By Sai Sachin Ravikumar and Aditi Shah
BENGALURU/NEW DELHI (Reuters) – India’s Jet Airways Ltd <JET.NS> is in talks to sub-lease nearly half its ATR turboprop aircraft to regional carrier TruJet, in a move that will reduce its presence in the competitive domestic market as the beleaguered airline struggles to raise money.
Jet Airways deferred reporting earnings earlier this month, sending its shares to a three-year low. Just days earlier it had told staff it was running out of cash, sources told Reuters.
TruJet’s commercial head, Senthil Raja, said the company was in talks with Jet Airways to take seven aircraft, manufactured by France’s ATR, on a five-year “wet lease”. He said that he expects to receive the aircraft by the end of October.
A wet lease includes the insurance, maintenance and crew as well as the aircraft.
“Both the companies are deliberating on the agreement and should sign it very soon,” Raja said, adding that he was not aware of how much TruJet would pay for the lease.
Jet Airways, which is part owned by Etihad Airways, told Indian stock exchanges it continues to “evaluate all possible alternatives to ensure optimum utilization of its fleet”.
The airline has a total of 121 aircraft, according to its website, of which 18 are turboprops that fly shorter routes and to smaller cities.
By sub-leasing them the airline will reduce its presence in the domestic market where it competes with low-cost carriers like IndiGo and SpiceJet <SPJT.BO>, allowing it to focus on more lucrative international operations.
“Jet has been trying to wet lease their regional operations for a while. I don’t think they seem to be interested in keeping them,” said Kapil Kaul, CEO and director, South Asia at global aviation consultancy CAPA.
Kaul said the wet lease to TruJet is unlikely to have a material impact on Jet Airways’ finances and estimates that the airline needs to raise at least $500 million.
TruJet is also in talks to take four arrival and departure slots at airports in the southern Indian cities of Chennai and Coimbatore, Raja said, adding that the routes are not a part of the leasing deal.
“Once Jet exits those routes, TruJet will move in,” he said.
(Writing by Aditi Shah; Editing by Kirsten Donovan)