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Jet Airways looking to retire $500M debt this year

27 May, 2013

After announcing its deal with Etihad Airways, India’s second-largest carrier Jet Airways Ltd is looking to retire debt of close to $500-$550 million, the company management said on a call with analysts.

In the coming year, Jet Airways aims to deleverage its balance sheet and move towards profitability. It sold 24 per cent stake to Etihad for $379 million and also agreed to sell a majority stake in its loyal programme for $150 million. The transaction is awaiting necessary clearances.

Jet Airways’ management indicated that in the coming year the airline will regain pricing power and focus on enhancing ancillary revenues. Naresh Goyal-promoted airline, which has debt of $2.1 billion, also sees additional revenues from sale/lease of niche aircraft and a healthy trend in the international route business.

The management officials present on the call included Sudheer Raghavan, chief commercial officer; KG Vishwanath, vice president (investor relations); and Raj Sivakumar, senior vice president (network and alliances).

For FY13, Jet Airways reported total revenue of $3.51 billion even as its domestic business saw a sharp decline. In Q4FY13, Jet group’s total revenue was $826 million compared with $911 million in the corresponding period last year, a drop of 9.33 per cent.

The Jet Airways management highlighted that the impact on the airline for the quarter was $16.6 million and the impact during the year was around $34.8 million. This has prompted the airline to sell or lease out its excess capacities to other airlines, said a senior company official during an investor call. According to a Mint report, Jet Airways is expecting to realise $300-350 million through this process.

Jet Airways will use the funds from its deal with Etihad and sale/lease of its aircraft to retire its high-cost rupee debt.

The stock closed at Rs 545.85 per share, down 2.99 percent on the BSE on Monday.

Jet-Etihad to collaborate on fleet, fuel acquisition

Jet Airways is looking at a combined 140 destination network through code sharing. It will witness immediate revenue growth due to the deal with Etihad and will also jointly look at fleet acquisition, spare parts, equipment and joint purchasing opportunities for fuel and catering. The airlines will also focus on joint training of pilots, cabin crew and engineers in the fleet.

Once the deal is concluded, the airline will undertake consolidation of its loyalty programme called Jet Privileges which is currently valued at $300 million. The programme, which has been hived off into a separate company, is looking for coalitions with banking, retail, telecom and fuel partners for its customers and the tickets would be redeemed only with the airline.

Abu Dhabhi to be focal point; to target flyers going West

The management officials said, “We are processing a multi-year strategy where Abu Dhabi will be the key focus.”

Jet Airways said it will first focus on connecting Indian cities like Mumbai, Delhi, Chennai, Kochi and Hyderabad to Abu Dhabi. Later, it will connect Tier II and III cities with Abu Dhabi. In three years, it will also focus on North America and Canada as part of its expansion. Besides, it will explore partnership for the London, Frankfurt, Paris and Amsterdam route.

Europe will also be a key market for the airline where it wants to connect on a non-stop basis. Of the 40 million customers from India, 28 million travel toward the West to reach destinations such as the Gulf, North America, Canada, Europe. Only 1 million passengers fly towards the East to destinations such as Australia.

The airline is looking at a 10-12 per cent growth in the coming year. It is selectively adding flights to profit making routes such as the Middle East and ASEAN routes and is looking to discontinue flights in the loss-making routes. Its domestic business was one of the key contributors for its poor result whereas the international business made profits last year.


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Jet Airways looking to retire $500M debt this year

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