Jet Airways defers Boeing 737 Max deliveries on payment issues
The airline has also considerable overdues to the Mumbai airport, its base in India, said a third person in the know.
India’s second-biggest airline by market share is also close to defaulting on payments to the operators of the Mumbai airport, said another industry source.
Jet placed an order for 225 of the Boeing planes: It received five of them to date and aimed to induct six more by March. Jet financed the aircraft under an agreement called sale and leaseback as part of which an airline sells the aircraft to a lessor at a premium (in case of new planes, even prior to delivery), and then leases them back for a monthly rental.
An email to Jet remained unanswered.
Jet was supposed to get three planes in December under this arrangement. A person aware of the development said these have been delivered to the lessor, which will not send them to Jet until it settles payments. Jet has delayed lease payments for some of the aircraft in its current fleet of 124 planes.
The airline is going through the worst financial crisis in its 25-year existence. It has defaulted on loan repayments for December, and delayed employee salaries throughout the year.
The cash-strapped and lossmaking airline has been in talks with its partner Etihad Airways and lenders for equity infusion and loans, and is currently grappling with a complex set of clauses put forward by the Gulf carrier before the latter agreed to make fresh investments.
In addition to these is founder chairman Naresh Goyal’s reported reluctance to give up the control of the company. Etihad currently owns 24% in Jet.
Earlier in the day, India’s aviation secretary RN Chaubey said the government is “aware” of the talks involving Jet, Etihad and its lenders. He didn’t say whether the government would directly assist in saving the airline but clarified that it would uphold laws that bar foreign ownership and control of an Indian carrier, something Etihad also would factor in while increasing stake in Jet.
Unless Jet raises money soon, the Mumbai airport is likely to be added to the swelling list of its angry creditors.
The airline has also “considerable overdues” to the Mumbai airport from where it operates the maximum number of its 600 daily flights. “Normally there are bank guarantees that can be used if the dues aren’t paid in time but even those are close to lapsing,” said an industry source.