Jet Airways is close to reaching a deal with State Bank of India for a fresh loan of 15 billion rupees.
New Delhi: India’s debt-laden Jet Airways is close to reaching a deal with State Bank of India for a fresh loan of 15 billion rupees ($215 million) to meet its working capital needs, two sources aware of the matter told Reuters.
The airline has scheduled a meeting on Jan. 8 with its vendors and lessors, many of whom are getting increasingly concerned over non-payment of dues, and officials from State Bank of India (SBI) to discuss the debt restructuring plan, the first source with direct knowledge said.
The bankers are being called to the meeting to reassure the creditors, some of whom are expected to come to India from overseas, that Jet is working toward securing funding and has a repayment plan which it will share with them, said the first source.
Jet, India’s biggest full-service carrier by market share, owes money to pilots, lessors, banks and vendors. Its problems have been exacerbated by higher oil prices and intense pricing competition in the domestic market.
The airline, part owned by Etihad Airways, was in talks with the Abu Dhabi-based carrier to infuse more equity, but any money would be conditional on Jet’s founder Naresh Goyal ceding control, sources have told Reuters.
Lessors have already forced the airline to ground at least four of its new fuel-efficient Boeing 737 MAX aircraft over non-payment of dues, the first source said, adding more planes could be grounded if lessors are unconvinced by the plan Jet presents next week.
Jet did not respond to various Reuters queries for this article but late on Friday, after the story was published, a company spokesman said none of its 737 MAX planes have been grounded.
SBI did not respond to a request for comment.
Jet has a total of 124 aircraft, the vast majority of which are leased.
The airline on Tuesday said it had defaulted on debt payment to a consortium of Indian banks, led by SBI, prompting ratings agency ICRA to downgrade the carrier and send its shares sharply lower.
SBI, which has an exposure to Jet of about 16 billion rupees, has in principle agreed to lend another 15 billion rupees, the second Mumbai-based source said, adding this is subject to the bank satisfactorily completing a forensic audit of the airline’s books - a process that started in December.
SBI is discussing securitising part of the sales of Jet’s tickets against subsequent loans, the Mumbai-based source said, adding it will not be able to securitise the entire amount.
“The debt will give the airline some money for its operational needs but it will not solve the long term problem,” said the first source.
India’s aviation watchdog, the Directorate General of Civil Aviation (DGCA) has asked to meet Jet’s CEO on Jan. 7 to get an update on its financial state and fund-raising plans to ensure non-payment of pilot salaries and other dues is not having an impact on safety, the first source said.
The DGCA did not respond to a request for comment.
The carrier is also late on salary payments to its employees for the month of December, the first source said.