Aviation industry is challenging, says Naresh Goyal

The airline industry is difficult at the best of times, but the recent headwinds have proven to be more challenging for the aviation industry, according to Naresh Goyal, Chairman, Jet Airways.

In the February issue of ‘JetWings’, the inflight magazine of Jet Airways, Goyal has written that despite the challenging times he is confident of the future. “We go on to operate an optimal number of flights on our network and our load factors continue to be among the highest in the industry. We are confident that the future will continue to see us being an integral part of and contribution to the fastest growing civil aviation market in the world.”

This comes even as airline has called for an extraordinary general meeting on February 21 to seek approval to allow lenders to convert debt into equity. Under the proposal, the lenders will also get to appoint one or more persons as nominee directors or observers on the board of the company. Jet is also seeking approval to raise further loans within the overall existing borrowing limit of ₹ 25,000 crore, and provide the lenders with the right to convert such loans into shares of the company.

According to the Directorate General of Civil Aivation (DGCA’s) January report, Jet Airways Passenger load factor declined from 87.0 per cent in December 2018 to 86.01 per cent in January 2019 and stood at the fifth position after Spicejet, Indigo, Air Asia and Go Air.

The debt-laden airline has been facing a lot of issues for the past two quarters. In the Quarter 3, the struggling airline reported a standalone net loss of ₹ 587.77 crore for the third quarter ended December 31 with an increment of revenue of Rs 62.78 crore and the company’s expenses shot up by ₹ 743.57 crore.

The airline owes money to its pilots, lessors, banks and vendors. Business Line had recently reported that the pilots were asked to do office work which they had refused.

The full service carrier had as a part of its cost-cutting and restructuring plan had also changed its distribution strategy. Its problems have been exacerbated by higher oil prices and intense pricing competition in the domestic market.

Jet Airways had also delayed the payment of an interest and principal instalment due on December 31 to its lenders. In a bid to solve things between lessors, lenders and Jet Airways, SBI had in a meeting asked the airline to propose a restructuring plan. The airline has loans of over ₹ 8,400 crore, with SBI being its biggest lender. SBI’s exposure is said to be close to ₹ 2,000 crore.

Business Line had reported that months of negotiations, lenders along with SBI was set to take control of debt laden Jet Airways with the company Board approving a Bank led Provisional Resolution Plan. Under this plan, lenders led by SBI will convert debt into 11.4 crore shares for just Re 1. This would result in the lenders becoming the largest shareholders in the company with about 50 per cent stake.

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