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Cash-strapped Jet Airways in talks with many 'interested parties' for stake sale, capital infusion

After media reports on Monday that Tata Sons is conducting due diligence on Jet Airways as it explores the purchase of a controlling stake in the cash-strapped airline, the cash-strapped airline said on Tuesday that it is at various stages of discussions with multiple "interested parties" for capital infusion and partial stake sale in its loyalty programme Jet Privilege.

The Naresh Goyal-run airline is looking for investors to tide over the liquidity crisis, which has resulted in delayed payments to some vendors and salaries to a section of its over 16,000 employees.

"We are working towards various liquidity initiates to bridge the gap. We have engaged the services of experts to help in the turnaround plan and enhance liquidity," deputy chief executive and chief financial officer Amit Agarwal told analysts in a post-earnings con call Tuesday. These measures include sale of aircraft, monetization of its stake in Jet Privilege and fresh equity infusion, the
official added.

"We are actively pursuing both the transactions and are currently at various stages of discussions with multiple interested parties for both part stake sale in Jet Privilege and fresh inclusion of equity into the airline," Agarwal said.

He said the company has hired investment bankers and consulting firms to carry out these tasks, adding, "six wide-body Boeing 777s have already been put on sale."

On Monday, the airline reported its third consecutive quarterly loss at Rs 1,261 crore in three months to September, roiled by higher fuel cost that soared 59 percent, a steep rupee fall that led to a seven-fold spike in forex loss as well as airline's inability to increase fares in the face of excess capacity and stiff competition.

On a standalone basis, the Naresh Goyal-promoted airline, which has been facing cash crunch for some time leading to delayed payments, reported a net loss of Rs 1,297.46 crore against a profit of Rs 49.63 crore a year ago.

Rating agency Crisil had recently projected that domestic airlines would report a combined loss of over Rs 7,348 crore (at pre-tax level) due to higher fuel cost and steep fall in the rupee this fiscal.

Airlines are battling for market share over profitability by dumping capacity into the market at unprecedented levels enabled by fare regimes that are unsustainable, chief executive officer Vinay Dube said.

Representational image. Reuters.

Representational image. Reuters.

"The rupee fell by about 10 percent during the quarter over the same period last year while Brent jumped almost 50 percent. However, instead of witnessing an increase in fares to recover cost, the industry fares and yields are in fact down," he said. Such a low fare regime is not sustainable for either the industry or the consumer in the medium-term, he said adding, "it is imperative that fares rise in the short-term."

Jet, which has about 16,000 employees, including 2,000 pilots, has been facing a cash crunch due to which it has been delaying salaries of its employees. The airline has been delaying salary disbursement to its senior management, pilots and engineers since August. While it has paid 25 percent amount of the September salaries to these categories of staff on 25 October, the remaining 75 percent of the amount is yet to be paid. Besides, there are salaries for the month of October.

Agarwal admitted that the airline has delayed payment to vendors and a section of the employees, but quickly added that it is current on payment obligations to banks, fuel companies and airport operators as well as statutory dues.

Acknowledging that the employees are not happy with salary delays, Dube said, "almost 15 percent employees have not been receiving their salaries on time and I am sure they are less than happy. But let me add that our employees are extremely committed and dedicated."

Net debt during the quarter rose by Rs 690 crore to Rs 8,052 crore over the June quarter, while gross debt came down by Rs 200 crore to Rs 8,411 crore from what it was in the year-ago period, Agarwal said, adding 60 percent of debt is dollar-denominated. "Since a large part of the debt is dollar-denominated, the rupee depreciation has impacted our closing debt balance by Rs 530 crore," he added.

--With PTI inputs


Updated Date: Nov 14, 2018 10:22 AM

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