Partner Etihad could come to the rescue of ailing Jet Airways. The two have jointly begun talks with creditors to get easier terms on loan repayment.
The Abu Dhabi-based carrier, Jet Airways’ second-largest shareholder with 24 per cent stake, may raise its current equity holding, taking it to up to 49 per cent, the highest permissible limit for foreign airlines.
“The airlines are taking to banks on cash flow and business plan,” said an industry executive.
The development points to deteriorating financial health of Jet Airways, which has been forced to withdraw dozens of flights to contain losses. It also reminds one of the crisis in 2012 that forced Vijay Mallya-run Kingfisher Airlines out of business.
Days before going belly up, Kingfisher Airlines was cancelling dozens of flights as it did not have cash to buy even fuel and disburse employees’ salaries. Its desperate attempts to raise funds failed miserably eventually, leading to its closure.
Jet Airways has also been finding it tough to pay salaries to its employees and owe as much as $400 million to lessors and vendors. It is also facing the wrath of pilots for non-payment of salaries.
Jet Airways has been in the spotlight in recent days with speculation of promoter Naresh Goyal holding discussions with prospective investors such as Tata Group, Etihad Airways PJSC and a consortium of Air France-KLM and Delta Air Lines. But none of them has so far progressed beyond talks.
Last month, Tata group termed its talks with Jet for acquiring a majority stake as preliminary after remaining silent for a few weeks.
Jet Airways has posted loss for the last three consecutive quarters on rising fuel price and fierce competition in the local market. The airline reported a net loss of Rs 1,261 crore during the September quarter.
As competition in the domestic market remains fierce the situation is unlikely to get better anytime soon. Seeking to bolster its cash flow, the airline on Wednesday reduced its base fares by up to 30 per cent for both domestic and international travel across its network under a limited period offer.
Meanwhile, aviation regulator DGCA has approved the flight schedule of Jet Airways for five months. The watchdog monitors operations of an airline through a systematic procedure of surveillance, regulatory audits and spot checks.