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Last Updated : Apr 15, 2019 07:39 PM IST | Source: Moneycontrol.com

How much will Rs 1,500 crore from lenders help Jet Airways?

The company spends Rs 7,000 a year on fuel alone

Prince Mathews Thomas @prince0879

Even as Jet Airways' management is meeting with lenders in the hopes of securing emergency funds to keep the airline afloat, industry observers point out that the expected infusion of Rs 1,500 crore 'is not a massive lifeline'.

But it may be just enough to keep the airline flying, while lenders sort through the suitors and get a new owner for the carrier.

Etihad Airways, former Chairman Naresh Goyal, TPG Capital and IndiGo Partners have put in their expression of interest (EoI). Sovereign fund NIIF, which doesn't need to submit an EoI, is also expected to put in a bid for a stake buy.

The final bids are expected to come in by April 30, and to survive till then, Jet Airways needs urgent cash.

The airline employees haven't been paid (pilots and engineers for three months), it's flying only six aircraft and has suspended international operations.

The banks, led by State Bank of India, had promised to infuse Rs 1,500 crore, but have invested around Rs 250 crore. Some of the banks are said to have been reluctant to lend the airline more, given its already high exposure. Jet Airways owes banks over Rs 8,000 crore.

"Rs 1,500 crore is not much, given that Jet Airways' fuel bill for a year is about Rs 7,000 crore," says Nitin Sarin, Managing Partner of Sarin & Co, which specialises in aviation law.

Apart from the fuel bill, the airline in 2018-19 spent Rs 2,316 crore on rentals, Rs 2,375 crore on maintenance, Rs 2,371 crore in landing and navigation and Rs 2,995 crore on salary costs. This brings its average monthly spend on these overheads to about Rs 1,400 crore.

"It is true that the company is operating a skeletal operation, so its expenses would be lower than last year. But it does have to pay lessors, vendors and banks and clear arrears," added an executive from the industry.

The airline has defaulted on its payment schedule to banks and lessors. And oil marketing companies have repeatedly stopped fuelling the airline's aircraft due to bill arrears.

Flying ATRs a smart move

Sarin points out that the airline has done the 'smart thing' by keep its ATRs flying. "This allows them to continue with minimal operations and keep their licence," he stated.

He recalled how the regulator DGCA had initially suspended the air operator permit, or AOP, of Kingfisher Airlines, and then cancelled it.

By flying seven aircraft and doing about 50 flights a day, Jet Airways has managed to hang on to its AOP.
First Published on Apr 15, 2019 12:24 pm
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