Jet Airways has agreed to Etihad’s bailout terms

Jet Airways Ltd has agreed to most conditions set by shareholder Etihad Airways for offering a lifeline to the debt-laden Indian carrier, the Business Standard newspaper said, sending Jet’s shares soaring as much as 18 per cent yesterday. Both airlines are set to sign a memorandum of understanding (MoU) within days, which would result in Jet Airways’ founder and chairman Naresh Goyal reducing his stake to 22pc from 51pc and stepping down from the board, the report said, citing sources.

Etihad’s stake would go up to 40pc from 24pc and the lenders would convert some of their debt to equity, giving them about 30 percent ownership of the cash-strapped carrier, the newspaper reported. Jet Airways said in a statement to the stock exchange that, as previously stated, the airline is working on a comprehensive resolution plan with lenders, lead by State Bank of India (SBI), and other stakeholders.

Etihad declined to comment. Saddled with debt of about $1.14 billion, Jet Airways has been hit by fierce competition, rupee depreciation and high oil prices. The airline, which controls a sixth of India’s booming aviation market, owes money to banks, 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 existing debt into equity and allow its lenders to nominate directors to its board, in an effort to resolve its financial issues.

Jet Airways is also behind on salary payments to pilots. The airline had agreed to pay the outstanding 25pc of salary for October and 75pc of November in January, while the remaining would be cleared in tranches by April. While it has cleared dues for October, Jet has only paid 50pc of the salary for November, two sources told Reuters.