India asks indebted Jet’s rivals to take over planes

Bloomberg/Dhiraj Singh

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The proposal involves SpiceJet, led by Chairman Ajay Singh, acquiring as many as 40 of Jet Airways’ grounded planes that are owned by lessors.

Thursday 21, March 2019

(Bloomberg) --India is mulling options to save jobs at Jet Airways India including asking low-cost carrier SpiceJet to consider taking over some of the debt-laden company’s aircraft.

The government has also reached out to other carriers, the person said.

Prime Minister Narendra Modi is keen to avoid the collapse of an airline that employs about 23,000 people, weeks before elections. The need to save jobs at the beleaguered carrier became urgent this week after lenders led by State Bank of India failed to convince Etihad Airways, which owns 24 per cent of Jet Airways, to infuse funds into the Indian carrier.

Jet Airways has amassed about $1.1 billion of debt and has fallen behind on paying loans and salaries. Once India’s second-biggest airline it has been forced to ground almost two-third of its fleet because its inability to pay lessors. Earlier today an Indian government official said they were trying to revive Jet Airways by changing its management but any decision on the carrier’s future will be a commercial decision by the lenders.

Both SpiceJet and Jet Airways operate Boeing 737 planes making it feasible for the budget carrier to fly the aircraft. SpiceJet, which had cash of about $15 million as of 30 September, will initially operate a two-class configuration of business and economy under the SpiceJet brand. Lessors have been in discussion with SpiceJet to take over the planes, the person said.

Operating 40 aircraft will help employ as many as 250 pilots as well as cabin crew, maintenance workers and engineers, the person said.

While such an arrangement could help ease the immediate pressure on Jet Airways, it would not solve its underlying problems, said Jitender Bhargava, an aviation expert and a former director at Air India.

Singh, who is credited with turning around SpiceJet from the verge of closure in 2015, and rivals including IndiGo are potential beneficiaries of Jet grounding most of its fleet.

Lenders to the carrier will make every effort to keep the ailing carrier in operation, State Bank of India (SBI) Chairman Rajnish Kumar said in New Delhi after meeting Finance Minister Arun Jaitley.

“Our aim that corporate debtor which is Jet Airways should not be harmed, we are not concerned with who the promoter is,” Jaitley said.

Lenders are seeking Jet Airways Chairman Naresh Goyal’s resignation and want him to reduce his stake to below 10 per cent. Banks will infuse INR 15 billion as emergency fund to keep the airline afloat once Goyal resigns.

Singh partnered with firms including a unit of JPMorgan Chase in 2015 to rescue SpiceJet, which he had co-founded.

TAGS : Jet Airways , Etihad Airways, Spicejet, Boeing 737, Prime Minister Narendra Modi, SBI

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