Jet Airways postpones $400 mn rights issue

The liquidity crunch in global markets following the crisis in the US sub-prime mortgage business has prompted Jet Airways to postpone its $ 400 million rights issue to finance the airline's aircraft acquisition by two or three months. The issue was scheduled for October.

Talking to reporters on the sidelines of the launch of Jet's Delhi-Toronto flight, Chairman Naresh Goyal said, "This does not mean that there is any lack of investor interest. We have decided to delay the issue because of US market conditions."

According to company sources, the rights issue would have required Goyal, who owns around 80 per cent of the airline, to raise roughly $ 320 million in his personal capacity. 

This would have entailed raising loans from international institutions, which would have been difficult in current market conditions.

However, Goyal said Jet's fleet expansion would not be impacted by the postponement of the rights issue. The airline is adding 25 aircraft -- both Boeings and Airbuses -- to its fleet for international operations.

Five Boeing 777s have already been delivered and the expected delivery of the entire new fleet is October 2008, so a two-month delay in the rights issue will not make much difference.

Talking about further international operations, Goyal said that he was planning to fly Gulf destinations like Dubai, Abu Dhabi, Doha and Muscat.

"We have sought permission from the ministry and we expect an approval around January 2008," he said.

Currently, national carriers Air India and Indian Airlines have a monopoly among Indian carriers for operations in the Gulf, which is a major revenue earner for them.

The civil aviation ministry, however, has been looking at unlocking this monopoly and opening up the sector to other airlines.

Jet's entry into the sector would mean fierce competition, similar to the one that has been unleashed on the India-US routes between the two carriers. Other carriers like SpiceJet, Kingfisher and Deccan also have major plans for Gulf operations.

Among his other plans Goyal said are flights to CapeTown and Johannesburg in South Africa.

He said flights to Vancouver would start in October and those to Shanghai and San Francisco around February.

He said Jet was looking at servicing around 50 destinations through a code sharing with Brussels Airline and other carriers. Other agreements with carriers like Lufthansa Airways were also on the cards, he said.