India’s biggest full-service carrier, Jet Airways Ltd, has made several attempts to save the company from a crippling pile of debt. A few days ago, it approved a rescue deal which will make its lenders its largest shareholders and fix a near Rs 85 billion funding gap.
Jet Airways said late on Friday that its shareholders have okay-ed a plan to convert existing debt to equity, paving the way for the Jet’s lenders to infuse funds and nominate directors to its board.
Jet’s board last week approved a plan by lenders, led by State Bank of India, for an equity infusion, debt restructuring and the sale or sale-and-lease-back of aircraft. This development will mean the lenders will have a bigger holding than any other shareholder.
Government-owned State Bank of India (SBI) and Punjab National Bank (PNB) have agreed to provide Rs 500 crore emergency funding for Jet Airways, subject to others in the consortium of lenders not objecting.
Presently, chairman Naresh Goyal owns a 51 per cent stake and Abu Dhabi’s Etihad Airways owns 24 per cent.
Minority shareholders did raise questions on the company’s proposal to allow lenders to take control of the debt-laden airline. “Pumping in public money into a debt-laden airline may be risky,” said a minority shareholder, who was present at the extraordinary general meeting (EGM) held on Thursday. The meeting lasted 45 minutes. It was not attended by the Chairman and Promoter of Jet Airways, Naresh Goyal. Gurang Shetty, whole-time director, and Amit Aggarwal, deputy CEO, addressed the shareholders.
Jet, which had net debt of Rs72.99 billion ($1.03 billion) as of end-December 2018, has debt and other liabilities payments looming next month, according to rating agency ICRA. It has been unable to pay pilots’ salaries and has outstanding bills to aircraft lessors and vendors.
Jet Airways is struggling with competition from LCC rivals, high ATF prices and a weaker rupee. The share price fell miserably in 2018, losing more than 70 per cent of its value.
In a regulatory filing, the Company has said on Friday that 98 per cent of its shareholders voted in favor to increase the share capital to Rs22 billion from Rs2 billion at a special meeting.
Jet Airways has been steadily losing market share. Its financial problems are set against the backdrop of wider aviation sector woes, has been in the red for the last four straight quarters.