The credit crunch, soaring fuel prices and slowing economies are playing havoc with airline financing. Raising fresh equity in these conditions is virtually impossible, with Cebu Pacific, Air India and Vietnam Airlines all deferring their IPO plans this year. The sale of a stake in Jet Airways by founder, Naresh Goyal, has also been consistently delayed.
China Eastern Airlines has confirmed it is still hoping to revive talks for an equity sale to Singapore Airlines following the Olympics after last week denying rumours it was discussing a merger with Shanghai Airlines. With a debt to asset ratio of 95%, China Eastern has one of Asia’s weakest balance sheets and will need to move decisively after the Olympic Flame is extinguished in Beijing next month. Whether Singapore Airlines is prepared to deal again remains to be seen, particularly as Star Alliance partner, Air China, has demonstrated its preparedness to intervene in the process in the past.
Air India and China Southern are seeking a government injection of funds to help tide them over, while Pakistan International Airlines is pushing for a deal with the government whereby it would transfer its hotel and other assets to the government in exchange for debt relief.
Tough market conditions are also grounding the ambitions of several start-up airlines, which, combined with service cutbacks by some airlines, is easing sections of the aircraft leasing market. Older aircraft will be difficult to place with airlines in this environment, which is why the lessors have been such active participants in the new aircraft order market.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.