Jet Airways board likely to consider multiple fundraising options today

Ailing airline likely to report third consecutive quarterly loss

Naresh Goyal-controlled Jet Airways at its board meeting on Monday is likely to consider multiple fundraising options to turn around the airline amid a tough operating environment and cash crunch.

“There will be a discussion on the way forward at the board meeting as financial re-energisation is the need of the hour,” a source privy to the development told Business Standard.

According to him, the board would explore the options the company has received so far and weigh each of them.

“As a policy, Jet Airways does not comment on speculation,” said a spokesperson.

The board is also expected to discuss whether the sale of frequent flyer programme will generate enough cash, or if it will need to raise more equity capital.

Sources say that private equity firms and some corporate groups, including the Tata group, which runs two airlines in the country, have evinced an interest to acquire a stake in the struggling carrier and in its loyalty programme.

Faced with a tough operating environment, the airline is bleeding. In two successive quarters, the airline posted a combined loss of over Rs 23 billion and is expected to report another huge loss on Monday.

The board meeting is taking place three days after the resignation of independent director and audit committee member Vikram Singh Mehta. The Jet spokesperson added another member of the board had been nominated by the board to the audit committee, but did not disclose the name.

Fundraising is critical as the airline is delaying salaries and vendor payments. The cash crunch has also led to the grounding of some of its planes and curtailment of schedule.

The airline’s Founder-Chairman Goyal holds a 51 per cent stake, while Etihad Airways controls 24 per cent. At the close of trade on Friday, Jet Airways had a market capitalisation of Rs 29.24 billion.

The airline had sought $150 million loan from Etihad Airways, while it plans to monetise stake in its loyalty programme, and sale and leaseback of wide-body planes are facing challenges.

The concern is primarily around Jet Airways’ financial health as a loyalty programme will not have value if the airline’s survival itself is at stake, the suitors are believed to have told the airline. Jet Airways’ partner Etihad Airways owns 50.1 per cent of the loyalty programme, while the rest of it is owned by Jet.

“Any stake sale proposal in the airline depends upon Chairman Naresh Goyal as he is not keen to dilute his 51 per cent stake and cede control,” said another person in the know.

“Nothing has been finalised so far. However, the board wants to have certainty on various issues which would secure the airline’s much-needed funding,” a source said.

“Immediate interim funding is critical for Jet Airways before long-term investment takes place. Softer fuel prices will be a positive for the airline,” said Kapil Kaul, chief executive officer (South Asia) of aviation consultancy Centre for Asia-Pacific Aviation (CAPA).

In August, CAPA had estimated the airline to post an annual loss of $500 million for 2018-19.

Air pockets

• Fundraising and cost saving will be focus of Jet Airways’ board meeting. The board will take a call on way forward for the airline
• Cash crunch has led to salary and vendor payment delays. Hence, fundraising is critical
• A few private equity firms and Tata group have evinced interest in acquiring stake in the airline
• The airline has posted a combined loss of over Rs 23 billion in two preceding quarters. Expected to post a huge loss for second quarter of 2018-19
• Independent director and audit committee member Vikram Singh Mehta resigned three days before board meet