The Hindu Business Line : Jet Airways defers plans to raise $800 m

Scorecard
FCCB/GDR issue deferred due to downturn in the domestic equity market and in the emerging markets.
Pilot and cabin crew training at the top of the agenda.
Chalks out a strategy to increase on focus on international operations.

FLIGHT PLANS: Mr Naresh Goyal, Chairman, Jet Airways, Mr Javed Akhtar and Mr Yash Chopra, Directors, on their way to attend the company's AGM in Mumbai on Wednesday. — Paul Noronha

Mumbai Sept. 20

Jet Airways has deferred its proposal to raise $800 million by way of FCCBs or GDRs to part-finance its capital expenditure programme, especially acquisition of 30 new narrow-body and wide-body aircraft.

The company took the decision to defer this proposal on the ground of a "downturn in the domestic equity market specifically and in the emerging markets as well."

Addressing the 14th AGM meeting here on Wednesday, Mr Naresh Goyal, Chairman of Jet Airways, said the company has deferred these capital-raising plans until market conditions are more conducive. "In the meantime, we have undertaken short-term borrowings from IDBI Bank, SBI and ICICI Bank towards the pre-delivery payment commitments on the new aircraft we have ordered. We are actively monitoring market conditions and will revive our efforts to raise additional capital as soon as a window of opportunity arises," he said.

The company will be investing $2.5 billion over the next three years to acquire 30 new aircraft.

He pointed out that pilot and cabin crew training was at the top of the agenda, with the company exploring opportunities to establish an integrated training facility and a flight academy.

"We have purchased our second Boeing 737 flight simulator, which will be delivered next month. This will allow us to generate up to 150 trainee pilots every year to meet our growth requirements," he said.

Losses likely

Mr Goyal pointed out that various estimates suggested that airlines in India were expected to post a cumulative loss of about Rs 2,200 crore during 2006-07. "The situation is likely to worsen with five to six new airlines planning to commence operations in the near future," he said, adding that the number of seats offered in the domestic market increased from 80,000 seats per day in January 2005 to around 1,24,000 seats per day in March 2006, representing an increase of 55 per cent. "We are witnessing unprecedented capacity expansion in the domestic market, even as airlines struggle to cope with infrastructure constraints, downward pressure on yields, rising fuel costs and consequently lower earnings," he pointed out.

International operations

Jet Airways has chalked out a strategy that envisages an increase in focus on international operations.

Talking to presspersons later, Mr Goyal said the company would increase its revenue from international operations to 50 per cent of the total earnings within the next three years. The company has applied for rights to expand its international network to connect India to key destinations across the world, including the US, Canada, UK, South Africa, Kenya, China and South East Asia.

"We are confident of getting the rights in time with our deliveries of the new aircraft," he said.

Asked whether the company would notch up a profit this fiscal, he refused to comment, except saying that, "We will do better than we did last year."

On the Jet-Sahara deal, Mr Goyal was not willing to go into details, as it has been referred to arbitration. "Proceedings for the recovery of the amount of Rs 1,500 crore lying in escrow and the advance amount of Rs 500 crore guaranteed by Mr Subrata Roy are pending in the courts," he said.

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