Jet plans swap of high-cost debt

Airline says coming quarters too will see higher maintenance expense on account of overhaul of its aircraft engines

A mix of equity infusion from Etihad, conversion of high cost debt to low cost debt and sale or lease of five widebody A330 planes will help Jet Airways improve its finances, the airline informed sector analysts on Thursday.

It has, as reported earlier, announced its worst ever quarterly loss, of Rs 998 crore. The airline said there were various factors including an increase in fuel costs (Rs 94 crore), maintenance costs (Rs 213 crore), rupee depreciation (Rs 231 crore), increase in landing and parking charges (Rs 38 crore) and aircraft on ground (Rs 123 crore). It said the coming quarters will also see a higher maintenance expense, on account of overhaul of aircraft engines. Its chief financial officer, Ravishankar Gopalakrishnan, said the airline plans to raise external commercial debt worth $300 million to replace its existing high cost loans. The total debt is a little over Rs 11,700 crore, of which Rs 7,300 crore is an aircraft acquisition loan. The rest is working capital and other short-term debt. He said the airline will save around $30 million (Rs 183 crore) in reduced interest outgo after the debt restructuring. The average cost of debt is also expected to reduce from five per cent to 4-4.2 per cent.

Jet is still awaiting approval from the Competition Commission of India for the Rs 2,060-crore equity investment from Etihad Airways. Apart from the equity infusion, Etihad will invest $150 million (Rs 915 crore) in Jet's frequent flyer programme and help raise $150 million worth of external commercial borrowing.

The airline is also looking to sell or lease five A330 planes, idling due to withdrawal from loss-making routes. Selling these will reduce another $200 million (Rs 1,200 crore) from the account book. The airline has 14 Airbus A330s and has leased three of these to Etihad for a short period. Three Boeing 777s have been leased to Turkish Airlines.

Jet said it was yet to receive traffic rights from the government to launch new services to Abu Dhabi and beyond. The enhancement of traffic rights between India and Abu Dhabi is now under scrutiny of the Supreme Court, which is hearing a petition on the issue.

It has sanction from the US department of transportation to code-share on Etihad flights beyond Abu Dhabi and the Brussels-Newark flight.