This Debt-Ridden Airline Just Sold a Majority Stake for a Penny
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Major Indian carrier Jet Airways, on the brink of financial collapse, needs 85 billion rupees ($1.2 billion USD) to claw its way out of debt.
Fortunately for the airline, a bailout seems to be on the horizon — involving the sum of one rupee, or a little more than a US cent.
How? The deal is actually a debt restructuring backed by the State Bank of India in which the bank would acquire a 50.1 percent stake in the airline for the nominal sum of one rupee, by being issued 114 million new shares, Bloomberg says. Jet Airways currently has a negative net worth, and with the debt restructuring it will be able to obtain fresh equity and time to liquidate some unnecessary assets — mostly by dumping aircraft it can’t afford.
“The structure, however, is expected to be temporary, allowing the airline to raise equity from investors, which in turn would alter the shareholding pattern,” Bloomberg explains. “While the bank deal is nominally a conversion of debt into shares, debt levels will come down only by 1 rupee once the exercise is completed.”
The plan still has to be approved by the airline’s lenders, a banking group, Jet Airways’ founder Naresh Goyal and the board of Etihad Airways, the (also financially unstable) Abu Dhabi-based airline that owns a 24 percent stake in Jet Airways.
It’s still unclear who the airline’s new investors would be. Bloomberg reports that Goyal has said he would invest up to 7 billion rupees if he keeps his 25 percent stake, Etihad could invest 14 billion more rupees to keep its 24 percent holding and India’s National Investment and Infrastructure Fund could pump in up to 13 billion rupees. But those possibilities would still leave the carrier about 50 billion rupees in debt.
For India’s government, saving Jet Airways may actually make sense in the short term. As the nation’s largest full-service carrier, the airline employs at least 16,000 people, and with an impending election, the loss of all those jobs might look bad for incumbent prime minister Narendra Modi. Jet Airways used to serve New York JFK, Newark and San Francisco in the US, but has shrunk to only one destination in North America, Toronto.
Featured photo by Artur Widak/NurPhoto via Getty Images.
Welcome to The Points Guy!
WELCOME OFFER: 80,000 Points
TPG'S BONUS VALUATION*: $1,650
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
- Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
- Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.