DGCA to conduct financial audit of turbulence-hit Jet Airways from 27 August; airline says prepared for it

Mumbai: Aviation regulator DGCA is set to conduct a financial audit of the Naresh Goyal-promoted Jet Airways, amid its fiscal conditions under pressure due to the surging jet fuel prices and low fares, a source said.

The Directorate General of Civil Aviation (DGCA) has already evaluated the financial health of the national carrier Air India recently, besides conducting a special audit of Air Deccan, the source close to the development said.

The financial audit of airlines, which has been conducted in the past too, is done to assess their fiscal health and also ensure that they are not compromising on safety due to financial stress.

"We will conduct the financial audit of Jet Airways from 27 August. A similar audit of Air India has been completed," the source said.

Jet Airways confirmed that the regulator will be evaluating its performance and said the airline is prepared for it.

"The airline is aware of the proposed inspection and is prepared for it. At Jet Airways, safety is of paramount importance," said a Jet Airways spokesperson in a statement to PTI.

The financial audit of Air India was necessitated as the airline has been defaulting on salary payments to its employees, besides grounding a number of aircraft due to payment issues with vendors.

The DGCA has also carried out a special audit of Air Deccan and will soon be conducting a similar exercise on Air Odisha, following orders from the aviation ministry, the
source said.

Representational image. Reuters

Representational image. Reuters

The two carriers, which together have been mandated to fly on 84 routes under the government's regional connectivity scheme, had recently cancelled a number of flights, citing a shortage of pilots and a technical glitch in their aircraft, the source said.

Air Deccan had started operations in December last year while Air Odisha took to the skies in February this year.

The Ahmedabad-based GSEC Aviation and Monarch Networth Capital had last year acquired 100 percent stake in Air Deccan and 60 percent in Air Odisha.

The Naresh Goyal-promoted Jet Airways, in which Gulf carrier Etihad holds 24 percent stake, is grappling with financial woes and its share price has also taken a beating in recent weeks.

On 9 August, the board of directors of Jet Airways deferred the matter of consideration of the unaudited financial results for the June quarter.

Regulator Sebi is looking into Jet Airways' deferring the announcement of the June quarter results following reservations expressed by the airline's audit committee.

The loss-making Air India, which failed to attract any buyer earlier this year, is also facing a cash crunch and is awaiting Rs 980 crore additional funding from the government. It delayed the payment of salaries to its employees for the fifth consecutive month in July.

Airline reassures investors

Jet Airways Ltd sought to reassure investors on Saturday, saying it is meeting its payment obligations to lenders and other dues, such as staff commitments.

The country's biggest-full service airline issued the statement a day after its shares fell to a three-year low following an announcement that it had deferred its quarterly earnings report.

Jet, which is part-owned by Abu Dhabi’s Etihad Airways, was due to report quarterly earnings on Thursday but said in stock exchange filings that its audit committee had not signed off on them “pending closure of certain matters”.

“Our account with all the banks as on date is “Standard”,” Jet Airways said in a statement on Saturday. It said it had not been placed in any special mention accounts by the banks, referring to the name given to accounts for borrowers that are behind in their loan servicing payments.

The chairman of State Bank of India, the country’s top bank and a key lender to Jet, said on Friday that the airline’s loan is on the bank’s watch list and special mention accounts. He didn’t give details.

Jet needs to repay about Rs 30 billion ($436 million) in loans and bonds over the next three years, with a third falling due by the end of 2019, Reuters data shows.

The company has denied suggestions it told staff earlier this month it was running out of money.

On Saturday, Jet said it was working on cost and revenue initiatives to cushion the sharp rise in fuel costs and the depreciation in the Indian rupee.

“We have had scheduled amortizations in the past so many years and the company has met its repayment obligations all the time,” it said.

Airlines in India, the world’s fastest-growing major aviation market, operate on thin margins. Carriers have struggled to stay profitable despite filling nearly 90 percent of seats as they compete fiercely to keep ticket prices low to woo passengers.

--With inputs from agencies


Updated Date: Aug 13, 2018 07:15 AM

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