Faced with higher borrowing costs in the country due to the Reserve Bank of India's aggressive rate hike cycle, Jet Airways Ltd plans to raise $210 million in fresh debt by the end of this fiscal to cut borrowing costs. The company's Senior Vice-President for Finance, Mr M Shivkumar said the move will help offset higher borrowing costs for rupee loans.
The airline is also trying to convert part of its Rs 3,000 crore worth of loans into dollar loans but is facing challenges on that front. “It is becoming increasingly difficult to swap rupee debt into dollar loans now. But we are still hopeful,” said Mr Shivkumar.
With the rupee at a two-year low, many companies are considering hedging their dollar loans. However, Mr Shivkumar said that it would be too early to tie up the higher dollar rate on existing debt as the rupee weakness is expected to be brief.
“Our large fleet of aircraft is an asset that can act as a natural hedge for our dollar debt. Sale and leaseback is always an option on some planes if repayment of loans is necessary,” he said.
On track
Jet Airways, along with its subsidiary, has a fleet of 115 aircraft. Earlier in July, the airline had said that it expects three to four aircraft to be sold and leased back during the quarter. “The plans are on track. We have already spoken to the lessors,” said Mr Shivkumar.
The airline had also raised close to Rs 200 crore in a land deal earlier this year and the sale and leaseback of aircraft is expected to fetch the company another $8-9 million an aircraft. The airline's total debt as of end-July stands at Rs 13,530 crore.
Its policy of going in for increased overseas borrowings is in line with plans by a number of other corporate houses, who are cutting down on borrowing costs by picking up dollar debts instead of rupee loans. However, the move has backfired for some in the current quarter as the dollar has surged against the rupee, increasing the borrowing costs for companies with a high amount of dollar debt.
New Aircraft
Meanwhile, Jet Airways announced on Tuesday that it had taken delivery of the first next-generation Boeing 737-800 with Boeing's Sky Interiors.
This is first of the 11 new Boeing 737-800 aircraft to be inducted into the airline's fleet. The remaining aircraft will be delivered between October 2011 and March 2013.