Tuesday, April 09, 2019

The downfall of Jet Airways: How India's premium airline crumbled

Singapore/New Delhi: The idea was to shore up confidence in one of India’s biggest brands, squeezed by low fares and high costs. But some lessors quickly lost patience as the bank did not provide details and Jet’s founder angrily defied them to take back planes.

At one point, the airline’s usually jovial founder and chairman, Naresh Goyal, banged his fist on a table, jarring some of the lessors who had flown to Mumbai from Dublin, Singapore and Dubai, said one person who attended the discussions. “That meeting went horribly wrong,” recalled the executive from a global leasing firm, who did not want to identified because the meeting was not public.

Goyal’s emotional outburst and Jet’s subsequent failure to pay up as promised may have pushed the relationship between the airline and its lessors to a breaking point, two other executives who were at the meeting said, prompting some to take the drastic step of pulling their planes from its fleet.

That has led Jet, which blazed trails in one of the world’s fastest-growing air travel markets, to cancel hundreds of flights. Saddled with more than $1.2 billion in debt, and with dwindling revenue, the airline has said it also owes money to banks, pilots and suppliers.

It was not immediately clear how much money Jet owes.

Jet did not respond to multiple requests for comment but has said it is “actively engaged” with all its lessors. Goyal did not respond to requests for comment.

“Aircraft lessors have been supportive of the company’s efforts in this regard,” Jet said in its most recent statement to the Mumbai stock exchange on April 2.

The loss of aircraft and friction with lessors is just the latest major setback for Jet, which has been struggling for years, beset by an insurgent group of low-cost Indian competitors.

Purchases of wide-body aircraft 13 years ago and ambitions for the international market may have set Jet on its current course, industry insiders say.

The 26-year-old airline has posted losses in eight of the past 10 years and its share of the domestic passenger market has fallen to about 15.5 percent in 2018 from 22.5 percent in 2015.

About 60 percent, or more than $600 million, has been wiped off Jet’s market value over the past year.

Now, with the airline’s running out of ways to make money, state-run banks, led by SBI, took a temporary stake in Jet, promised a new loan of 15 billion rupees ($216 million) and forced 69-year-old Goyal to resign as chairman.

On Monday, Jet’s lenders laid out terms for potential bidders to buy up to 75 percent stake in the carrier. Expressions of interest are due on Wednesday, with final bids due on April 30.
But lessors remain concerned, and some, such as Avolon, SMBC Aviation Capital, Aircastle and a subsidiary of Mitsubishi Corp, have asked India’s aviation regulator to de-register a combined 18 planes, according to the regulator’s website.

“Despite Goyal’s departure from Jet, lessors don’t seem to think the carrier can be rescued, judging by the urgency in repossessing aircraft,” said Shukor Yusof, the head of aviation consultancy Endau Analytics.

That adds complications for any potential new investor, two industry sources said.

“How we do business with Jet in the future will depend a lot on the new investor and how they manage the relationship,” said one of the executives who was at the January meeting.

Aercap Holdings, GE Capital Aviation Services, Avolon and BOC Aviation are among the big lessors grounding Jet’s aircraft, leasing and industry sources say. Aercap, Avolon and BOC Aviation declined to comment. GE Capital Aviation Services said Jet was a long-standing customer and it remains in regular contact with the airline.
09/04/19 Anshuman Daga/Aditi Shah/Reuters