Jet Airways to sell and lease back aircraft to fly out of turbulence

Naresh Goyal-promoted Jet Airways, which reported a loss of Rs 1,326 crore in April-June quarter, plans to sell and lease back "a portion" of the 16 aircraft it owns.

The airline management estimates the market value of these aircraft over $750-800 million.

The airline at present has a fleet 121 aircraft, comprising Boeing 777-300 ERs, Airbus A330-200/300, Boeing 737s and ATR 72-500/600s. Further, it has placed orders for 225 Boeing 737 MAX 8, of which three have been delivered to the airline.

Speaking during a conference call with the analysts, Amit Agarwal, CFO and deputy CEO of Jet Airways, referring to the monetary value of these aircraft said, "We have a clear intent to put a portion of these to sale and lease back. Clearly there is a huge equity sitting there," Agarwal said.

As part of the turnaround strategy, the airline's Board on Monday decided to bring cost-cutting measures, debt reduction and funding options, infusion of capital, monetisation of assets including the company's stake in its loyalty programme. The airline executives claim the company will save an excess of Rs 2,000 crore due to cost reduction over the next two years.

Further, the airline management said it reduced debt by around Rs 700 crore during March-June this year by way of lease incentives and fresh borrowing from the domestic banks. The airline management did not specify the amount it received as lease incentive. Ravi Chandran, senior VP of the airline, said the incentive will be spread over the period of lease. The carrier plans to repay around Rs 2,200 crore this year.

On the airline's efforts to reduce its fleet maintenance costs, which increased by 20% in the latest quarter, Agarwal said with an important negotiation they will be in a position to save around Rs 650 crore from January 1, 2019 . Similarly, due to another negotiation, which they are about to complete, the carrier will be able to save around Rs 350-370 crore this year. The executives said maintenance cost depends upon the numbers of block hours and flying hours during the year. They attributed the spike in maintenance costs to increase in about seven more aircraft in its fleet.

On a query whether the airline is looking at cutting the number of orders placed for Boeing 737 Max 8 in view of the not-so-impressive load factors during the reporting quarter, the airline's CEO Vinay Dube said that not much should be read into it as it was just one-off quarter when the load factor was low.

On monetisation of its loyalty programme, the executives said the percentage and quantum of the deal will be finalised in the time to come.

HIGHER ALTITUDE

• The airline has a fleet 121 aircraft, comprising Boeing 777-300 ERs, Airbus A330-200/300, Boeing 737s and ATR 72-500/600s
   
• Further, it has placed orders for 225 Boeing 737 MAX 8, of which three have been delivered to the airline