India's Jet Airways confident in prospects despite reports cash running out

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NEW DELHI/MUMBAI (Aug 3): India's biggest full-service airline Jet Airways Ltd said on Friday that it was confident it would be able to cut costs and keep flying, despite reports it had warned staff it was running out of cash.

Reuters and several local newspapers reported earlier on Friday that Jet Airways had told pilots it had enough cash left to keep operating for just 60 days and would need to put in place cost-cutting measures including pay cuts.

The airline has asked pilots to take a 15% pay cut for two years, a proposal they have refused, a senior company executive told Reuters.

Jet Airways CEO Vinay Dube called the reports "factually incorrect" and "malicious", although the company did not specify precisely what aspects of the reports it disputes.

Dube confirmed that the company was in talks with employees and suppliers to cut costs. It was looking at sales and distribution, payroll, maintenance and fleet simplification for savings to create "a healthier and more resilient business".

In a separate emailed statement the airline said it was "confident about its operations" continuing beyond 60 days.

India is the world's fastest-growing aviation market but surging fuel prices, a weaker rupee and airfare wars are hurting airlines, with the country's leading carrier IndiGo reporting a 97% plunge in profit on Monday.

Jet Airways agreed last month to purchase 75 Boeing 737 MAX aircraft to meet domestic passenger demand, taking its total order for the planes to 225.

The airline has said the planes would enhance efficiency and lower costs.

"We are confident that the various transformation initiatives identified and under implementation by the company will help in addressing the current issues faced by us and the industry," Dube said.

The company, part owned by Etihad Airways, had net debt of 81.5 billion rupees (US$1.2 billion) as of end-March, the bulk of it denominated in U.S. dollars.

Shares of Jet Airways closed 7% lower, while the broader market ended 1% higher.

Funds needed

Jet Airways told the pilots the company is looking for working capital loans but banks want it to show a turnaround commitment, the source said, adding that salary reduction was part of the same issue.

"There are some job losses across verticals but not among pilots," the source added, declining to be identified as the talks with staff were private.

The airline did not specifically comment on the details.

Jet Airways in July 2017 asked dozens of junior pilots to take 30%-50% salary and stipend cuts or quit, sources had told Reuters.

The management team including Chairman Naresh Goyal had informed employees that drastic measures were needed, the Economic Times daily reported earlier on Friday, citing two executives.

Separately, newspaper Mint reported Jet Airways had approached investment bankers again to help sell a stake in the carrier, citing two people with direct knowledge of the matter.