Jet Air Defers Placement Due To Turbulence

The global downturn in aviation industry seems to have taken its first toll in India with Jet Airways putting its proposed private placement on the backburner.

On the status of the proposed private placement, Jet Airways executive director Saroj K Datta said: "There is no such plan at the moment." Jet Airways, the country's second largest air carrier after the state-run Indian Airlines with a market share of 40 per cent, had announced plans to raise between $150 million and $250 million through private placement of equity shares in July. The issue was supposed to fund expansion and finance debt as well.

But later, the company chose not to go ahead with the issue, at least for the time being, as "the overall situation has changed in the past few months."

The reason for withholding the fund raising programme through the private placement of shares is clear: the worldwide downturn in the aviation industry following the terrorist attacks on the US on September 11.

Should the private placement happen, Jet Airways would have offered some well-heeled outsider for the first time a stake in the country's fastest growing airline. But does it mean that Jet Airways will stop expansion through acquisition of aircraft? Dutta said: "The company is going slow on its expansion plans, but acquisition of aircraft is on." But he declined to elaborate the issue further. "I do not want to talk on the subject right now," he added.

The decision not to go ahead with the issue may have stemmed from the fact that aviation industry has been the hardest hit following attack on World Trade Centre and the unfolding of a chain of events in Asia. Many international carriers, including giants such as United Airlines and Swissair, have either curtailed operations or axed staff strength drastically to stay afloat.

In such an unnerving scenario when governments worldwide are doling out bailout packages for airlines, fresh investment is hard to come by.

Founded in 1993 by Naresh Goyal, Jet Airways has become India's second-largest domestic airline in less than a decade. It is still very active in overtaking Indian Airlines as the largest domestic carrier. Its equity stands at nearly $25 million. Jet now operates 225 flights daily to 44 destinations across the country.

It would like to expand by flying internationally if allowed by the government, and is eyeing destinations in the Gulf, south east Asia, China and other Asian countries.

India's civil aviation policy now allows only state-run airlines Air-India and Indian Airlines to fly abroad. Jet is hoping that the proposed partial privatisation of the state-run airlines will result in a rule change.