Jet Airways to raise $300 million via ECBs, cut Indian debt

Jet Airways, India's largest private carrier by passengers, on Monday said that it will have a cash surplus of $200 to $300 million as it enters the next financial year.

Jet 's  Chief Financial Officer and acting chief executive officer (CEO) Ravishankar Gopalakrishnan said in an earnings call with investors that the carrier will be in a comfortable position operationally irrespective of the state of economy in 2014/15.  "The next (financial year) will be better if rupee stays at 62 to a dollar and the Brent crude is at $105 per barrel," he said.

Jet plans to strengthen its financial position by repaying expensive Indian rupee loan on its books by raising $300 million in external commercial borrowings (ECBs). Abu Dhabi-based Etihad Airways, Jet's strategic and equity partner, will help the carrier raise $ 150 million through  its network of bankers. The remaining $150 million will be raised by Jet through its own bankers.

"The RBI has approved $150 million (ECB limit) and we hope to complete that transaction by the end of the fourth quarter and process is already under way to seek clearance to raise another $150 million from the RBI," Gopalakrishnan said. This reduces the interest outgo by $30 million for Jet and it targets a total annualised saving of about $50 to $60 million as it renegotiates vendor and maintenance contracts.

Jet  Airways has brought down its debt in the third quarter to Rs 10, 895.20 crore from its previous level of Rs 12, 494.70 crore. It reduced debt by Rs 1600 crore as it got equity by selling 24 per cent share to Etihad in a Rs 2057 crore deal in 2013.

Beside the ECBs, the airline is looking at raising $150 million by monetising its frequent flier programme (FFP). The Competition Commission of Indian approved the sale of 51 per cent of its FFP to Etihad last week.   

To improve its cash flow position Jet is also looking to raise foreign currency loans from Indian banks. An airline has majority of its operational costs in dollar denominations.

Jet is hopeful that it will conclude talks for either sale or lease of three of its grounded Airbus A330-200 aircraft by the end of this month. It has already made a net profit of $10 million on two similar aircraft which was reflected in its third quarter income.

Jet will add nine narrow body aircraft to its network and will strengthen its Gulf flights and expand on routes to the US and Europe, said Raj Shivakumar, Senior Vice President, Revenue Management, Jet Airways.

With its network now becoming increasingly aligned to Etihad's, Jet will focus on adding services to Abu Dhabi and leverage its Gulf network. It is considering new routes such as Jakarta and Ho-Chi Min in the Asian markets.

For the third quarter ended December, Jet posted a loss of Rs 268 crore as against a net profit of Rs85 crore in the year-ago quarter.

*An earlier version of the story said Ravishankar Gopalakrishnan is the CCO of Jet Airways.