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Rediff News  All News  » Business » Jet gets notice for aircraft lease rentals non-payment

Jet gets notice for aircraft lease rentals non-payment

September 27, 2013 12:02 IST

Jet Airways (India) Ltd has defaulted on lease rentals of its Boeing 737s, highlighting the financial difficulties faced by the airline. 

Airfinance Journal, a publication dedicated to airline finance, has reported that Jet has been served a notice by International Lease Finance Corp (ILFC), the world's largest aircraft lessor by value.

Jet and its subsidiary JetLite have a fleet of 115 aircraft, which include a mix of narrow-body and wide-body planes. About 75-80 of its planes are on operating lease and in the last two-three years, the airline has been carrying out a sale-lease back of its plane to reduce debt.

According to sources, the notice pertains to four-five Boeing 737s, which have been inducted into the fleet over the last five-six years. The default amount could not be immediately confirmed. 

"The airline has been under pressure from lessors, but the default is serious. Other lessors, too, might start putting pressure," a source said.

A Jet spokesperson said Jet had a long and excellent relationship of leasing aircraft from ILFC. "Jet and ILFC are in discussions to reconcile their respective accounts to identify the exact dues. On completion of the same the accounts will be settled between Jet and ILFC."

Added an airline executive, who did not want to be named, said: "There are reconciliation issues, which are being sorted out and these pertain to variable rents, rate and other things. As an airline, we are particular about payments to lessors and financial institutions."

ILFC spokespersons were not available for comment.

Jet, which is waiting for a regulatory approval for a 24 percent stake sale to Abu Dhabi-based Etihad Airways, posted a consolidated loss of Rs 779 crore (Rs 7.79 billion) last financial year. 

The airline's lease expenses increased 36 percent to Rs 1,232 crore (Rs 12.32 billion) in FY13 from Rs 906 crore (Rs 9.06 billion) in the previous year. 

The company, in its annual report, said the lease rentals increased because of induction of new leased aircraft and lease-back of 12 planes. Also, the interest rate fluctuation and increase in dollar price from Rs 50.8 to Rs 54.28 impacted the lease rentals.

Aircraft leasing companies typically collect three-six months of advance lease rentals like a deposit. This amount can be used as a security and be adjusted in case of a default by airline or against violation of re-delivery conditions. 

"The lessor will ask the airline to make payment in a stipulated period and in case it fails to pay up, can serve a notice for re-possession of the aircraft," an aviation industry expert said.