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Jet Airways Almost on The Brink of Shutdown, Facing Mounting Ground Problems

The possible scenario which may send the scrip plunging, say analysts, is if the bidders do not match up to the expectations of lenders or they lose interest after the initial Expression of Interest or the whole process gets entangled or delayed in the law courts.

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"In the case of other airlines facing stress, the government reacted differently largely because of their lower share on international routes," he added. Pixabay

BY: RAVI DUTTA MISHRA

From a fleet of 119 until last year to only 7 as of on Monday, Jet, once India’s second-largest airline by market share, is almost on the brink of a shutdown. But the change in fortune for the airline has not dented investor confidence as the Jet counter continues to remain resilient.

Jet’s scrip is down just by a little over 6 per cent since January 1 even though the airline’s performance has nose-dived ever since it defaulted on its loan commitment in December.

For Jet, the developments are unlike how things panned out for an airline like Kingfisher during its turbulent times that ultimately led to its closure. Analysts say that this is largely owing to Jet’s 30 per cent market share on international routes.

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Prior to the grounding which has depleted around 90 per cent of Jet’s fleet size, the airline, with its large fleet, offered flights to 56 destinations in India and overseas. Pixabay

“The government is keen that they should keep this entity afloat by selling it to other airline partners. This is also important as Jet accounts for 30 per cent market share on international routes,” Sandeep Raina, Associate Director, Edelweiss Professional Investor Research, told IANS.

“In the case of other airlines facing stress, the government reacted differently largely because of their lower share on international routes,” he added.

Prior to the grounding which has depleted around 90 per cent of Jet’s fleet size, the airline, with its large fleet, offered flights to 56 destinations in India and overseas.

Besides its international share, Jet has some valuable assets, said Deepak Jasani of HDFC Securities.

“It owns 16 planes which are worth $400 million. The Jet Privilege programme, the international routes, and landing and parking slots in key cities make the airline an attractive option for potential buyers or can be easily monetised by its lenders (under IBC),” he added.

However, the airline on Monday said it has extended the cancellation of all its international flights until April 18, which might spell trouble for it on the stock exchanges.

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Jet’s scrip is down just by a little over 6 per cent since January 1 even though the airline’s performance has nose-dived ever since it defaulted on its loan commitment in December. Pixabay

Inflating debt is another major concern for investors. Jet owes over Rs 8,000 crore to a consortium of lenders led by the state-run State Bank of India (SBI).

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The possible scenario which may send the scrip plunging, say analysts, is if the bidders do not match up to the expectations of lenders or they lose interest after the initial Expression of Interest or the whole process gets entangled or delayed in the law courts.

“If a non-strategic investor (including the National Infrastructure Investment Fund) wins the bid or the company needs to be nationalised or taken over by the government (through Air India or any other route)… in all such cases, its stock price could plunge,” said Jasani.(IANS)

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Despite Tariff War With U.S, China’s Economic Growth is Steady

The fight between the two biggest global economies has disrupted trade in goods from soybeans medical equipment, battering exporters on both sides and rattling financial markets.

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An employee working on the production line of an electronics factory is seen reflected on an equipment, in Jiaxing, Zhejiang province, China, April 2, 2019. VOA

China’s economic growth held steady in the latest quarter despite a tariff war with Washington, in a reassuring sign that Beijing’s efforts to reverse a slowdown might be gaining traction.

The world’s second-largest economy expanded by 6.4% over a year earlier in the three months ending in March, the government reported Wednesday. That matched the previous quarter for the weakest growth since 2009.

“This confirms that China’s economic growth is bottoming out and this momentum is likely to continue,” said Tai Hui of JP Morgan Asset Management in a report.

Government intervention

Communist leaders stepped up government spending last year and told banks to lend more after economic activity weakened, raising the risk of politically dangerous job losses.

Beijing’s decision to ease credit controls aimed at reining in rising debt “is starting to yield results,” Hui said.

Consumer spending, factory activity and investment all accelerated in March from the month before, the National Bureau of Statistics reported.

The economy showed “growing positive factors,” a bureau statement said.

A delivery worker pushes boxes of goods at the capital city's popular shopping mall in Beijing, April 4, 2019. The U.S. and China opened a ninth round of talks Wednesday, aiming to further narrow differences in an ongoing trade war.
A delivery worker pushes boxes of goods at the capital city’s popular shopping mall in Beijing, April 4, 2019. The U.S. and China opened a ninth round of talks Wednesday, aiming to further narrow differences in an ongoing trade war. VOA

Recovery later this year

Forecasters expect Chinese growth to bottom out and start to recover later this year. They expected a recovery last year but pushed back that time line after President Donald Trump hiked tariffs on Chinese imports over complaints about Beijing’s technology ambitions.

The fight between the two biggest global economies has disrupted trade in goods from soybeans medical equipment, battering exporters on both sides and rattling financial markets.

The two governments say settlement talks are making progress, but penalties on billions of dollars of each other’s goods are still in place.

China’s top economic official, Premier Li Keqiang, announced an annual official growth target of 6% to 6.5% in March, down from last year’s 6.6% rate.

Li warned of “rising difficulties” in the global economy and said the ruling Communist Party plans to step up deficit spending this year to shore up growth.

Beijing’s stimulus measures have temporarily set back official plans to reduce reliance on debt and investment to support growth.

Also in March, exports rebounded from a contraction the previous month, rising 14.2% over a year earlier. Still, exports are up only 1.4% so far this year, while imports shrank 4.8% in a sign of weak Chinese domestic demand.

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Chinese leaders warned previously any economic recovery will be “L-shaped,” meaning once the downturn bottomed out, growth would stay low. VOA

Auto sales fell 6.9% in March from a year ago, declining for a ninth month. But that was an improvement over the 17.5% contraction in January and February.

Tariffs’ effect long-lasting

Economists warn that even if Washington and Beijing announce a trade settlement in the next few weeks or months, it is unlikely to resolve all the irritants that have bedeviled relations for decades.

The two governments agreed Dec. 1 to postpone further penalties while they negotiate, but punitive charges already imposed on billions of dollars of goods stayed in place.

Even if they make peace, the experience of other countries suggests it can take four to five years for punitive duties to “dissipate fully,” said Jamie Thompson of Capital Economics in a report last week.

Chinese leaders warned previously any economic recovery will be “L-shaped,” meaning once the downturn bottomed out, growth would stay low.

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Credit growth accelerated in March, suggesting companies are stepping up investment and production.

Total profit for China’s national-level state-owned banks, oil producers, phone carriers and other companies rose 13.1% over a year ago in the first quarter, the government reported Tuesday. Revenue rose 6.3% and investment rose 9.7%. (VOA)