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Etihad pumps $35 million into beleaguered Jet Air

UAE-based Etihad Airways, which has a 24% stake in Jet Airways, said on Friday that its majority shareholders have approved a financial restructuring and support plan for its beleaguered and loss making partner. The plan includes infusion of $35 million into Jet as part of a pre-purchase payment to Jet Airways by JetPrivilege. Etihad owns majority in this flying miles programme.

According to sources, the Jet board approved the plan on Monday and Etihad board ratified it on Thursday. FE had earlier reported about Jet board’s resolution and Etihad’s infusion of $35 million on Thursday.

 

The details of the financial restructuring and support plan are not exactly known but it is understood that there might be third party equity investment and there might be a further acquisition of Etihad’s stake in the reward programme by possibly a private equity investor, with the name of US-based TPG in the lead. FE had reported earlier that Jet will monetise its flying miles programme and that it might seek a valuation of $500 million for the same.

Etihad’s investment into Jet is also indicative that it is still confident of the airline and it wants to protect its own investment which it made in 2013.

Etihad had bought the 24% stake in Jet Airways for Rs 2,060 crore in May 2013 and later it also invested in JP Miles programme as it bought a majority stake into the business.

Interestingly, Etihad itself is going through financially troubled times and it has exited all its investments into the other global markets like German-based carrier Air Berlin (branded as airberlin) or Alitalia, the Italian flag carrier among others.

Jet Airways is finding it hard to get cash into the airline as the environment for funding aviation businesses is currently not too encouraging for the investors with escalating crude prices and brent hovering around $90 a barrel and a depreciating rupee coupled with the inability of Indian carriers to raise ticket prices due to a very competitive environment in a low- cost carrier dominated market.

In this environment this funding by Etihad will definitely give an interim relief to the airline that has lease payments coming up and it also has commitments towards its aircraft order for the 737MAX-8 .

The airline has also not been able to disburse salaries on time for a large part of its staff as it deferred or partially paid salaries to its different sections of employees since August.

As on June 2018, Jet Airways has a gross debt of Rs 8,620 crore, of which Rs 1,968 crore is aircraft related. The airline has accumulated losses of Rs 10,878 crore and is currently working on a turnaround plan to save Rs 2,000 crore over a couple of years through several initiatives that the board has adopted. For the first quarter it got $300 million of liquidity into the airline a large part of which was lease incentives.

 

 

Saturday, October 6, 2018

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