Revival of full fleet crucial for turnaround of Jet Airways

Curtailed operation cannot support overheads

March 29, 2019 10:49 pm | Updated 10:49 pm IST - MUMBAI

FILE PHOTO: A Jet Airways plane is parked as another moves to runway at the Chhatrapati Shivaji International airport in Mumbai, India, February 14, 2018. REUTERS/Danish Siddiqui/File Photo

FILE PHOTO: A Jet Airways plane is parked as another moves to runway at the Chhatrapati Shivaji International airport in Mumbai, India, February 14, 2018. REUTERS/Danish Siddiqui/File Photo

Revival of Jet’s full fleet is crucial for the projected turnaround of the airline as the overall cost is built into that.

Any lesser deployment of aircraft or even a near-full fleet would render the operation unviable, said people familiar with the running of the airline.

Before it flew into a financial crisis which ultimately led to the removal of the promoters from the board, the airline had 124 aircraft in its fleet. Owing to financial issues and non-payment of lease rentals, more than two-thirds of its fleet was grounded during most part of this month.

Progressive induction

On Tuesday, a day after its board approved the takeover by the lenders, Jet Airways had committed to the civil aviation ministry that it would fly 75 aircraft by the end of April from about 35 currently. It said it would progressively induct more aircraft. In the past two days, it has revived 50-odd flights.

“The entire schedule has to be maintained. Now the main focus is to bring in reliability in the schedule. From May, the airline has to get back to the original schedule, otherwise it will make no sense. It has to get to the critical mass. The establishment cost, rentals and employee cost have been built into the entire fleet,” a person with knowledge of the matter said.

In the December quarter, when the near full schedule was in operation, Jet had spent ₹730 crore on aircraft and engine lease rental, ₹781 crore towards employee cost, ₹256 crore as finance cost, ₹687 crore as aircraft maintenance and ₹1,253 crore as other expenses. Thus, a curtailed operation cannot support the overheads.

Stabilising operations

“The intent is to get a clear picture of the near future. The ₹1,500-crore fresh loan will help us manage for the next four to five months because the business will generate cash. Now, all effort will be to stabilise operations,” a senior official said.

Till Friday afternoon, the fresh loan was not credited to the airline. “It has been delayed due to some regulatory framework and money should come any time,” an official said. The company will have to retain its existing fleet because of the uncertainty in delivery of the Boeing 737 MAX 8 planes it has ordered.

Jet had ordered 225 such aircraft, five of which have been delivered. But all these were not flying since they were grounded by lessors.

MAX delivery delay

“The MAX delivery issue is something that one has to deal with. Boeing will find a solution in two to three months, when Jet should be ready to accept the delivery. The delay in MAX delivery will delay the network expansion, but will not impact the current schedule,” the official said.

It is still not known whether the airline will continue its ATR fleet of 16 aircraft. Nearly half of this fleet is operational.

Jet Airways on Thursdayinformed the stock exchanges that it had defaulted repayment of Foreign Currency Borrowing, believed to be $150 million, which it had availed towards working capital.

Jet shares on Friday remained unchanged at ₹269.35 on the BSE.

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