Jet, SpiceJet seek lease rent moratorium amid weak rupee, high oil prices

To avoid a default on loan payments, Jet Airways and SpiceJet have sought a moratorium on lease rent payment.

A weakened rupee, surge in crude oil prices and inability to raise fares have put pressure on all airlines, tightening their liquidity situation. In this backdrop, ratings agencies have downgraded the debt of all three listed airlines, including that of IndiGo, the market leader. 

CRISIL has downgraded the rating of SpiceJet's Rs 14.45-billion debt, from the earlier BBB to one of BB-minus. ICRA has downgraded the rating for IndiGo's Rs 80-billion loan to A+ from the earlier AA. 

A SpiceJet spokesperson said the airline had secured a one-time relief of two to three months from a lessor. "The rating downgrade is an industry phenomenon and we continue to outperform the industry on financial metrics," the spokesperson added.

Jet Airways did not respond to a query but sources said it had sought discounts and easier payment terms, including 60-90 days of moratorium on its lease payments.

Jet has 124 aircraft in its fleet; 108 of these are on an operating lease (use for a specific period, without onwership transfer). In the case of SpiceJet, 47 of its 60 planes are on an operating lease.

"Negotiations are on between Jet and lessors. Given the tight liquidity, lessors will assess their exposure and that will depend on factors like relationship with the airline, their margins and external demand for aircraft," said an aviation expert.

In June, Steve Zissis, chief executive of Fly Leasing, said the aviation sector in India was showing stress again from a strong dollar and higher fuel prices. Fly Leasing has three Boeing 737s leased to Jet Airways.

"They (Jet) have talked about some restructuring of those leases but have not really pursued it. We are kind of standing by and trying to just monitor the situation," he'd said.

Avolon, Dubai Aerospace Enterprise and Aergo Capital declined to comment. Other lessors did not respond to queries.

"We are keeping a close look on the India market. I know high fuel prices and low fares have forced airlines to go through a rough patch. From Boeing's side, we will support them, for arranging beneficial financing. If there are no airlines, there is no business for us," said Dinesh Keskar, Boeing's senior vice-president of sales (Asia-Pacific).

Jet had secured around $200 million as incentives from lessors and this, along with bank borrowings, helped it to tide over a fund shortage over recent months. It has 225 Boeing 737 Max planes on order and taken delivery of five.