Etihad discusses rescue deal for India’s Jet Airways with bankers

A Jet Airways passenger aircraft prepares to land at the airport in the western Indian city of Ahmedabad, India - REUTERS

NEW DELHI (Reuters): Abu Dhabi-based Etihad Airways, the second largest shareholder of Jet Airways Ltd., is holding talks with the debt-laden Indian carrier and its bankers on a rescue plan, two sources aware of the matter told Reuters.

Shares in Jet Airways rose as much as 3% on Wednesday while the overall Mumbai market .BSESN was down 0.6%.

Executives from Etihad, which owns a 24% stake in Jet, and the Indian carrier have met some of the airline’s bankers from State Bank of India (SBI) in Mumbai in recent days to discuss ways to address its cash flow issues and evaluate the carrier’s future business plan, the sources said.

Etihad is also considering investing fresh funds in the airline if it can agree on the structure, one of the sources said, adding that no deal has been finalised.

The business plan presented to banks includes details on Jet’s network and fleet expansion target for the next three to five years as well as revenue and cost projections, the second source said.

There is an indication that by mid-January, the airline could see some money coming in, said the source, adding Jet does not have the liquidity to honour all its payments and expenses but is paying its statutory dues, like taxes.

The sources did not want to be named as the discussions are private.

Jet, Etihad, and SBI did not immediately respond to Reuters’ emails seeking comment.

Jet, India’s biggest full-service carrier by market share, is in desperate need of cash. The 25-year-old airline, founded by Naresh Goyal, has outstanding dues of about $ 400 million, which it mainly owes to lessors and vendors, one of the sources who is close to the matter said.

It has delayed salary payments to pilots and top executives and is cutting flights on non-profitable routes to save money.

With fewer flights on some routes, the airline is looking at reducing some airport and support staff, the source said, adding that it has also deferred the delivery of at least two aircrafts to January from November-December.

Some domestic airport operators and fuel suppliers have put Jet on cash-and-carry, meaning it must pay cash in advance for the services it uses, the source said.

India is one of the world’s fastest-growing domestic aviation markets, but high fuel prices, a weak rupee, and intense price wars in the country, which is dominated by no-frills airlines like Interglobe Aviation Ltd.’s IndiGo, has exacerbated Jet’s woes in recent months.

Etihad has already come to Jet’s rescue once when it picked up a 24% stake in the carrier in 2013, but the situation is different this time.

While the Abu Dhabi-based carrier is invested in Jet, it has lost money in other airline ventures, such as Alitalia and Air Berlin, and may be wary of loosening the purse strings again, said another source.

Foreign carriers are permitted to own up to 49% in an Indian airline.