Jet eyes $400 mn via private equity

Private airline Jet Airways is talking to several leading private equity firms to raise $400 million (over Rs 1,760 crore) through qualified institutional placements for its aircraft acquisition plan.

The qualified institutional placements are aimed at improving the airline's balance sheet besides raising 15 per cent of the cost of its $2.5 billion bill for 20 wide-bodied aircraft for international operations and 10 Boeing 737s for domestic operations. The rest of the bill will be funded by debt.

The qualified institutional placement could result in a dilution of the promoters' equity by 10 per cent. The promoters currently hold 80 per cent in the airline.

Sources said the airline was also considering a follow-on issue or a combination of QIP investments and equity expansion. However, the airline, which reported a third-quarter profit over the trailing quarter on account of improved load factors and an aircraft sale, has dropped plans for a $500 million foreign currency convertible bonds issue.

A Jet Airways executive said the airline would extend its international operations to North America, Europe, Africa and Asia once it acquired the wide-bodied jets.

Besides its $2.5 billion acquisition programme, Jet Airways also plans to buy 10 Boeing 787-8 "Dreamliners". The biggest commercial aircraft from the Boeing family, the Dreamliner carries a listed price of $1.5 billion.

Deliveries are scheduled between July 2011 and December 2012.

Investment bankers say qualified institutional placements reflect the changing investment climate in the aviation industry. For instance, reputed investment houses like the Tata Group, Istithmar PJSC and Goldman Sachs recently acquired a stake in low-cost carrier SpiceJet.

"With its India-UK operations nearing break-even, investing in Jet Airways makes sense for private equity firms," said an investment banker.