Etihad Airways, the second-largest shareholder of debt-laden Indian carrier Jet Airways, is reportedly holding talks with the airline and its bankers on a possible rescue plan, Reuters quoted two sources aware of the matter as saying.
According to the report, executives of Etihad and Jet Airways have met with officials of the State Bank of India (SBI) in Mumbai in recent days to discuss ways to address its cash flow issues and
evaluate the carrier's future business plan.
Reuters quoted one of the sources as saying that Etihad is also considering investing fresh funds in the airline if it can agree on the structure, but so far no deal has been finalised.
The business plan presented to bank officials reportedly includes details on Jet's network and fleet expansion target for the next three to five years as well as revenue and cost projections.
In desperate need of fresh cash
One of the Reuters sources said that by mid-January the airline could see some money coming in, adding that Jet Airways does not have the liquidity to honour all its payments and expenses but is paying its statutory dues like taxes.
As earlier reported by CargoForwarder Global, India's largest full-service airline by market share, is in desperate need of cash. The 25-year-old carrier, founded by Naresh Goyal, has outstanding dues of about US$400 million which it mainly owes to lessors and vendors. Its total debt is about 80.52 billion rupees (US$1.14 billion) as of Sept. 30.
No cash, no fuel
Earlier reports disclosed that Jet Airways has delayed salary payments to pilots and top executives and last week it announced that it will cancel about 40 flights to Persian Gulf destination including Dubai, Muscat, Doha and Abu Dhabi from various Indian cities. The airline said it was attempting to move out of uneconomical routes to more profitable ones, The Times of India reported.
Meanwhile, some domestic airport operators and fuel suppliers have put Jet on cash-and-carry, meaning it must pay cash in advance for services rendered.
In addition, the airline is looking at reducing some airport and support staff and it has also deferred the delivery of at least two aircraft to January from November-December.
Jet is heading into an unknown future
While Etihad has a 24% stake in Jet Airways, it has lost money in other airline ventures such as Alitalia and Air Berlin and sources indicate that the Abu Dhabi-based carrier may be wary of loosening the purse strings again.
At the same time, with tighter lending norms and a liquidity crisis in India, bankers may be hesitant to lend more to the financially-troubled airline.
Last month, CargoForwarder Global reported that Jet Airways founder and chairman Naresh Goyal held discussions with India's largest conglomerate Tata Group about a possible merger of Jet Airways with Vistara, Tata's joint venture carrier with Singapore Airlines. In earlier discussions, the Tata Group indicated it wanted to buy a controlling stake in Jet Airways and was open to Goyal retaining a minority stake with Etihad staying on as a minority investor.
Though initially Tata Group appeared to be the frontrunner, Goyal now appears to be keener to strike a deal with Etihad.
Nol van Fenema
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