Jet eyes debt restructuring to turn profitable by 2017

Jet Airways, which began as a full-service airline in 1993 has been plagued by losses for years due to intense competition in the domestic sector

Jet Airways, India's second-biggest airline by market share, on Wednesday said it would explore sale of some of its wide-body aircraft and restructure its debt, besides removing some complexities in its fleet, product and brand, to turn profitable by 2017.

Chairman Naresh Goyal, however, refused to divulge whether removing of complexities in service meant a switch to becoming a single full-service brand, instead of offering both full-service and no-frills options in the domestic aviation space. Without giving out further details, he said the airline was talking to bankers for financial restructuring.

Jet, which began as a full-service airline in 1993 and switched to a two-brand offering with the launch of Jet Konnect in May 2009, has been plagued by losses for years due to intense competition in the domestic sector. Though the Konnect brand helped it compete better with other low-cost carriers, Jet Airways has not reported annual profits for the past seven years. The airline has been evaluating whether to stick to two brands or go back to being only a full-service carrier.

Asked about the launch of AirAsia India and Tata-Singapore Airlines, Goyal said the airline welcomed competition. On service model, he said: "We are in the process of finalising a new product, but I won't say if there will be one brand or two brands."

Jet Airways, partly owned by Abu Dhabi-based Etihad Airways, had in May set out a three-year restructuring plan centred around cutting costs and boosting efficiency. On Wednesday, Goyal and Etihad CEO James Hogan met the media for the first time since Etihad bought a 24 per cent stake in the Indian airline in April last year for Rs 2,057 crore.

Jet said it was hopeful its partnership with Etihad would lead to cost-saving synergies and a collaboration in procurement, training, sales and sharing of resources.

The announcement of corrective measures come after Jet reported a record loss of Rs 4,129 crore in 2013-14. The airline's loss was worsened by a Rs 700-crore impairment on account of an erosion in subsidiary JetLite's net worth, and another one Rs 800 crore in one-off costs and provisions due to maintenance of engines.

Goyal said the airline was in the midst of a financial restructuring and was not delaying payments to lessors and vendors. The airline is in talks with banks to raise $150 million in debt to refinance its high-cost rupee loans.

Jet's three-year business plan to become profitable by 2017 includes financial restructuring, a new route-and-network plan and product improvement. "We plan to reduce losses in 2015, consolidate in 2016 and turn profitable in 2017.... We are already on track as our international business has turned profitable. We now have to take our business forward," said Jet Airways CEO-designate Cramer Ball.

Ball added the airline would grow its profitable global operations with a three-pronged strategy of growing traffic via Abu Dhabi, launching new overseas routes from its Mumbai and Delhi hubs and wider code-sharing pacts. This includes new services to Vietnam's Ho Chi Minh from November and to Kuala Lumpur, Yangon and Seychelles sometime this financial year.

Etihad's Hogan said his airline was committed to helping Jet turn around its operations but cautioned it would not happen overnight. "We have no exit strategy from Jet Airways. Our strategy is to build and partner," he said.