Jet Airways’ Future Hinges on Bank Debt Settlement

Neelam Mathews
March 7, 2019

Embroiled in a quagmire of losses resulting in the grounding of 42 of its 114-aircraft fleet and the cancelation of some 200 flights a day, India’s Jet Airways faces a bleak future should stakeholders not accept a resolution plan to convert mounting debt into equity. The airline owes more than $1.25 billion, $300 million of which came from government-owned State Bank of India (SBI). The approval of the bank-led provisional resolution plan “is an important step” toward saving the country’s oldest private carrier, Jet Airways chairman Naresh Goyal indicated in a statement late last month.

Jet Airways vendors have called a meeting on March 11 with the carrier and representatives from minority shareholder Etihad Airways to ascertain and decide the way forward. “It is hard to say if there will be closure,” an airline official told AIN.

“The situation is very critical and any further delay will create challenges for Jet,” said CAPA Centre for Aviation's CEO for India and the Middle East, Kapil Kaul. As revenues continue to slump and costs increase, “the gap is getting wider,” he added.

At least seven aircraft lessors have claimed pending payments for leasing and maintenance reserves since October. “As we move closer to the deadline—around the end of the year—when Jet may likely have to file for bankruptcy, lessors will want to get their aircraft out of India in time,” said a lessor.

During a recent CAPA summit held in Delhi, Air Lease Corporation executive v-p Kishore Korde expressed concern that India hadn’t yet fully implemented its participation in the Cape Town Convention. “The proof is in the pudding,” he said. “One never knows how the enforcement scenario will work.” The Cape Town Convention exists as a means to facilitate financing of aircraft by providing creditors with an internationally recognized set of rights in the event of a debtors default or insolvency.

“Insurance companies also stand to lose a lot as unused aircraft require more maintenance as they deteriorate over a longer period of time,” said Amit Mittal, director of Delhi-based consultancy AeroIntellect Aviation Capital.

As if to lend some reassurance, the International Air Transport Association earlier this year said it is “carefully watching the Jet Airways situation…as the airline is on its billing settlement plan.”

“Jet Airways continues to be of good standing in the IATA settlement systems,” IATA official Albert Tjoeng told AIN.  “We are in regular communication with the airline to review their position.”