Jet Airways Ltd has agreed to most conditions set by shareholder Etihad Airways for offering a lifeline to the debt-laden Indian carrier, the Business Standard newspaper said, sending Jet’s shares soaring as much as 18 percent on Friday. Both airlines are set to sign a memorandum of understanding (MoU) within days, which would result in Jet Airways’ founder and chairman Naresh Goyal reducing his stake to 22 percent from 51 percent and stepping down from the board, the report said.
Etihad’s stake would go up to 40 percent from 24 percent and the lenders would convert some of their debt to equity, giving them about 30 percent ownership of the cash-strapped carrier, the newspaper reported. Jet Airways did not immediately provide a comment while Etihad was not immediately reachable outside business hours.
Saddled with debt of about $1.14 billion, Jet Airways has been hit by fierce competition, rupee depreciation and high oil prices. The airline, which controls a sixth of India’s booming aviation market, owes money to banks, vendors and lessors – some of whom are considering taking back aircraft, sources have told Reuters.
Jet Airways is also behind on salary payments to pilots. The airline had agreed to pay the outstanding 25 percent of salary for October and 75 percent of November in January, while the remaining will be cleared in tranches by April.
While it has cleared dues for October, Jet has only paid 50 percent of the salary for November, two sources told Reuters, adding that the pilot’s union is expected to meet with the management next week to discuss the issue.
In a letter to employees on Thursday, Jet Airways CEO Vinay Dube said that the airline’s key stakeholders are “actively engaged” towards finalisation of a resolution plan and an outcome is “very close”.
“Our chairman, the board of directors and your management team are working hard on a balance sheet transaction that will help us eliminate our current challenges,” Dube said in the letter, the contents of which were viewed by Reuters.
“We are working as fast as we can for a successful outcome,” Dube said, asking employees to be patient and warning that it might get tougher before it gets better.
The airline’s directors are expected to discuss the legal formalities of the deal and other details at a board meeting on Feb. 14, the newspaper reported, adding that if Jet agrees to the terms, Etihad is willing to pump in $35 million immediately.