways India has approached banks for a moratorium on loans and has asked for fresh funds to ease a cash crunch, people with direct knowledge of the matter said, adding to signs the carrier's troubles are deepening.

The airline has already grounded about a dozen planes as part of a review of its network aimed at reducing unprofitable domestic routes, said one of the people, who asked not to be identified because the plans aren't public.

The Mumbai-based carrier is also studying laying off more employees in non-core areas, the person said.

The moves show India's biggest full-service carrier - unprofitable in nine of the past 11 years - is struggling for survival as two-cent fares in one of the world's most expensive places to buy jet fuel negate the gains from a surge in domestic passenger numbers.

Indian banks, having suffered setbacks from lending previously to failed Kingfisher Airlines, had earlier rebuffed Jet Airways with their reluctance to extend additional loans to the company.

A representative for Jet Airways couldn't comment immediately.

Jet Airways has the highest portion of short-term debt to total debt compared to its Asian peers at 46 per cent.

For Naresh Goyal-led Jet Airways, it's critical to raise funds as the airline is battling a depreciating local currency, intense local competition from budget carriers and surging fuel prices.

The banks have asked for a detailed action plan from Jet Airways on proposals to sell shares, sources said.

The carrier was one of the first to take off in the early 1990s after India opened up aviation to non-state carriers.

Jet Airways has shared little details of a turnaround plan it announced in August, while the stock has plunged 75 per cent this year, shrinking the market value of the company to about US$325 million.

Among the proposed steps it announced were the sale of the carrier's stake in its frequent-flier programme, capital infusion, paring of debt and cutting costs by as much as 20 billion rupees (S$375 million) over the next two years.

While Blackstone Group and TPG were reportedly in talks for the stake in the loyalty programme, JetPrivilege, the carrier hasn't given any indication it is anywhere close to a deal.

Jet Airways owns 49.9 per cent of JetPrivilege, with the rest held by Etihad Airways, which separately owns 24 per cent of the Indian carrier.

Cash and equivalents dwindled to 3.2 billion rupees as of March, from as high as 20.8 billion rupees three years earlier, signalling the urgency to raise capital.

Net debt was at 73.6 billion rupees as of June 30, 65 per cent of that denominated in dollars, chief financial officer Amit Agarwal said in August.

The local currency's 13 per cent slide against the greenback is making matters worse by threatening to drive up plane financing costs. BLOOMBERG