Jan. 30--MUMBAI -- Jet Airways (India) Ltd cancelled several local flights on Tuesday, affecting hundreds of passengers, as its lessors forced the grounding of some planes due to non-payment of lease rentals, said two people aware of the matter.
The development comes a day after the cash-strapped carrier announced plans to convert a portion of its loans into equity, extending the beleaguered carrier a much-needed financial lifeline.
At least four Boeing 737 planes of Jet Airways were grounded by lessors, seeking repossession of the planes due to delay in payment of lease rentals, the two people cited above said on condition of anonymity.
"The groundings have led to as many as 19 flight cancellations," said one of the two people.
The cancelled flights included those on trunk routes such as Chennai-New Delhi, New Delhi-Mumbai, Bengaluru-Mumbai, Mumbai-Hyderabad and other sectors such as Delhi-Pune, Delhi-Mangaluru, Port Blair-Chennai.
"The situation is expected to be resolved in a week's time," said the second person.
The names of the lessors could not be ascertained immediately. GE Capital Aviation Services, SMBC Aviation Capital and Jackson Square are some of the lessors to the Mumbai-based airline.
A third person familiar with the matter said one of the 737 planes of Jet Airways is currently grounded at Mumbai airport due to engine snags, thus taking the total number of grounded aircraft to five. The person also requested anonymity.
Reuters had earlier this month reported, citing unnamed people, that talks between Jet Airways and its planes' lessors had failed to ease a row over late payments, prompting some of them to explore taking back their leased aircraft.
Jet Airways did not respond to emailed queries seeking comment.
The Naresh Goyal-led airline has been combating a cash crunch for the past six months amid high jet fuel costs and cutthroat competition that have prevented it from raising fares sufficiently to cover the increased costs.
To tide over the crisis, Jet Airways delayed salaries to pilots, lessors, vendors and interest payments on its debt. The airline also defaulted on payments to a consortium of lenders led by the State Bank of India on 31 December.
The financial troubles also forced the airline to halt deliveries of six Boeing Co. 737 Max planes that were due by March. Jet Airways has a total of 123 aircraft in its fleet, including five Boeing 737 Max planes.
Jet Airways has convened an extraordinary general meeting of shareholders on 21 February to vote on a proposal to raise its authorized share capital from INR200 crore to INR2,200 crore, in a bid to garner fresh investments, including from Goyal and Abu Dhabi-based Etihad Airways PJSC, which has a 24% stake.
SpiceJet Ltd and Kingfisher Airlines Ltd had previously cancelled dozens of flights, after their aircraft were grounded by lessors due to non-payment of lease rentals. While Kingfisher eventually shut operations, SpiceJet managed to revive under the new leadership of Ajay Singh and is currently the second-largest budget airline in India.
Industry experts say Jet Airways is unlikely to meet the fate of Kingfisher.
"We expect the restructuring and recapitalization package (of Jet Airways) to be formalized soon post shareholder approval, which will start the process of stabilization at Jet," said Kapil Kaul, chief executive and director of CAPA, South Asia.
Kaul said the uncertainty surrounding Jet Airways is temporary. "Some global lessors have defined recovery processes and hence the repossession trigger of four aircraft should be seen from this perspective," he added.
On Tuesday, Jet Airways shares fell 1.08% to INR242.75 on BSE, compared to a 0.18% drop in the benchmark Sensex.
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