Jet to return 8 Boeing 737 aircraft to lessors following cash crunch

Jet Airways is returning eight Boeing 737 aircraft to its lessors and delaying induction of new planes following a cash crunch.

The airline has already cut down its network to trim losses. Jet has 123 aircraft in its fleet that has ATR, Airbus and Boeing variants. Around 10 planes are grounded because of want of spares and maintenance. Several of its lessors have served default notices as the airline has been unable to pay lease rents on time. It has delayed salaries and vendor payments after losing over Rs 25 billion in the first half of FY19.

It is learnt that Jet has worked out a settlement with GE Capital Aviation Services (GECAS) and will return the eight 737s over the next few months before the end of lease period. GECAS, however, declined to comment on the issue.

Experts said it made sense for an airline to return some of the planes, as it would help in reduction of lease and maintenance expenses. Jet's aircraft utilisation reduced in the second quarter on a year-on-year basis and could decline further with the network rejig. 

The development comes as Jet is looking to raise fresh capital. Talks are underway with Etihad Airways, which currently owns 24 per cent stake in the airline, for equity, and with State Bank of India, for conversion of debt to equity. 

Jet had ordered 225 737s and has already inducted five of them. In October, the airline had indicated it would induct six more planes by March 2019. The airline was expected to receive two 737s in December. GECAS took delivery of one aircraft and it has not joined the Jet fleet. Another is ready at Boeing's plant at Seattle and is due for delivery in the next few days. But a source said these planes may join the airline next month.

In an email response Jet said it was not prematurely returning the eight Boeing 737s in December. "The airline is committed to create a growth-oriented and sustainable future. We have already inducted five Boeing 737 Max planes in past four months and will continue to receive the balance over the next few months," it said. 

The airline said that the airline had introduced 65 additional weekly frequencies on its domestic and international routes from Mumbai and Delhi and scale of its deployed capacity would remain unaffected. Jet said it was talking to all its partners, including lessors, providing them updates on the various efforts being undertaken to improve liquidity. "Our partners understand the challenges being faced by the domestic aviation industry and have been supportive of the airline's efforts. The airline has relationships with leading global companies for a substantial part of its fleet and enjoys the trust of its partners," the carrier said.

Jet board meets today

The board of Jet will meet on Thursday to discuss steps for revival. The meeting is taking place in the backdrop of State Bank of India-ordered forensic audit of the airline's accounts. The board, which recently saw resignation of Ranjan Mathai and V S Mehta, would discuss growth strategy and turnaround plans, it is learnt. The airline posted huge losses in the two preceding quarters and is working out fund raising initiatives and has held talks with suitors including Tata group, Etihad and private equity firms. BS REPORTER