Business - India;Jet gets Rs 1,000 cr from Abu Dhabi firm

Manisha Singhal


Private carrier Jet Airways is believed to have struck a deal last week with west Asian investment agency Mubadala Development Company for a funding of Rs 1,000 crore. The instrument of funding, however, has yet to be formalised.

Mubadala is wholly owned by the government of Emirates of Abu Dhabi.

The tenure of the loan, the interest rate and other details were not immediately available.

Mubadala owns Abu Dhabi Aircaft Technologies, which provides aviation technical services to carriers (Kingfisher Airlines is a client). The agency has also bought 35 per cent in aircraft manufacturer Piaggio Aero Industries. Mubadala also came into the limelight for buying 5 per cent in Ferrari.

The deal comes at a time when the aviation industry is facing its worst crises and accessing funds is becoming a major challenge. Aviation experts said the money Jet has raised is sufficient for the airline to continue to fly for at least another year.

Jet Airways had announced a loss of Rs 384 crore for the second quarter of this fiscal. The airline is also struggling with overdues to the state-owned oil marketers, airport authorities and operators. Jet’s outstanding to the oil firms is Rs 1,057 crore. It has also ordered 10 Boeing 777-300ERs, for which it needs Rs 4,000 crore, say experts.

Jet CEO Wolfgang Prock Schaeur was travelling and did not reply to a text message.

With a market share of around 30 per cent, Jet recently tied up with its main rival Kingfisher Airlines, under which it will cut costs by sharing ground-handling facilities, and pilots, and rationalise routes.

The airline has been looking at ways to raise funds, including an aborted rights issue, private placement and by approaching banks in India. Negotiations with a south Indian bank came close to a culmination.

“For the two largest private carriers in India — Jet Airways and Kingfisher Airlines — another six months will be the most crucial and the major concern for both will be raising working capital,” said Kapil Kaul, CEO, Centre for Asia Pacific Aviation, India and West Asia.

“Both airlines need at least Rs 2,000 crore to survive a softer third quarter and a harsh fourth quarter,” Kaul added.

“Getting private funding is good news because what is important for airlines is to get dedicated investors who can be committed for a longer period rather than speculative investors,” said Mark Martin, senior advisor, aviation, KPMG.