Jet Airways has been the subject of grim rumours in the past week, even as it battled tailwinds owing to ballooning debts, falling market share and increasing fuel prices. The latest report suggests the carrier will need a huge cash infusion immediately to stay afloat.
The Naresh Goyal-promoted airline needs as much as Rs 3,500 crore in cash immediately, Bloomberg reported, citing aviation analysts. Besides, the company will also need to restructure a whopping $400 million in debts immediately, the report said.
On Thursday, Goyal said he was embarrassed over the troubles the airline was going through. After the company deferred reporting quarterly results, Goyal said he was feeling guilty about investors' pain. The market freefall continued on Friday, with the stock falling another 15 percent.
There have been reports about Jet Airways asking staff to take up to 25 percent cut in wages. However, the management denied it was mooting a pay cut. Reports had also surfaced that Jet was firing staff, which were also rubbished. The Jet management has also reiterated that they have met all loan repayment commitments so far, adding that refinancing options were being explored.
However, the latest Bloomberg report cites analysts saying that the airline company's default risk was the highest in close to three years. The chances of defaulting on loans in the next 12 months is the highest since October 2015, Bloomberg's Default Risk model data showed.
Analysts quoted by Bloomberg said Jet Airways will have to resort to drastic measures to come back from the brink. "They can do that by possibly doing sale and lease-back of their widebodies and getting costs down, especially in the domestic market ... If they can recapitalize and restructure, then may be in a couple of years, they can be sustainable," said Kapil Kaul, South Asia CEO for CAPA Centre for Aviation.
Share freefall
- Jet Airways shares plunged 15 percent Friday
- The shares have fallen 66 percent so far this year
- This compares to an 11 percent rise in the Sensex in the corresponding period
- The freefall makes the airline stock the worst performing in the Asia Pacific region
Jet Airways -- debts, losses, other key facts
- Jet Airways has a net debt of 81.5 billion rupees ($1.2 billion)
- In the year ended 31 March, the airline reported a loss of Rs 636.45 crore. Peers such as SpiceJet and Indigo had reported impressive profits during the same period.
- Most of Jet's debts are dollar-denominated and hence a continued fall in the rupee has worsened the debt problem.
- Abu Dhabi's Etihad Airways owns 24 percent in Jet Airways. It was reported earlier that Etihad was interested in taking a controlling stake in Jet Airways, but Naresh Goyal, who holds 51 percent, had declined the offer. It remains to be seen if Etihad will raise its stake in the current context.
- Jet Airways wants to raise loans in the markets but banks have insisted on a turnaround commitment. Loans are unlikely to be approved without significant cost reduction.
- Apart from bloated costs, surging fuel prices and a weaker rupee are hurting Jet Airways. The other reasons cited by senior management in parleys with the staff are an erosion in market share in recent years and the inability to expand into other markets.
- The rise of Indigo and the launch of Air Asia ate into Jet's formidable market share.
- Naresh Goyal launched the airline in 1993. Jet became a listed company in 2005.
- After starting operations with four Boeing aircraft, Jet Airways became an international carrier in 2004 when it started flights to Colombo.
- Jet Airways acquired rival Sahara Airlines in 2007.
- Jet Airways survived a major scare in 2008, when global airline majors faced headwinds. Jet let nearly 2,000 employees go and restructured the operations to stay in business.
- In its 25 years of operations, Jet Airways aircraft have not been involved in any airline accidents where lives were lost.
