Jet Airways plans to sell all its wide-body Boeing 777 and Airbus A330 planes to raise cash and retire a portion of its Rs 12,000-crore debt.
Jet Airways has a fleet of 117 planes, a mix of turboprop, narrow-body and wide-body planes. It flies the Boeing 777s and Airbus A330s to London, Paris, Brussels, Newark, Toronto and Hong Kong.
While the airline says it has no plans to reduce its international operations, the management is exploring both an outright sale and sale & lease back of its wide-body planes to raise cash. The airline has 22 wide-body planes (10 Boeing 777s and 12 Airbus A330 aircraft). Six A330s are on operating lease and the remaining 16 are on a financial lease.
Currently, Jet Airways does not fly all its wide-body planes. It only uses five Boeing 777s and seven A330 aircraft and has leased the remaining 10 aircraft to Etihad Airways and Turkish Airlines. The Boeing 777-300ERs planes being flown by Jet Airways service have been manufactured in 2007 and 2008.
International Bureau of Aviation (IBA), a consultancy firms which carries out aircraft valuation puts the current market value of a single Jet’s 777 aircraft from $89.8 million to $97 million (Rs 550-600 crore) Similarly, IBA values a single Jet’s A330-200 plane, which entered service in 2008 at $58.4 million (Rs 360 crore).
Aviation consultant Ascend has pegged the current market value of a single Jet Airways Boeing 777s from $81.2 million to $86 million (about Rs 500 to Rs 530 crore) and $42.95 million to $45.6 million (Rs 265 crore to Rs 280 crore) for a single A330s.
“Jet Airways is evaluating several options to optimise the fleet inventory in context of our ongoing network evaluation to drive sustainable profitability,” said an airline spokesperson.
While the airline has put on the block all its wide-body planes, the number of aircraft it will actually sell or take back on lease (in a sale and lease back deal) will depend on the price it receives for them. It will also depend on the airline’s network strategy and the airline might even consider leasing planes from other airlines to support its network growth.
Last July, the airline had announced a three-year business plan to return to profitability by 2017. The airline had then said it would explore sale of some of its wide-body aircraft and restructure its debt, besides removing some complexities in its fleet, product and brand. It posted a record Rs 3,667 crore loss in FY14. It made a consolidated profit of Rs 3 crore in the third quarter of FY15, the first quarterly profit in December 2012.
“Jet Airways’ plan to put on sale its Boeing 777s is perplexing. The Boeing 777 is its workhorse on high-density routes and is also an in demand aircraft. What is the compulsion to sell the plane now?” asked Devesh Agarwal, editor of aviation blog, Bangalore Aviation.
“Over the next 10 years, a large number of new technology aircraft will enter the service such as A330neo, 787-10 and 777x. Fuel pricing will be the key to the success of longer-range aircraft; So a drop in fuel price will keep the older Boeing 777s and A330s to fly for longer period. We expect Boeing to lower the 777-300ER aircraft pricing in order to bridge the gap between that last orders (of 777-300ER) and the first deliveries of the 777x plane which is due to enter service in 2019,” said IBA’s Commercial Director Owen Geach.
"The 777-300 type aircraft is coming towards the end of its production run at the end of this decade or early in the next as Boeing moves production to the next generation 777-9X. And Boeing has significant availability of 777-300 aircraft in the market in the intervening period which can compete with aircraft being offered by Jet Airways. There are also at least 15 777-300ERs currently operated on lease with airlines that are scheduled for return over the next 24 months and these will thus potentially also be available to new operators. The A330s are a little different as there are already almost 20 aircraft available for sale or lease before taking into account Jet Airways aircraft. So there the supply dynamic is different. Airbus recently cut new production rates for the A330 type planes as they recognised the challenge of demand," said Rob Morris, head of consultancy, Ascend.