Jet Tying Up $486m Funds To Purchase 10 Boeings

Jet Airways is close to tying up funds worth $486 million for purchase of 10 Boeing aircraft. Mandate for selecting the lead bank is expected to be taken before this week-end.

Three financial institutions - ANZ Investment Banking, Chase Manhattan and Citibank - are bidding for the deal which is being syndicated out of Singapore. The funds will go towards pre-delivery financing of four Boeing 737-400s and six 737-800s. However, a firm commitment for buying the aircraft will only be made around 60 days before the delivery of the aircraft starts. This practise follows the norm followed in the aviation industry.

 

The first delivery of aircraft is expected to commence from the first quarter of next year. According to airline's officials, the decision to seek foreign loan was made as interest rates were extremely high in India. The domestic airline has already launched syndication for $ 63 million for hire-purchase of two Boeing 737-400s from Malaysian Airline Systems. The deal is a two year 11 month facility with a margin of 1.5 per cent over LIBOR and an upfront fee of 25 basis points.

ANZ Grindlays has syndicated $50.4 out of a total transaction of $63 million. The rest will be retained by the bank on its own books. This is the first cross-border aircraft financing deal for a private sector airline. Jet Airways with a current fleet of 12 aircraft will add four more 737-400s on lease before October 1997. While two of them are being leased from Malaysian Airline System, the rest is being done through General Electric Capital Aviation Services.

In view of the expansion plans, the airline has put on hold its move to launch feeder service. Jet Airways had earlier planned to tie up with state government to start feeder services.

The airline is also exploring possibilities of having marketing and technical tie ups with more foreign airlines.

It already has marketing tie up with British Airways. The entire expansion programme of the airline is expected to be completed by 2002.

The airline notched up a profit of $5 million in 1996-97 while its turnover shot up by 36 per cent to $200 million. There was a marginal dip in its load factor by 3 per cent compared to the previous year. Its load factor for 1996-97 was around 76 per cent. Its foreign exchange earnings also went up by around 24 per cent.

Jet Airways has recently been asked to divest its foreign airline partners' stake in the airline. Both Kuwait Airways and Gulf Air hold 20 per cent each in Tailwinds which is the holding company of Jet Airways. It has been directed to divest stake by October 15.