Ailing Jet Airways now has no money to pay interest to debenture holders, owing to severe liquidity constraints.
The airline, which had a gross debt of around Rs 7,654 crore at the end of December, has reported losses for subsequent quarters and has seen at least 40 of its planes grounded due to non-payment of lease rentals. This has in turn hurt operations, forcing the full-service carrier to suspend some of its operations, including at Abu Dhabi airport.
“The payment of interest due on March 19, 2019 to the debenture holder will be delayed owing to temporary liquidity constraints,” Jet Airways said on Monday.
This is the second time that the airline has not been able to service its debt. The airline had said on January 1 that the payment of interest and principal instalment due to the consortium of Indian banks had been delayed due to temporary cash flow mismatch.
Earlier on Monday, the Naresh Goyal-promoted airline said that additional four aircraft had been grounded due to non-payment of amount outstanding to lessors.
“The company is actively engaged with all its aircraft lessors and regularly provides them with updates on the efforts undertaken by the company to improve its liquidity,” Jet said.
For the nine months ended December 31, 2018, Jet Airways reported a net loss of Rs 3,208 crore on a revenue of Rs 18,320 crore.
On February 14, the board of directors of Jet had approved a bank-led provisional resolution plan (BLPRP), which includes fresh equity infusion, debt restructuring and sale and leaseback of planes. The BLPRP estimates a funding gap of Rs 8,500 crore, including proposed repayment of aircraft debt of Rs 1,700 crore.
Currently, Goyal holds 51 per cent stake in the airline, while the Gulf airline, Etihad, holds 24 per cent. Goyal has reportedly agreed to pare down his stake to around 22 per cent so that a bailout can be secured. Goyal also wrote to Etihad CEO Tony Douglas last week, seeking an immediate funding of Rs 750 crore.
However, there has been no decision from the Gulf airline so far. The Abu Dhabi-based airline is itself not in a great health. Etihad reported a loss of $1.28 billion in 2018.
A meeting of the board of directors of Etihad last week remained inconclusive. Goyal’s demand for the exclusion of the perpetuity clause is reportedly a contentious issue.
“Jet Airways, its principal shareholders including Etihad Airways, and key financial stakeholders are working towards the finalisation and subsequent implementation of the BLPRP, to ensure that the carrier emerges as a financially strong and resilient airline,” Jet and Etihad said in a joint statement on February 25.
However, the clock is ticking and troubles continue to mount each passing day that a final deal is not done. The stock has plunged near 15 per cent in 2019. As the cash crunch rises, its salaries to employees get delayed and each day that it can’t pay back its lessors, air craft continue to be grounded.
“Delays in finalising Jet Airways’ recovery plan will impact the turnaround process, significantly increasing its cost and complexity,” aviation consultant CAPA India said.
Jet Airways had highest share of international traffic to and from India and therefore if its international operations are further constrained, summer travel plans could be severely impacted because of limited capacity and high fares, it added.
