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And the 217 aircraft that Jet Airways ordered from Boeing?
By MC01, a frequent commentator, for WOLF STREET:
Today, another major airline has collapsed. Jet Airways, India's largest private airline, announced "with immediate effect" that it was "forced to cancel all its international and domestic flights". It suspended its activities on a "temporary" basis. "No emergency funding from lenders or any other source being available, the airline will not be able to pay for fuel or other essential services to ensure continuity of operations."
Last year, Jet Airways discovered "suddenly" serious financial problems, which led to an extremely dramatic bailout of major creditors (mainly the State Bank of India and the private bank ICICI Bank) and l 39; minority shareholder Etihad under the new Sashakt legislation. introduced by the Indian government to deal with the "sudden liquidity problems" of the giant Indian economy.
Etihad has injected $ 35 million into the troubled Indian airline, and the State Bank of India and ICICI Bank have provided a $ 218 million emergency credit line to meet liquidity needs such as the payment of wages and the prevention of the immediate withdrawal of aircraft by the lessors.
Apparently, Jet Airways burned these new funds in no time, as the company's financial situation became unmanageable. Cabin crews, pilots and clerical staff went on strike for unpaid wages. Suppliers of goods and services began cutting deliveries "until partial repayment of debts". The Dutch authorities seized a Jet Airways Boeing 777-300ER at Schiphol Airport on April 12, following a court ruling regarding unpaid processing fees.
Unpaid landlords rushed to recover their plane: According to the Indian Directorate General of Civil Aviation (DGCA), for the week of April 8 to 14, 22 of the 737-800 leased from the company were written off and returned to the lessors. Between the takeover of leased aircraft and the grounding of other aircraft for financial reasons, the Jet Airways operational fleet increased from 124 aircraft in February to just 14.
This posed a major problem, since the DGAC requires at least 20 aircraft to operate internationally. This led to a wave of flight cancellations as Jet Airways tried to find a "temporary" agreement with the DGAC on international licenses. In short, society was falling apart.
Currently, Jet Airways has ordered 217 aircraft of different models from Boeing. How much will be paid and will be delivered remains an interesting question and raises even more questions about the feasibility of maxi-orders placed by many other Asian airlines whose financial resources are vulnerable.
The Indian government was publicly asking state-owned banks to intervene and "invest in Jet Airways," but banks have raised their hands: they have already lost too much money and they do not want to lose more, at least not without direct loss. government guarantees.
And the desperate efforts of the Indian government to privatize Air India, a chronic deficit company, promise to be a very interesting show.
This follows the fiasco of Alitalia. On March 31, the Italian government and the EU imposed on Alitalia the recovery plan adopted with a simple press release from the bankruptcy administration: no financially feasible plan could be developed at the time. deadline, the administrators have requested extension of two months. They have one, so the new deadline is April 30th.
Alitalia, the Italian airline, has a long history of poor financial performance, but the current turmoil began in 2008, when the Italian government finally decided to privatize the airline. The first talks with the Air France-KLM group failed because of the policy and the financial crisis of 2008, forcing the Franco-Dutch group to significantly reduce new investments. This unsuccessful sale allowed Alitalia to protect itself almost immediately from bankruptcy, until a sale could be arranged with a group called Compagnia Aeronautica Italiana (CAI).
CAI was a particular creature, nominally a consortium of investors who, after careful scrutiny, turned out to be a motley collection of Italian banks, economic godfathers, and Poste Italiane, the Italian public postal service. Do this what you want.
As the Euro Bubble began to deflate and the rising tide revealed that it was swimming naked, the investment required to rebuild Alitalia from scratch has disappeared and the troubled airline has found itself reducing its costs. to survive. These cost-cutting measures started with a reasonable sense (the failed maintenance division was sold and allowed it to fail), but they quickly turned into desperation (selling aircraft to leasing companies such as that APF to get help quickly and returned to them), grotesque (abandoning the profitable center of Milano Malpensa, MXP).
In 2014, CAI was short of gas and funds. Poste Italiane (read: the Italian government) has therefore directly injected 75 million euros to avoid an immediate bankruptcy. At the same time, the Italian government has begun negotiations with the airline Etihad, the national airline of Abu Dhabi, with a view to bringing the Gulf airline. The agreement was sealed in 2015 and Etihad bought 49% of Alitalia, the maximum share allowed by the EU's air transport ownership rules.
The euphoria of having a partner laden with money in oil and willing to spend it with total surrender was however short-lived, as it was quickly discovered that "Etihad was another". naked swimmer ".
Once forced to discontinue its questionable accounting practices and present honest financial data, it was found that Etihad was losing huge sums of money, worth $ 1.8 billion in 2016 and $ 1.5 billion dollars in 2017.
In 2016, the first full year of the Etihad partnership, Alitalia lost an unprecedented amount of 600 million euros. It was immediately apparent that Etihad had neither the capacity nor the resources to redress Alitalia.
Thus, in May 2017, Alitalia has once again entered the bankruptcy administration and resides since then. Until now, the Italian government has granted two "bridge loans" of a total amount of 900 million euros to keep the company alive. The EU has approved this direct state aid provided that a stimulus package is submitted by March 31, 2019. Here we go again.
The administrators of the bankruptcy have made every effort to find a buyer, at least a financial / technical partner hired for Alitalia, but until now, this has proved extremely difficult. The only remaining interesting assets at Alitalia are 60% of the slots in the heavily constrained Milan Linate Airport (LIN); Ryanair and Easyjet, the two main low-cost carriers in Europe, have shown interest in them. Both have since withdrawn from the negotiations on the grounds that it is impossible to reach a satisfactory agreement.
The only remaining potential partner is Delta Air Lines, but there are still too many outstanding issues: apparently, their interest in buying 20% of Alitalia needs to be approved by shareholders. Shareholders and investors in airlines are becoming increasingly cautious when buying companies through the WOW Air fiasco.
On March 28, WOW Air, a very low cost carrier based in Iceland, ceased operations. At the time of writing these lines, all of his remaining aircraft were still stationed on various Atlantic airfields, pending a decision of the Reykjavik Bankruptcy Court.
WOW Air began operations in 2012, but its business model proved uneconomic. By 2018, the company was accumulating losses at an alarming rate. In November 2018, Sigurdur Helgason, Chairman of the Icelandair Group, announced "an agreement reached" for the acquisition of WOW Air. However, this "concluded agreement" was shot down by Icelandair's shareholders, who were justifiably concerned about the financial resources needed to transform WOW Air.
A similar deal was announced shortly after by Indigo Partners, but it was again canceled by investors worried about the financial viability of the deal.
WOW Air is another former darling of the financial media who praised the "aggressive expansion plans", "cool image" and "call to a key demographics" without worrying about subtleties such as the financial viability of the airline or saturation of the market. By MC01, a frequent commentator, for WOLF STREET
There has been a multitude of bankruptcies in the airline industry. Read … Next in the saga of European and Asian airlines on bankruptcy and restructuring
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