Fresh capital a must for India's Jet AirwaysMUMBAI - Auditors for India's largest private airline Jet Airways have said that it needs fresh capital in another sign of the financial squeeze hitting the country's once-booming aviation sector.
Deloitte Haskins and Sells and Chaturvedi and Shah said in a letter published on Monday on the Bombay Stock Exchange's website that raising money was vital for Jet and its loss-making, low-cost subsidiary JetLite.
Commercial Aircraft Leasing
"The appropriateness of assumption of going concern is dependent upon the company's ability to raise requisite finance/generate cash flows in future to meet its obligations, including financial support to its subsidiary," it said.
A "going concern" is an assumption made by an accountant looking at a company's books that the firm will be in business for the foreseeable future.
Jet's auditors made the assessment on November 11 in a limited review of the airline's second-quarter financial position, which saw losses of 7.13 billion rupees ($145 million) to the end of September.
In response to the letter, Jet Airways' senior vice-president finance, M. Shivkumar, said the company was confident of getting the equity and was planning to raise $300 million by selling and leasing back 40 aircraft.
"We are in talks with leasing companies and are close to finalising sale and leaseback for the aircraft that are owned by Jet," he told the Economic Times newspaper.
Revenues for the third quarter ending December should also be healthier, he told the financial daily.
The letter comes as India's aviation industry -- once seen as a symbol of the country's growing prosperity -- battles rising fuel costs, a weakening rupee against the US dollar and high interest rates.
Last Tuesday, the head of India's third-largest carrier by market share, Kingfisher Airlines, rejected reports that it was about to collapse, despite concerns about route cancellations and heavy losses.
In September, the airline's auditors questioned its ability to survive without fresh capital, prompting a strong rebuttal from the company that it was "100 percent a going concern".
Aviation industry analysts say all Indian airlines require urgent funding, as only one carrier -- IndiGo -- is in profit.
by Maria Antonova
(c) 2011 AFP