Even as the promoters of India’s second largest airline Jet Airways seek for funds to keep the carrier afloat, it cancelled 19 flights on Tuesday following grounding of four of its Boeing 737 aircraft. As per company sources, the groundings have happened as the lessors of these equipment are soon expected to take back possession of the aircraft.
“One aircraft each has been grounded at Delhi, Mumbai, Chennai and Bengaluru airports due to which flights have been cancelled. Some of these 19 flights are even cancelled for tomorrow (Wednesday). However, a resolution is expected by end of this week,” a Jet Airways source said on condition of anonymity.
An e-mail query sent to Jet Airways did not elicit a response till the time of publishing.
Last month, Jet Airways defaulted on payment of interest and principal installment to a consortium of banks led by State Bank of India (SBI) as the airline’s initiatives to raise a Rs 1,500 crore short-term loan in order to meet its working capital requirement and payment obligations failed to materialise on time. Earlier this month, Jet Airways senior management had met SBI officials and the aircraft lessors to apprise them of a revival plan.
The Naresh Goyal-promoted Monday said that it has sought shareholder approval to issue new equity and convert existing debt into equity among other things at a special general body meeting, indicating that banks are likely to convert part of the debt into equity. The company will also seek approval to allow its lenders to nominate directors to its board, the airline had said in a stock exchange filing. The company proposed that its share capital is increased to Rs 2,200 crore.
Trouble mounting for Jet Airways
Jet Airways' financial troubles have started translating into operational concerns with grounding of 4 of its aircraft as lessors want to take back possession of their planes due to payment delays. This led to cancellation of as many as 19 Jet flights from key airports on Tuesday On Wednesday while some of the flights cancelled on Tuesday resumed operations, sources said this was because of unforeseen cancellations at some other airports due to weather conditions that freed up capacity for Jet Airways. In prior cases, where airlines went into a tailspin due to liquidity crunch, the downfall began with non-operational aircraft and flight cancellations. As was with previous incidences of turnarounds, Jet's chance of survival rests on its promoters' ability to raise fresh funds for the airline.
This could be to facilitate conversion of debt into equity by lenders as part of the restructuring plan. The company has sought “the consent of the shareholders…to convert the whole or part of the outstanding under loans, extended/ to be extended by the lenders into shares or convertible instruments or other securities of the company as per the terms contained in the respective loan”, it had said. The EGM will be held on February 21.
State-owned State Bank of India had said the lenders are considering a restructuring plan for the airline. Lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long term viability of the company, SBI had said. The conversion price of debt is likely to be a contentious issue. As per some reports SBI is likely to pick up a 15 per cent stake in the carrier after the airline gets consent for a debt to equity swap. Jet Airways, which is saddled with debt of over Rs 8,000 crore, is searching for a deal that could help mitigate its severe liquidity crunch.
Jet Airways has a fleet of 123 aircraft, including 86 Boeing 737s – including several variants such as 737 MAX 8, 737-700, 737-800, 737-900 and 737-900ER. Other aircraft operated by the airline include Boeing 777, ATR 72 and Airbus A330.