Monday, April 08, 2019

Jet Airways Boeing 777 fleet at risk of repossession as airline delays bank repayment

New Delhi: Even as the SBI-led consortium of 26 lenders to Jet Airways kicked off the bidding process for a stake sale today, the beleaguered airline's woes continue to multiply. India's second largest airline till January is currently operating only 26 of its once 124-strong fleet and many of the aircraft grounded in recent weeks due to non-payment of lease rentals could get deregistered soon.

Last week, two of its lessors, MC Aviation Partners and Avolon, applied to the Directorate General of Civil Aviation (DGCA) for de-registration, which means that the lessors can take their aircraft out of country and lease them to other players. But now even the planes owned by Jet Airways may be at risk- it owns a total of 17 aircraft, mostly Boeing 777 and Airbus A330 planes, while the rest of its fleet is leased.

In September 2005, Jet Airways had signed a purchase agreement for 10 Boeing 777-300ER series aircraft with plans to start serving long-haul international destinations. According to The Economic Times, these aircraft were bought under a finance lease agreement. These work more like an EMI scheme whereby the lessee (Jet in this case) obtains ownership at the end of the tenure while in the case of operating lease agreements, the aircraft go back to the lessor.

Because of this factor, with Jet Airways having delayed repayments of over $18 million to global lenders- including Citibank- that had financed its purchase of the Boeing 777s on the back of guarantees from Export-Import (EXIM) Bank of the US, these planes are now at risk of being repossessed.
The daily added that in a presentation detailing the latest revival and fund infusion plan for Jet Airways, payments to EXIM Bank were estimated at Rs 1,433 crore. Under the circumstances, a guarantee invocation could sound the death knell for Jet Airways as the US institution would likely deregister and then repossess the planes. That would be a big blow for the already ailing airline since the Boeing 777s have been cited as collateral for additional loans that it aims to raise as part of the latest revival plan.
08/04/19 Business Today
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