NEW DELHI: Jet Airways creditor State Bank of India is likely to own 15 percent of the airline if the cash-strapped carrier’s plan for a debt-for-equity swap is approved, Indian TV channels reported on Tuesday.
With debts of about $1.14 billion, Jet has been hit by fierce competition from other low-cost carriers, a rupee depreciation and high oil prices. It owes money to banks, pilots, vendors and lessors, some of whom are considering taking back aircraft, sources have told Reuters.
Jet said on Monday it would seek shareholder approval next month to convert debt into equity, increase its share capital and allow lenders to nominate a director on its board to help resolve its financial problems.
Its lenders, including SBI, could end up owning as much as 30 percent while shareholder Etihad Airways could see its stake rise to more than 40 percent from 24 percent if it injects more equity in the Indian carrier, TV channels reported. The airline’s founder and chairman Naresh Goyal is likely to see his stake cut to below 20 percent from 51 percent.
Jet, which controls a sixth of India’s booming aviation market, did not respond to a request for comment, while SBI and Etihad also did not reply to emails seeking a response.
Indian banks in 2010 undertook a similar debt for equity swap to try and save Kingfisher Airlines, founded by liquor baron Vijay Mallya, and ended up owning nearly a quarter of the airline, before losing out when it was eventually grounded.
Jet defaulted on a debt payment to a consortium of Indian banks, lead by SBI, this month, prompting a downgrade by ratings agency ICRA.
The airline has to make large debt repayments over the next few years, starting with about 17 billion rupees ($242 million) by the end of March, ICRA said on Jan. 2.
The Economic Times reported on Tuesday that Jet’s lenders want to repossess some planes and have forced the airline to ground five aircraft, including its new fuel-efficient Boeing 737 MAX planes, leading to flight cancelations.
Jet was scheduled to add 11,737 MAX planes to its fleet by March 31, but has taken delivery of only five and will not add more until a resolution plan is agreed, Reuters has reported.
Etihad ‘could own 40% of India’s Jet Airways’
Etihad ‘could own 40% of India’s Jet Airways’
- With debts of about $1.14 billion, Jet has been hit by fierce competition from other low-cost carriers, a rupee depreciation and high oil prices
- Jet said on Monday it would seek shareholder approval next month to convert debt into equity, increase its share capital and allow lenders to nominate a director on its board
Maersk latest shipping firm to halt Gulf cargo bookings as Iran conflict pushes up insurance costs
JEDDAH: Danish shipping giant Maersk has suspended cargo bookings to and from several Gulf markets in light of the war in Iran, becoming the latest logistics company to reassess its operations in the region.
The firm has halted new business related to the UAE, Kuwait, and Qatar, as well as Iraq, Bahrain, parts of Saudi Arabia and most ports in Oman “until further notice” after a fresh risk assessment.
In a statement, Maersk added that “exceptions will be made for critical foodstuff, medicine and other essential goods,” and the measure does not apply to Jordan and Lebanon. Two of its vessels are currently in the Gulf.
This comes as Iran’s Revolutionary Guards said on March 5 that passage through the critical transit passage of the Strait of Hormuz would remain under Iranian control during wartime and claimed a US tanker had been hit in the northern Gulf, though there was no immediate independent confirmation of the incident.
The strait is a critical transit route for roughly 20 percent of global crude oil shipments and significant volumes of liquefied natural gas.
Khaled Ramadan, an economist and head of the International Center for Strategic Studies in Cairo, said oil and gas transit through Hormuz could fall by as much as 80 percent if tensions intensify, driving up prices and creating shortages.
“This crisis will also hamper global trade by escalating freight and insurance costs, forcing vessel rerouting, and causing widespread supply chain delays, particularly for oil-dependent economies,” he told Arab News.
Hapag-Lloyd said on March 5 it would implement contingency procedures for cargo already in transit to and from the Upper Gulf after suspending all shipments to and from the area.
The company said vessels may be diverted to contingency ports or held in safe waters for shipments linked to the UAE, Saudi Arabia, and Kuwait, as well as Qatar, Bahrain, Iraq, Oman and Yemen.
Chinese shipping line COSCO Shipping has halted new container bookings to multiple Gulf ports following traffic restrictions in the Strait of Hormuz, while Mediterranean Shipping Co. has announced the end of a voyage.
In a statement on March 3, MSC said: “In light of the ongoing situation in the Middle East, MSC regrets to inform you that it is compelled to declare an End of Voyage for all shipments currently under MSC’s custody and care, whether located ashore or at sea, and destined for ports in the Arabian Gulf.”
It added that all shipments already en route will be diverted to the nearest safe port, with a mandatory $800 surcharge per container to cover deviation costs.
MSC later said Gulf-bound cargo would be offloaded at the closest safe seaport amid ongoing hostilities following US and Israeli attacks on Iran.
CMA CGM has also introduced emergency measures for Gulf-bound vessels, prioritizing the safety of crews, ships, and cargo.
APM Terminals Bahrain declared force majeure at Khalifa Bin Salman Port, saying regional security conditions were disrupting port operations and that the duration of the disruption remained uncertain.
Insurance providers have also reduced Gulf exposure. Reuters reported that Angus Blayney of Gallagher said London insurers were still offering cover, but at sharply higher premiums depending on cargo, vessel type and route.
Separately, the agency reported that insurance broker Marsh McLennan said it had met US officials to explore ways to restore maritime trade as escalating fighting threatens energy shipments through the Strait of Hormuz.
