India's second-largest carrier, Jet Airways, which has encountered turbulent weather in recent weeks, is evaluating various options to raise funds, but has denied reports of a planned stake sale or monetising of its frequent flier programme.
“Jet has been evaluating various funding options to meet its liquidity requirements on priority. The recent news on stake sale by Jet as well as any move to monetise its investment in the frequent flier programme—Jet Privilege—is purely speculative,” the airline said.
The Naresh Goyal-led airline has been under the gaze of regulators and stock exchanges in recent weeks. The country's top exchanges, BSE and NSE, still seem to be unconvinced over the explanation by Jet Airways for its delay in announcing first quarter earnings. Furthermore, the stock exchanges also sought replies from the airline seeking responses on reports that it was planning to raise $400 million by selling a stake to private equity players.
Questions have arisen over different responses Jet Airways gave in the days following the delay in the earnings announcement. The airline was scheduled to announce its results for the quarter ended June 30 on August 9. A board meeting of the airline was scheduled for the same on that day. However, Jet Airways informed that “the audit committee did not recommend the said financial results to the board for its approval, pending closure of certain matters,” and the company deferred the matter of consideration of financial results.
Subsequently, a day later, Jet Airways had a different response to exchanges.
“The management informed the audit committee that they needed more time to finalise the accounts; the audit committee on their request agreed to accord them further time to finalise the same and directed that the finalised accounts be placed before the audit committee thereafter,” it said.
“There is clear contradiction between the two submissions i.e., outcome of board meeting and response to exchange query with respect to disclosure verification. You [Jet Airways] are requested to clarify on the relevant facts in this matter,” said the Bombay Stock Exchange.
A similar response was sought by the National Stock Exchange too.
“We have noticed a difference in your [Jet Airways] response dated August 10, 2018. Hence kindly clarify whether the management sought extension from audit committee as per your response dated August 10, 2018 or audit committee did not recommend the said financial result to the board as per your announcement dated August 9, 2018,” the National Stock Exchange has asked.
In its response, Jet Airways says its quarterly earnings were deferred mainly due to certain additional time requested by the management to its audit committee to complete its accounts, which was accepted.
Apart from the contradictory responses, the exchanges also want Jet Airways to disclose the fresh date on which it will announce the results.
Jet Airways, facing a cash crunch, had reported a Rs 1,040 crore consolidated loss in the January-March quarter. For the year-ended March 31, 2018, it had a negative net worth of Rs 7,242 crore.
Kapil Kaul, CEO, South Asia, at Centre for Aviation (CAPA), has said recapitalisation is critical for Jet Airways.
Ambiguity also remains over the status of the loans given to the airline by state-owned lenders, with a possibility that some loans may have been moved to default status briefly last year, something Jet Airways has denied.
“All our accounts with lenders are standard, and there is no overdue in any of our accounts. There have been no delays in discharging any of our loan obligations to any of the lenders... The company's account has been consistently standard over the last several years,” Jet Airways said.
A statement prepared by Central Repository of Information on Large Credits (CRILC) in circulation, placing Jet Airways under default status by some of the banks on certain dates was only due to technical errors, which has subsequently been rectified in the system, the airline added.
The Indian aviation sector has been hit by a double whammy of a surge in crude oil price this year and a sharp depreciation in the rupee. Even as traffic growth has been steady, full service carriers like Jet Airways have also been hit because of limited pricing power in a highly competitive market. The airline has also lost market share to low-cost rivals in recent years.
Earlier this month, it was reported that Jet Airways had asked its employees to take a salary cut, else it would not be able to fly beyond 60 days.
While Jet Airways had termed the report on its sustainability as “factually incorrect”, CEO Vinay Dube had stated that the dialogue with employees was to apprise them of the challenges being faced by the aviation sector and the company in particular and to enlist their full support and cooperation for realising necessary savings.
Jet Airways has placed orders for 225 Boeing 737 Max jets, which are more fuel efficient, which the company is banking on to lower expenses as the aircraft start entering service. Eleven of these new planes are to be inducted by the airline the year ending March 2019. That coupled with its participation in the government's UDAN scheme in the country and multiple strategic alliances with leading carriers overseas, has it uniquely positioned, Jet Airways said.
Jet Airways shares were down 2 per cent at Rs 280.90 on the BSE on Tuesday. The stock has nosedived over 65 per cent in 2018.