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Notes to Accounts of Jet Airways (India) Ltd.

Mar 31, 2015

A. Terms / Rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of Rs. 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends if any, in Indian rupees. The dividend proposed, if any, by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the Shareholders.

Security and Salient Terms :

a. Rupee Term Loans of Rs. 9,225 lakhs (Previous Year Rs. 19,960 lakhs) and Foreign Currency Term Loan of Rs. 21,454 lakhs (Previous Year Rs. 42,850 lakhs) are secured by way of a pari-passu charge on all the current and future domestic credit card realizations received into the Trust and Retention Account.

Interest rates are linked to respective Banks' Prime Lending Rate / Base Rate / LIBOR plus Margin and are repayable in installments starting from May, 2011 and ending in March, 2019.

b. Foreign Currency Term Loans of Rs. 76,067 lakhs (Previous Year Rs. 54,417 lakhs) are secured by way of a pari-passu charge on all the current and future international credit card realizations, as per the Merchant Establishment agreement, received into the Trust and Retention Account (Debt Service Reserve Account) maintained with the banks together with a First hypothecation charge on the four flight simulators and mortgage on the land located at Pali, Raigad.

Interest rates are linked to LIBOR plus Margin and are repayable in monthly instalments by September 2017.

c. Foreign Currency Term Loan of Rs. 93,750 lakhs (Previous Year Nil) is secured by way of First Charge on IATA and BSP receivables from the Kingdom of Saudi Arabia, United Arab Emirates and Qatar received into Revenue Accounts and further lying in Debt Service Reserve Account and Receivable Collection Account, maintained with Bank.

Interest rates are linked to LIBOR plus Margin and are repayable on monthly basis after a moratorium period of six months by November 2019.

d. Foreign Currency Term Loan from a financial institution of Rs. Nil (Previous Year Rs. 20,420 lakhs) is secured by pari-passu charge on leasehold land situated at Bandra Kurla Complex, Mumbai along with construction thereon, present and future and first charge on Company's entitlement under the development agreement for the aforesaid plot of land entered into with Godrej Buildcon Private Limited, for which no charge was created.

Interest rate was LIBOR plus Margin and was repayable on each working day Rs. 100 lakhs starting from 4th May, 2013.

e. Foreign Currency Term Loan of Rs. 87,500 lakhs (Previous Year Rs. 83,882 lakhs) is availed against a corporate guarantee given by one of the Shareholder to the lender. Further, the Company has hypothecated one B737 Aircraft in favour of that Shareholder and creation of pledge on 54,772 shares held in Jet Privilege Private Limited is pending.

Interest rates are linked to LIBOR plus Margin and guarantor's margin and are repayable by way of a bullet repayment in March, 2019.

f. (i) Finance Lease obligation for six aircraft are secured by the Corporate Guarantees given by the Subsidiary Company of Rs. 203,503 lakhs equivalent to USD 3,256 lakhs (Previous Year Rs. 242,411 lakhs equivalent to USD 4,046 lakhs).

(ii) Repayable in quarterly installments over a period of twelve years from the date of disbursement of the respective loans. Interest rate is linked with LIBOR plus margin.

Redelivery of Aircraft :

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, given below is the movement in provision for Redelivery of Aircraft.

The Company has in its fleet certain aircraft on operating lease. As per the terms of the lease agreements, the aircraft have to be redelivered to the lessors at the end of the lease term in certain stipulated technical condition. Such redelivery conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and the cost of ferrying the aircraft to the location as stipulated in the lease agreements.

The Company, therefore, provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease period.

* Note : Additions include adjustment of Rs. 553 lakhs (Previous Year Rs. 321 lakhs) on account of exchange fluctuation loss consequent to restatement of liabilities denominated in foreign currency.

The cash outflow out of the above provisions as per the current terms under the lease agreements are expected as under :

Security and Salient Terms :

a) Loans aggregating to Rs. 167,917 lakhs (Previous Year Rs. 177,329 lakhs) are secured by way of hypothecation of Inventories (excluding Aircraft fuel), Debtors / Receivables [excluding (i) credit card receivables, (ii) IATA and BSP receivables from the Kingdom of Saudi Arabia, United Arab Emirates, Qatar, Oman, Bahrain and Kuwait, (iii) receivables from aircraft subleased but including claim receivables from aircraft lessors], Ground Support Vehicles / Equipment (excluding trucks, jeeps and other motor vehicles), Spares (including engines), Data Processing Equipment, other current assets excluding cash and bank balances and fixed deposits with bank both present and future as well as all rights, title, interest and benefits in all and singular, the residual Aircraft proceeds and all accounts of the borrower in which such aircraft proceeds are deposited in relation to 22 aircraft out of which charge in respect of 9 aircraft is pending creation. The Company has escrowed the entire IATA collection with the lead bank for facilitating interest servicing and regularisation in case of any irregularity.

b) Foreign Currency Loans amounting to Rs. 28,012 lakhs (Previous Year Rs. Nil) is secured by hypothecation over 2 CFM engines, UK IATA receivables escrow collection account thereof and pledge of 238,834,623 shares of Jet Lite.

c) Rupee Term loan of Rs. 3,500 lakhs (Previous Year Rs. 6,937 lakhs) is secured by way of pledge of 151,834,623 shares of Jet Lite.

d) Buyefis credit of Rs. Nil (Previous Year Rs. 11,506 lakhs) was secured by hypothecation over two New CFM Engines and Quick Engine Change kits.

e) Rupee Term Loan of Rs. 165,000 lakhs (Previous Year Rs. Nil) is availed against standby letter of credit given by one of the Shareholder to the lender.

f) The rate of interest for the loans listed in (a) to (e) above ranges from 130 base points to 750 base points over LIBOR plus Margin for Foreign Currency Loans and 11.90 % to 16.5 % for Rupee Loans.

Disclosures relating to amounts payable as at the year end together with interest paid / payable to Micro and Small Enterprises have been made in the accounts, as required under the Micro, Small and Medium Enterprises Development Act, 2006 to the extent of information available with the Company determined on the basis of intimation received from suppliers regarding their status and the required disclosure is given below :

* Note : These figures do not include any amounts due and outstanding to be credited to the Investor Education and Protection Fund. During the year ended 31st March, 2015, Company had deposited Rs. 3 lakhs (Previous Year Rs. 6 lakhs) to the Investor Education and Protection Fund towards Unclaimed Dividend.

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, given below are movements in provision for Frequent Flyer Programme and Aircraft Maintenance Costs :

a) Frequent Flyer Programme :

Uptill 21st April 2014, the Company had a Frequent Flyer Programme named 'Jet Privilege', wherein the passengers who frequently use the services of the Airline become members of 'Jet Privilege' and accumulate miles to their credit. Subject to certain terms and conditions of 'Jet Privilege', the passenger is eligible to redeem such miles lying to their credit in the form of free tickets. The cost of allowing free travel to members as contractually agreed under the frequent flyer programme was accounted considering such miles accrued on an incremental cost basis.

The movement in the incremental provisions made before the slump sale in the current year is as under :

Effective 2 1 April, 2014, pursuant to the Slump sale Agreement (.Refer note 40), the Jet Privilege' miles continue to accrue and are accumulated to the credit of the members account maintained with Jet Privilege Private Limited ('JPPL'), an associate company. The Company pays contracted rate for each such mile accrued to its passengers and charges the same to the Statement of Profit and Loss.

b) Aircraft Maintenance Costs :

Certain heavy maintenance checks including overhaul of Auxiliary Power Units need to be performed at specified intervals as enforced by the Director General of Civil Aviation in accordance with the Maintenance Program Document laid down by the manufacturers. The movements in provisions made in the earlier years until AS-29 became effective for such costs are as under :

* Note : Adjustments during the year represent exchange fluctuation impact consequent to restatement of liabilities denominated in foreign currency.

Deposits / Advances/ Other receivable include Rs. Nil (Previous Year Rs. 2,200 lakhs) amount placed with private limited companies in which the Company's Director is a Director / Member.

Effective 21st April, 2014, pursuant to the Slump Sale Agreement (Refer note 40), the 'Jet Privilege' miles continue to accrue and are accumulated to the credit of the members account maintained with Jet Privilege Private Limited ('JPPL'), an associate company. The Company pays contracted rate for each such mile accrued to its passengers and charges the same to the Statement of Profit and Loss.

a) Uptil previous year, due to unusual and steep depreciation in the value of the Rupee, the unrealised exchange loss (net) had been considered by the Company to be exceptional in nature. The unrealised exchange Gain / (Loss) refers to the Gain / (Loss) arising out of the restatement of the foreign currency monetary assets and liabilities (other than asset backed borrowings).

b) Pursuant to a "Power by the Houi" (PBTH) engine maintenance arrangement entered into by the Company with a service provider for its ATR and B777 Aircraft engines, the PBTH costs are being charged to the Statement of Profit and Loss and the variable rentals payable to the Lessors, based on maintenance plan, are being recognised as "Receivable From Lessors". Based on a joint validation of the Company's maintenance plan with the service provider, the Company has recognised the expected refunds of variable rentals till 31st March, 2014 as "Contribution receivable from Lessors" towards maintenance.

A. Contingent Liabilities

(Rs in lakhs) Particulars As at 31st March, 2015 2014

a) Guarantees :

i. Letters of Credit Outstanding 183,371 191,812

ii. Bank Guarantees Outstanding 143,150 127,710

iii. Corporate Guarantee given to Banks and Financial Institutions against credit facilities and to Lessors /service provider against financial obligations extended to Subsidiary Company :

- Amount of Guarantee 30,776 37,580

- Outstanding Amounts against the Guarantee 24,215 35,358

b) Claims against the Company not acknowledged as debt (Refer note below) :

i. Service Tax Demands in Appeals 85,418 227,081

ii. Fringe Benefit Tax Demands in Appeals 4,462 4,462

iii. Pending Civil and Consumer Suits 12,044 8,145

iv. Inland Air Travel Tax Demands under Appeal 426 426

Amount deposited with the Authorities for the above Demands 105 105

v. Octroi 2,899 2,899

vi. Customs 1,510 426

vii. Income Tax Demands in Appeal 10,872 23,349

viii. Employee State Insurance Corporation 2,999 2,999

ix. The Company has provided security by way of a mortgage on its land situated at Bandra-Kurla Complex, Mumbai along with construction thereon, present and future and first charge on Company's entitlement under the development agreement (excluding built up area of 75,000 square feet) for the aforesaid plot of land against the financial assistance of Rs. 125,000 lakhs (Previous Year Rs. 75,000 lakhs) provided by a financial institution to its developer Godrej Buildcon Private limited. Out of the said amount of Rs. 125,000 lakhs, charge in respect of an amount of Rs. 50,000 lakhs is pending for creation.

x. The Company had acquired 100% of the shareholding of Sahara Airlines Limited (SAL) (now known as Jet Lite (India) Limited) in April, 2007. As per the Share Purchase Agreement (SPA) as amended by the subsequent Consent Award, the mutually agreed sale consideration was to be paid to the Selling Shareholders Sahara India Commercial Corporation Limted (SICCL) in four equal interest free instalments by 30th March, 2011. As a result of certain disputes that arose between the parties, both the parties had filed petitions in the Hon'ble Bombay High Court for breach of SPA as amended by the subsequent Consent Award. The Hon'ble Bombay High Court delivered its Judgment on 4th May, 2011 whereby SICCL's demand for restoration of the original price of Rs. 200,000 lakhs was denied and the Purchase Consideration was sealed at the revised amount of Rs. 145,000 lakhs. However, in its judgment, the Hon'ble Bombay High Court has awarded interest at 9% p.a. on the delayed payments made to SICCL largely on account of ongoing legal dispute. In view of this Order, a sum of Rs. 11,643 lakhs became payable as interest which has been duly discharged by the Company. As a result of this discharge, the undertaking given by the Company in April 2009 for not creating any encumbrance or alienation of its moveable or immoveable assets and properties in any manner other than in the normal course of the business, stands released.

Though the Company had complied with the order of the Hon'ble Bombay High Court, based on legal advice, it filed an appeal with the Division Bench of the Hon'ble Bombay High Court contesting the levy of interest. SICCL also filed an appeal with the Division Bench of the Hon'ble Bombay High Court for restoration of the purchase consideration to Rs. 200,000 lakhs and for interest to be awarded at 18% p.a. as against the 9% p.a. awarded by the Hon'ble Bombay High Court.

The Division Bench of the Hon'ble Bombay High Court heard the matter and vide its order dated 17th October, 2011 dismissed both the appeals as being not maintainable in view of jurisdictional issue. The Company has since filed Special Leave Petitions (SLP) before the Hon'ble Supreme Court challenging both the orders of 4th May, 2011 and 17th October, 2011. SICCL had earlier filed a SLP before the Hon'ble Supreme Court for increased compensation and interest.

Both the SLPs, filed by Jet Airways as well as SICCL, came up for hearing before the Supreme Court. The Supreme Court directed the parties to file the Counter and Rejoinder, which has since been filed. The Supreme Court also recorded that the statement made by Jet Airways, as recorded in the order dated 6th May, 2011 passed by the Hon'ble Bombay High Court, would continue till further orders.

The Company has filed its Counter Affidavit in the SLPs filed by SICCL and the Hon'ble Supreme Court has granted further time to SICCL to file their Rejoinder.

Note :

The Company is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on its financial conditions, results of operations or cash flows. Further, claims by parties in respect of which the Management have been legally advised that the same are frivolous and not tenable, have not been considered as contingent liabilities as the possibility of an outflow of resources embodying economic benefit is highly remote.

2. FOREIGN EXCHANGE DIFFERENCES

With effect from 1st April, 2011, the Company opted to apply the provisions under Para 46A of AS 11 with effect from 1st April, 2011. In line with the said notification, the Company has amortised the exchange difference as detailed in the Accounting Policy L in Note 1. The unamortised portion of Rs. 6,709 lakhs (Previous Year Rs. 4,690 lakhs) is accumulated in Foreign Currency Monetary Item Translation Difference Account (FCMITDA) grouped under reserves and surplus. The amortised portion of foreign exchange (Gain) / Loss (net) incurred on long term foreign currency monetary items for the year ended 31st March, 2015 is Rs. (4,331) lakhs (Previous Year Rs. (2,876) lakhs). Further, the amount of exchange difference adjusted to the tangible assets during the year is Rs. 23,292 lakhs - net loss (Previous Year Rs. 72,827 lakhs - net loss) and the unamortised balance (carried as a part of tangible asset), as at the year end, aggregates to Rs. 236,865 lakhs (Previous Year Rs. 231,084 lakhs).

3. DISCLOSURE ON DERIVATIVES

In the past, the Company had entered into derivative contracts i.e. Interest Rate Swaps (IRS) in order to hedge and manage its foreign currency exposures towards foreign currency borrowings. Such derivative contracts, were in the nature of firm commitments and were entered into by the Company for hedging purposes only and not for any trading or speculation purposes.

The Company accounted for the above said IRS in line with the pronouncement of The Institute of Chartered Accountants of India for "Accounting for Derivatives" along with principles of prudence as enunciated in Accounting Standard (AS-1) "Disclosure of Accounting Polices".

On that basis, the changes in the fair value of the derivative instruments as at 31st March, 2015 of Rs. Nil (Previous Year Rs. 938 lakhs) has been credited (net gain) to the extent of reversal of net loss charged to the Statement of Profit and Loss in earlier years and disclosed as an exceptional item.

There were no contracts outstanding as at the year ended 31st March, 2015 and 31st March, 2014.

The foreign currency exposures (other than investments) that have not been hedged by any derivative instrument or otherwise as on 31st March are as follows :

* includes Loans payable after 5 years - Rs. 1,854 lakhs (Previous Year Rs. 129,794 lakhs).

# includes Loans payable after 5 years - Rs. 3,250 lakhs (Previous Year Rs. Nil).

4. The Company has equity investment (net of impairment) of Rs. Nil (as on 31st March, 2014 it was Rs. 94,500 lakhs) in Jet Lite (India) Limited, a wholly owned subsidiary ("subsidiary company"), and has advanced loans (net of provision) amounting to Rs. 209,412 lakhs as on 31st March, 2015 (as on 31st March, 2014 it was Rs. 196,392 lakhs). The subsidiary company continues to incur losses and has negative net worth as on 31st March, 2015. During the financial year 2014- 15, the Company has implemented a single brand strategy with the subsidiary company effective 1st December, 2014. Considering this strategy, a detailed business plan of the subsidiary company has been drawn and an independent external valuer has determined the enterprise value of the subsidiary company as on 31st March, 2015. Based on this valuation, the Company has made a provision for other than temporary diminution in value of investments of Rs. 94,500 lakhs (previous year Rs. 70,000 lakh) and for loans of Rs. 22,739 lakhs (previous year Rs. Nil) to fairly reflect the recoverable amount.

5. EMPLOYEES BENEFITS

A. Defined contribution plans

The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees. The Company recognised Rs. 4,719 lakhs (Previous Year Rs. 4,032 lakhs) for provident fund contributions in the Statement of Profit and Loss.

B. Defined benefit plan

The Company provides the annual contributions as a non-funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under :

i. On normal retirement / early retirement / withdrawal / resignation :

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of continuous service.

ii. On death while in service :

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity was carried out on 31st March, 2015 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The estimates of rate of escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

C. Other Long Term Employee Benefit

The obligation of Compensated Absences (non-funded) for the year ended 31st March, 2015, amounting to Rs. 529 lakhs (Previous Year Rs. 1,552 lakhs) has been recognised in the Statement of Profit and Loss, based on actuarial valuation carried out using the Projected Unit Credit Method.

6. The Company has entered into a "Power by the Hour" (PBTH) Engine Maintenance agreements with a Service providers for its Next Generation Boeing 737 Aircraft fleet, ATR Aircraft fleet and Boeing 777 Aircraft fleet for future engine shop visits. Subsequent to such arrangements, the Company expenses out the cost of PBTH at the rate specified in the contract with the service provider to the Statement of Profit and Loss and treats the variable rentals payable to the Lessors as receivables to the extent considered good of recovery for set off against future claims reimbursable by the Lessors on each engine shop visit. The Company has recognised such expected refunds of variable rentals from lessors towards future engine repairs based on joint validation of the Company's maintenance plan with the service provider. Accordingly, such variable rent of Rs. 77,106 lakhs (Previous Year Rs. 49,586 lakhs) has been presented as "Contribution Receivable from Lessors" bifurcated into current and non-current based on expected engine shop visits in next 12 months and beyond.

7. LEASES

The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on 'Leases', the future minimum lease payments on account of each type of lease are as follows :

The salient features of a Finance Lease / Hire Purchase Agreement are :

- Option to purchase the Aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount or at the end of the Hire Purchase term on payment of a nominal option price.

- In the event of default, the Hirer / Lessee is responsible for payment of all costs of the Owner including the financing cost and other associated costs. Further a right of repossession is available to the Owner / Lessor.

- The Hirer / Lessee is responsible for maintaining the Aircraft as well as insuring the same.

- In the case of Finance Lease, the property passes to the Lessee, on payment of a nominal option price at the end of the term.

B. Operating Leases

a) The Company has taken various residential / commercial premises under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

The future minimum lease payments in respect of non-cancellable period, as at 31st March are as follows :

b) The Company has taken on operating lease Aircraft and Spare Engines. The future minimum lease payments in respect of which, as at 31st March are as follows :

The Salient features of an Operating Lease agreement are :

- Monthly rentals paid in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in the respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- In case of delayed payments, penal charges are payable as applicable.

- In case of default, in addition to repossession of the aircraft, damages including liquidated damages are payable.

- The Lessee is responsible for maintaining the Aircraft as well as insuring the same. The Lessee is eligible to claim reimbursement of costs as per the terms of the lease agreement.

- These leases are non-cancellable.

c) The future minimum lease payments in respect of Landing Rights, are as follows :

The Salient features of Dry Lease agreements are as under :

- Aircraft are leased without insurance and crew.

- Monthly rentals paid are in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre-determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- These dry leases are non-cancellable.

The Salient features of Wet Lease agreements are as under :

- Operational control and maintenance of aircraft remains the responsibility of the Lessor. The aircraft remains on Indian registry and is operated with the Lessor's crew.

- Monthly rentals are receivable on predetermined rates based on minimum guaranteed utilisation.

- The Wet leases are non-cancellable.

Details of owned Aircraft given on non-cancellable Dry and Wet Lease are as under :

Details of Assets given on Leased (Aircraft)

e) The lease rental expense of Rs. 278,149 lakhs (Previous Year Rs. 284,660 lakhs) is recognised during the year.

8. SEGMENT INFORMATION

a) Primary Segment : Geographical Segment

The Company, considering its level of international operations and internal financial reporting based on geographic segment, has identified geographic segment as primary segment.

The geographic segment consists of :

i. Domestic (air transportation within India)

ii. International (air transportation outside India)

Leasing operations are classified into (i) or (ii) above based on the domicile of the lessee being within or outside India.

Revenue and expenses directly attributable to segments are reported based on items that are individually identifiable to that segment, while the remainder of the expenses are categorized as unallocated which are mainly employee remuneration and benefits, other selling and distribution expenses, other operating expenses, aircraft lease rentals, depreciation / amortisation and finance cost, since these are not specifically allocable to specific segments as the underlying assets / services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to these revenue and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total revenues.

The Company believes that it is not practical to identify fixed assets used in the Company's business or liabilities contracted, to any of the reportable segments, as the fixed assets are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

b) Secondary Segment : Business Segment

The Company operates into two business segments viz. Air Transportation and Leasing of Aircraft and has identified the same as secondary segment to be reported considering the requirement of Accounting Standard 17 on "Segment Reporting" which is disclosed as under :

9. RELATED PARTY TRANSACTIONS

As per Accounting Standard - 18 on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India, the disclosure of transactions with the related party as defined in the Accounting Standard are given below :

List of Related Parties with whom transactions have taken place and Relationships

Name of the Related Party:

Naresh Goyal

Etihad Airways PJSC (w.e.f. 20th November, 2013)

Jet Lite (India) Limited

Jet Airways Training Academy Private Limited

Jet Privilege Private Limited (Subsidiary upto 23rd March, 2014)

Anita Goyal

Nivaan Goyal

Namrata Goyal

Gaurang Shetty

Tail Winds Limited (Holding Company upto 30th May, 2013)

Jetair Private Limited

Trans Continental e Services Private Limited

Jet Enterprises Private Limited

Jet Airways Europe Services N.V.

Jetair Tours Private Limited

Global Travel Solutions Private Limited

Nature of Relationship:

Controlling Shareholder of the Company

Enterprise exercising Significant Influence over the Company.

Wholly Owned Subsidiary Company (Control exists)

Associate Company

Relatives of controlling shareholder

Key Managerial Personnel

Enterprises over which controlling shareholder and his relatives are able to exercise significant influence directly or indirectly.

10. Pursuant to Shareholders' approval sought at an Extra Ordinary General Meeting held on 24th May, 2013, the Company at its Board Meeting held on 20th November, 2013 approved the issue and allotment of 27,263,372 Equity Shares of the face value of Rs. 10 each fully paid at a price of Rs. 754.7361607 per share (including a premium of Rs. 744.7361607 per share) aggregating to Rs. 20,576,652,711.02 to Etihad Airways PJSC on a preferential basis per terms of the Investment Agreement entered between Etihad Airways PJSC and the Company on April 24, 2013 and amendments thereto. Following the preferential allotment, Etihad Airways PJSC holds 24% of the post issued paid up Share Capital of the Company.

Details of funds raised through preferential allotment and its utilisation are as under :

11. The Company has transferred its 'Jet Privilege Frequent Flyer Programme' (JPFFP) undertaking to Jet Privilege Private Limited (JPPL) on 21st April, 2014 as a going concern on a slump sale basis for a total consideration of Rs. 119,378 lakhs. Upon completion of the balance pending matters, the Company, having regard to the terms and conditions under the agreements for such sale, has recognised a surplus of Rs. 30,501 lakhs during the Year ended 31st March, 2015 under "Exceptional Items". An amount of Rs. 26,248 lakhs has been recognised in "Other Income" for the Year ended 31st March, 2015. Further, an amount of Rs. 96,292 lakhs disclosed under "Other Liabilities" (Current Liability -Rs. 27,801 lakhs and Non-Current Liability - Rs. 68,491 lakhs) will be credited to income in subsequent periods proportionately on fulfilment of the underlying commitments / obligations as stipulated in the said agreements.

12. During the year ended 31st March, 2014, the Company was under the obligation to return Aircraft taken earlier on operating lease, one of the engines of the said Aircraft was damaged and became Beyond Economical Repair (BER) and in order to meet redelivery conditions, the Company has purchased an engine for Rs. 2,091 lakhs as "Asset Held for Sale" and later on swapped it against the BER engine with the Lessor. The cost of engine purchased on account of this swap has been charged to Statement of Profit and Loss.

13. With strategic investment by Etihad Airways PJSC, there is an improvement in operating cash inflows through network synergy, cost synergies, revenue management and leasing out aircraft. These measures coupled with ongoing initiatives to raise funds are expected to result in sustainable cash flows and accordingly the financial statement continue to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business.

14. PREVIOUS YEARS FIGURES

Previous yeafis figures have been regrouped / reclassified / rearranged / reworked wherever necessary to correspond with the current year's classification / presentation.


Mar 31, 2014

1. Contingent LIABILITIES And Commitments’ (TO THE Extent not Provided FOR)

A. Contingent Liabilities

( in lakhs)

Particulars As at 31st March,

2014 2013

a) Guarantees :

i. Letters of Credit Outstanding 191,812 175,989

ii. Bank Guarantees Outstanding 127,710 123,562 iii.Corporate Guarantee given to Banks and Financial

Institutions against credit facilities and to Lessors against financial obligations extended to Subsidiary Company :

- Amount of Guarantee 37,580 56,127

- Outstanding Amounts against the Guarantee 35,358 55,550

b) Claims against the Company not acknowledged as debt (Refer note below) :

i. Service Tax Demands in Appeals 227,081 161,325

ii. Fringe Benefit Tax Demands in Appeals 4,462 8,941

iii.Pending Civil and Consumer Suits 8,145 6,716

iv. Inland Air Travel Tax Demands under Appeal 426 426

Amount deposited with the Authorities for the above Demands 105 105

v. Octroi 2,899 2,899

vi. Customs 426 621

vii.Income Tax Demands in Appeal 23,349 29,157

viii.Employee State Insurance Corporation 2,999 -

ix. The Company has provided security by way of a mortgage on its land situated at Bandra-Kurla Complex, Mumbai along with construction thereon, present and future and first charge on Company''s entitlement under the development agreement (excluding built up area of 75,000 square feet) for the aforesaid plot of land against the financial assistance of Rs. 75,000 lakhs (Previous Year Rs. 75,000 lakhs) provided by a financial institution to its developer Godrej Buildcon Private limited.

x. The Company had acquired 100% of the shareholding of Sahara Airlines Limited (SAL) (now known as Jet Lite (India) Limited) in April, 2007. As per the Share Purchase Agreement (SPA) as amended by the subsequent Consent Award, the mutually agreed sale consideration was to be paid to the Selling Shareholders (SICCL) in four equal interest free installments by 30th March, 2011. As a result of certain disputes that arose between the parties, both the parties had filed petitions in the Hon''ble Bombay High Court for breach of SPA as amended by the subsequent Consent Award. The Hon''ble Bombay High Court delivered its Judgment on 4th May, 2011 whereby SICCL''s demand for restoration of the original price of Rs. 200,000 lakhs was denied and the Purchase Consideration was sealed at the revised amount of Rs. 145,000 lakhs. However, in its judgment, the Hon''ble Bombay High Court has awarded interest at 9% p.a. on the delayed payments made to SICCL largely on account of ongoing legal dispute. In view of this Order, a sum of Rs. 11,643 lakhs became payable as interest which has been duly discharged by the Company. As a result of this discharge, the undertaking given by the Company in April 2009 for not creating any encumbrance or alienation of its moveable or immoveable assets and properties in any manner other than in the normal course of the business, stands released.

Though the Company had complied with the order of the Hon''ble Bombay High Court, based on legal advice, it filed an appeal with the Division Bench of the Hon''ble Bombay High Court contesting the levy of interest. SICCL also filed an appeal with the Division Bench of the Hon''ble Bombay High Court for restoration of the purchase consideration to Rs. 200,000 lakhs and for interest to be awarded at 18% p.a. as against the 9% p.a. awarded by the Hon''ble Bombay High Court.

The Division Bench of the Hon''ble Bombay High Court heard the matter and vide its order dated 17th October, 2011 dismissed both the appeals as being not maintainable in view of jurisdictional issue. The

Company has since filed Special Leave Petitions (SLP) before the Hon''ble Supreme Court challenging both the orders of 4th May, 2011 and 17th October, 2011. SICCL had earlier filed a SLP before the Hon''ble Supreme Court for increased compensation and interest.

Both the SLPs, filed by Jet Airways as well as SICCL, came up for hearing before the Supreme Court. The Supreme Court directed the parties to file the Counter and Rejoinder, which has since been filed.

Note :

The Company is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on its financial conditions, results of operations or cash flows. Further, claims by parties in respect of which the Management have been legally advised that the same are frivolous and not tenable, have not been considered as contingent liabilities as the possibility of an outflow of resources embodying economic benefit is highly remote.

2. Foreign Exchange Differences

Until December, 2011, the Company was following the option offered by notification of the Ministry of Corporate Affairs (MCA) dated 31st March, 2009 under the Companies (Accounting Standards) Amendment Rules, 2006 which amended Accounting Standard (AS) 11 "The Effects of Changes in Foreign Exchange Rates" by introducing Para 46. On 29th December 2011, the MCA issued a further notification extending the said option under Para 46 and providing additional option under Para 46A amending AS 11. The Company opted to apply the provisions under Para 46A of AS 11 with effect from 1st April, 2011. In line with the said notification, the Company has amortized the exchange difference as detailed in the Accounting Policy L in Note 1. The unamortized portion of Rs. 4,690 lakhs (Previous Year Rs. 9,649 lakhs) is accumulated in Foreign Currency Monetary Item Translation Difference Account (FCMITDA) grouped under reserves and surplus. The amortized portion of foreign exchange (gain) / loss (net) incurred on long term foreign currency monetary items for the year ended 31st March, 2014 is Rs. (2,876) lakhs (Previous Year Rs. 5,429 lakhs). Further, the amount of exchange difference adjusted to the tangible assets during the year is Rs. 72,827 lakhs – net loss (Previous Year Rs. 55,049 lakhs - net loss) and the unamortized balance (carried as a part of tangible asset), as at the year end, aggregates to Rs. 231,084 lakhs (Previous Year Rs. 196,393 lakhs).

3. Disclosure On Derivatives

In the past, the Company had entered into derivative contracts i.e. interest rate swaps (IRS) in order to hedge and manage its foreign currency exposures towards foreign currency borrowings. Such derivative contracts, were in the nature of firm commitments and were entered into by the Company for hedging purposes only and not for any trading or speculation purposes.

On that basis, the changes in the fair value of the derivative instruments as at 31st March, 2014 of Rs. 938 lakhs (Previous Year Rs. 2,834 lakhs) has been credited (net gain) to the extent of reversal of net loss charged to the Statement of Profit and Loss in earlier years and disclosed as an exceptional item. The credit on account of derivative gains has been computed on the basis of MTM values based on the confirmations received from the counter parties and the cumulative net notional loss up till the balance sheet date is Rs. Nil lakhs (Previous Year Rs. 938 lakhs).

4. The Company has equity investment of Rs. 164,500 lakhs in Jet Lite (India) Limited, a wholly owned subsidiary, and has advanced an interest free loan amounting to Rs. 196,392 lakhs as on 31st March, 2014 (31st March, 2013 - Equity and Preference investment aggregating to Rs. 164,500 lakhs and interest free loan amounting to Rs. 133,660 lakhs). The subsidiary continues to incur losses and show negative net worth as on 31st March, 2014. The detailed study undertaken on future network synergy and fleet planning by Seabury APG, a renowned domain expert, has recently been concluded. Management based on the recommendations provided by Seabury APG, has approved the parameters to re-organize the fleet and network between Jet Airways and its wholly owned subsidiary Jet Lite (India) Limited. Considering these parameters, detailed business plans have since been drawn and an external valuer has valued the equity interest in the subsidiary based on these business plans. Management has performed a sensitivity analysis on the values so arrived and concluded that provision for diminution of Rs. 70,000 lakhs will fairly reflect the recoverable amount based on prudent assessment. In view of the significant uncertainty as regards the underlying assumptions about future events and the operating parameters, the same will be periodically monitored and changes to reflect the reliable measurement will be made if the conditions so warrant.

5. Employees Benefits

A. Defined contribution plans

The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees. The Company recognized Rs. 4,032 lakhs (Previous YearRs. 3,259 lakhs) for provident fund contributions in the Statement of Profit and Loss.

B. Defined benefit plan

The Company provides the annual contributions as a non-funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under :

i. On normal retirement / early retirement / withdrawal / resignation :

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of continuous service.

ii. On death while in service :

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity was carried out on 31st March, 2014 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

C. Other Long Term Employee Benefit

The obligation of Compensated Absences (non-funded) for the year ended 31st March, 2014, amounting to Rs. 1,552 lakhs (Previous Year Rs. 1,425 lakhs) has been recognized in the Statement of Profit and Loss, based on actuarial valuation carried out using the Projected Unit Credit Method.

6. During the financial year 2009-10, the Company entered into a "Power by the Hour" (PBTH) Engine Maintenance agreement with a Service provider for its Next Generation Boeing 737 Aircraft fleet for future engine shop visits. Subsequent to such arrangement, the Company expenses out the cost of PBTH at the rate specified in the contract with the service provider to the Statement of Profit and Loss and treats the variable rentals payable to the Lessors as receivables to the extent considered good of recovery for set off against future claims reimbursable by the Lessors on each engine shop visit. The Company has recognized such expected refunds of variable rentals from lessors towards future engine repairs based on joint validation of the Company''s maintenance plan with the service provider. Accordingly, such variable rent of Rs. 49,586 lakhs (Previous YearRs. 64,184 lakhs) has been presented as "Contribution Receivable from Lessors" bifurcated into current and non-current based on expected engine shop visits in next 12 months and beyond.

- Option to purchase the Aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount or at the end of the Hire Purchase term on payment of a nominal option price.

- In the event of default, the Hirer / Lessee is responsible for payment of all costs of the Owner including the fnancing cost and other associated costs. Further a right of repossession is available to the Owner / Lessor.

- The Hirer / Lessee is responsible for maintaining the Aircraft as well as insuring the same.

- In the case of Finance Lease, the property passes to the Lessee, on payment of a nominal option price at the end of the term.

B. Operating Leases

a) The Company has taken various residential / commercial premises under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

- Monthly rentals paid in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in the respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- In case of delayed payments, penal charges are payable as applicable.

- In case of default, in addition to repossession of the aircraft, damages including liquidated damages are payable.

- The Lessee is responsible for maintaining the Aircraft as well as insuring the same. The Lessee is eligible to claim reimbursement of costs as per the terms of the lease agreement.

- These leases are non-cancellable.

- Monthly rentals paid are in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre-determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- These dry leases are non-cancellable.

The Salient features of Wet Lease agreements are as under:

- Operational control and maintenance of aircraft remains the responsibility of the Lessor. The aircraft remains on Indian registry and is operated with the Lessor''s crew.

- Monthly rentals are receivable on predetermined rates based on minimum guaranteed utilisation.

- The Wet leases are non-cancellable.

e) The lease rental expense of Rs. 284,660 lakhs (Previous Year Rs. 186,032 lakhs) is recognized during the year.

7. Segment Information

a) Primary Segment : Geographical Segment

The Company, considering its level of international operations and internal financial reporting based on geographic segment, has identified geographic segment as primary segment.

The geographic segment consists of :

i. Domestic (air transportation within India)

ii. International (air transportation outside India)

Leasing operations are classified into (i) or (ii) above based on the domicile of the lessee being within or outside India.

Revenue and expenses directly attributable to segments are reported based on items that are individually identifiable to that segment, while the remainder of the expenses are categorized as unallocated which are mainly employee remuneration and benefits, other selling and distribution expenses, other operating expenses, aircraft lease rentals, depreciation / amortization and finance cost, since these are not specifically allocable to specific segments as the underlying assets / services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to these revenue and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total revenues.

The Company believes that it is not practical to identify fixed assets used in the Company''s business or liabilities contracted, to any of the reportable segments, as the fixed assets are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

8. Pursuant to Shareholders'' approval sought at an Extra Ordinary General Meeting held on 24th May, 2013, Company at its Board Meeting held on 20th November, 2013 approved the issue and allotment of 27,263,372 Equity Shares of the face value of Rs. 10 each fully paid at a price of Rs. 754.7361607 per share (including a premium of Rs. 744.7361607 per share) aggregating to Rs. 20,576,652,711.02 to Etihad PJSC on a preferential basis per terms of the Investment Agreement entered between Etihad PJSC and the Company on April 24, 2013 and amendments thereto. Following the preferential allotment, Etihad PJSC holds 24% of the post issued paid up share capital of the Company.

9. The Company at its Board Meeting held on 20th November, 2013 proposed the transfer / sale / disposal of the undertaking viz. ''Jet Privilege Frequent Flyer Programme'' (JPFFP) to its then subsidiary, Jet Privilege Private Limited (JPPL) as a going concern on a slump sale basis. The same has been approved by Shareholders of the Company by way of Special Resolution, carried out through a postal ballot process, the results of which were announced on 20th March, 2014.

During the Year, Company has received an advance ofRs. 119,378 lakhs from JPPL against the above said slump sale. Upon satisfaction of all the conditions, the Company has transferred its JPFFP business to JPPL on 21st April, 2014.

The aforesaid advance together with advance of Rs. 15,000 lakhs received against a "Ticket Sale Agreement" with JPPL is disclosed under other current liabilities.

10. During the year ended 31st March, 2014, the Company was under the obligation to return Aircraft taken earlier on operating lease, one of the engines of the said Aircraft was damaged and became Beyond Economical Repair (BER) and in order to meet redelivery conditions, the Company has purchased an engine for Rs. 2,091 lakhs as "Asset Held for Sale" and later on swapped it against the BER engine with the Lessor. The cost of engine purchased on account of this swap has been charged to statement of Profit and Loss.

11. The Airline Industry has been adversely affected by the general economic slowdown. This coupled with high fuel cost significantly impacted the performance and cash flows of the Company and its major subsidiary resulting in substantial erosion of the net worth. With the strategic investment by Etihad PJSC, the Management expects to improve operating cash flows through cost synergies, revenue management, network synergy, leasing out aircraft etc. These measures are expected to result in sustainable cash flows and accordingly the Financial Statements continue to be presented on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business.

12. Previous Years Figures

Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / presentation.


Mar 31, 2013

1. FOREIGN EXCHANGE DIFFERENCES

Uptill December, 2011, the Company was following the option offered by notification of the Ministry of Corporate Affairs (MCA) dated 31st March, 2009 under the Companies (Accounting Standards) Amendment Rules, 2006 which amended Accounting Standard (AS) 11 "The Effects of Changes in Foreign Exchange Rates" by introducing Para 46. On 29th December 2011, the MCA issued a further notification extending the said option under Para 46 and providing additional option under Para 46A amending AS 11. The Company opted to apply the provisions under Para 46A of AS 11 with effect from 1st April, 2011. In line with the said notification, the Company has amortized the exchange difference as detailed in the Accounting Policy L in Note 1. The unamortized portion of Rs. 9,649 lakhs (Previous Year Rs. 14,094 lakhs) is accumulated in Foreign Currency Monetary Item Translation Difference Account (FCMITDA) grouped under reserves and surplus. The amortized portion of foreign exchange loss (net) incurred on long term foreign currency monetary items for the year ended 31st March, 2013 is Rs. 5,429 lakhs (Previous Year Rs. 4,006 lakhs). Further, the amount of exchange difference adjusted to the tangible assets during the year is Rs. 55,049 lakhs - net loss (Previous Year Rs. 110,567 lakhs - net loss) and the unamortized balance (carried as a part of tangible asset), as at the year end, aggregates to Rs. 196,393 lakhs (Previous Year Rs. 201,216 lakhs).

2. DISCLOSURE ON DERIVATIVES

In the past, the Company had entered into derivative contracts i.e. interest rate swaps (IRS) in order to hedge and manage its foreign currency exposures towards foreign currency borrowings. Such derivative contracts, were in the nature of firm commitments and were entered into by the Company for hedging purposes only and not for any trading or speculation purposes.

The Company continues to account for the above said IRS in line with the pronouncement of The Institute of Chartered Accountants of India for "Accounting for Derivatives" along with principles of prudence as enunciated in Accounting Standard (AS-1) "Disclosure of Accounting Polices".

On that basis, the changes in the fair value of the derivative instruments as at 31st March, 2013 of Rs. 2,834 lakhs (Previous Year Rs. 1,384 lakhs) has been credited (net gain) to the extent of reversal of net loss charged to the Statement of Profit and Loss in earlier years and disclosed as an exceptional item. The credit on account of derivative gains has been computed on the basis of MTM values based on the confirmations received from the counter parties and the cumulative net notional loss uptill the balance sheet date is Rs. 938 lakhs (Previous Year Rs. 3,772 lakhs).

3. The Company has equity and preference investments aggregating to Rs. 164,500 lakhs (Previous Year Rs. 164,500 lakhs) in Jet Lite (India) Limited, a wholly owned subsidiary, and has advanced an interest free loan amounting to Rs. 133,660 lakhs (Previous Year Rs. 128,239 lakhs) as on 31st March, 2013. Although the said subsidiary improved its operating revenue over the previous year, the results finally turned out to be negative and the subsidiary company continues to show negative net worth as on 31st March, 2013. An external reputed valuer, based on future business plans as approved by the Board of the subsidiary company, has valued the equity interest in the subsidiary, which supports the carrying value of such investment as at the balance sheet date. The Company is committed to support the subsidiary''s operations and with the recent announcement of its tie up with a strategic partner pursuant to the announcement of the liberalized FDI policy, it expects to turn it around. Accordingly, the subsidiary''s financial statements have been prepared on a "Going Concern" basis and no provision is considered necessary at this stage in respect of the Company''s investments in and the loans outstanding from the said subsidiary.

4. EMPLOYEES BENEFITS

A. Defined contribution plans

The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees. The Company recognized Rs. 3,506 lakhs (Previous Year Rs. 3,528 lakhs) for provident fund contributions in the Statement of Profit and Loss.

B. Defined benefit plan

The Company provides the annual contributions as a non-funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under :

i. On normal retirement / early retirement / withdrawal / resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of continuous service.

ii. On death while in service :

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity was carried out at 31st March, 2013 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

C. Other Long Term Employee Benefit

The obligation of Compensated Absences (non-funded) for the year ended 31st March, 2013, amounting to Rs. 1,425 lakhs (Previous Year Rs. 1,074 lakhs) has been recognized in the Statement of Profit and Loss, based on actuarial valuation carried out using the Projected Unit Credit Method.

5. During the financial year 2009-10, the Company entered into a "Power by the Hour" (PBTH) Engine Maintenance agreement with a Service provider for its Next Generation Boeing 737 Aircraft fleet for future engine shop visits. Subsequent to such arrangement, the Company expenses out the cost of PBTH at the rate specified in the contract with the service provider to the Statement of Profit and Loss and treats the variable rentals payable to the Lessors as receivables to the extent considered good of recovery for set off against future claims reimbursable by the Lessors on each engine shop visit. The Company has recognized such expected refunds of variable rentals from lessors towards future engine repairs based on joint validation of the Company''s maintenance plan with the service provider. Accordingly, such variable rent of Rs. 64,184 lakhs (Previous Year Rs. 45,437 lakhs) has been presented as "Contribution Receivable from Lessors" bifurcated into current and non-current based on expected engine shop visits in next 12 months and beyond. An amount of Rs. 11,866 lakhs was recognized as recoverable during the previous year against variable rentals of past years accrued up till 31st March, 2009 and was disclosed as an exceptional item in the Statement of Profit and Loss.

6. LEASES

The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on ''Leases'', the future minimum lease payments on account of each type of lease are as follows:

The salient features of a Finance Lease / Hire Purchase Agreement are :

- Option to purchase the Aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount or at the end of the Hire Purchase term on payment of a nominal option price.

- In the event of default, the Hirer / Lessee is responsible for payment of all costs of the Owner including the financing cost and other associated costs. Further a right of repossession is available to the Owner / Lessor.

- The Hirer / Lessee is responsible for maintaining the Aircraft as well as insuring the same.

- In the case of Finance Lease, the property passes to the Lessee, on payment of a nominal option price at the end of the term.

B. Operating Leases

a) The Company has taken various residential / commercial premises under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

The future minimum lease payments in respect of non-cancellable period, as at 31st March, 2013 are as follows :

7. SEGMENT INFORMATION

a) Primary Segment : Geographical Segment

The Company, considering its level of international operations and internal financial reporting based on geographic segment, has identified geographic segment as primary segment.

The geographic segment consists of :

i. Domestic (air transportation within India)

ii. International (air transportation outside India)

Leasing operations are classified into (i) or (ii) above based on the domicile of the lessee being within or outside India.

Revenue and expenses directly attributable to segments are reported based on items that are individually identifiable to that segment, while the remainder of the expenses are categorized as unallocated which are mainly employee remuneration and benefits, other selling and distribution expenses, other operating expenses, aircraft lease rentals, depreciation / amortization and finance cost, since these are not specifically allocable to specific segments as the underlying assets / services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to these revenue and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total revenues.

The Company believes that it is not practical to identify fixed assets used in the Company''s business or liabilities contracted, to any of the reportable segments, as the fixed assets are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

8. The Airline Industry has been adversely affected by the general economic slowdown. This coupled with high fuel cost significantly impacted the performance and cash flows of the Company and its major Subsidiary resulting in substantial erosion of the net worth. With the recent announcement of a tie up with a strategic partner, the Management is optimistic of improving the operating cash flows through equity infusion, network synergy, expanded code sharing, cost synergies, leasing out Aircraft, exploring avenues of enhancing ancillary revenues etc. These measures are expected to result in sustainable cash flows and accordingly the financial statement continue to be presented on a going concern basis, which contemplates realization of assets and settlement of liabilities in the normal course of business.

9. PREVIOUS YEARS FIGURES

Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / presentation.


Mar 31, 2012

A. Terms / Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends if any, in Indian rupees. The dividend proposed if any, by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the Shareholders.

Security and Salient Terms :

a. Rupee Term Loan of Rs. 44,997 lakhs (Previous year Rs. 60,000 lakhs) and Foreign Currency Term Loan Rs. 34,458 lakhs (Previous year Rs. 40,273 lakhs) are secured by way of a pari-passu charge on all the current and future domestic credit card realizations received into the Trust and Retention Account including interest earned thereon.

Interest rate is linked to respective Banks' Prime Lending Rate / Base Rate / LIBOR plus Margin and are repayable in instalments starting from July, 2011 and ending in June, 2014.

b. Foreign Currency Term Loans of Rs. 81,577 lakhs (Previous year Rs. 101,792 lakhs) are secured by way of a pari-passu charge on all the current and future international credit card realizations received into the Trust and Retention Account, together with First mortgage and charge on the four flight simulators and on the land located at Vadgaon, Pune.

Interest rates are linked to LIBOR plus Margin and are repayable in instalments starting from September, 2010 and ending in April, 2014.

c. Foreign Currency Term Loan of Rs. 44,979 lakhs (Previous year Rs. Nil) is hypothecated by way of a pari-passu charge on domestic credit card realizations.

Interest rate is linked to LIBOR plus margin and is repayable in instalments starting from July, 2011 and ending in May, 2015.

d. Rupee Term Loan from a Financial Institution of Rs. 32,500 lakhs (Previous year Rs. 32,500 lakhs) is secured by way of a pledge of 100% of Equity Share Capital of Jet Lite (India) Limited held by the Company. Further, in the event of default in payment of interest or repayment of any two consecutive instalments of the loan by the Company, the Institution reserves a conversion option to convert either the whole or part of the defaulted amount into fully paid Equity Shares of the Company at par.

Interest rate is linked to Institutions Benchmark Rate plus Margin and is repayable in six quarterly instalments starting from June, 2012.

e. (i) Term Loan from a financial institution of Rs. Nil (Previous year Rs. 36,180 lakhs) was secured by mortgage on leasehold land situated

at Bandra Kurla Complex, Mumbai and construction thereon, present and future.

Interest rate was LIBOR plus Margin and was repaid in December, 2011 ahead of repayment scheduled in March, 2012.

(ii) Term Loan from a financial institution of Rs. 38,382 lakhs (Previous year Rs. Nil) is secured by pari-passu charge on leasehold land situated at Bandra Kurla Complex, Mumbai along with construction thereon, present and future and First charge on CompanyRs.s entitlement under the development agreement for the aforesaid plot of land entered into with Godrej Buildcon Private Limited.

Interest rate is LIBOR plus Margin and is repayable in six half yearly instalments from July, 2014.

f. (i) Finance Lease obligation for six Aircraft are secured by Corporate Guarantee given by the Subsidiary Company.

(ii) Repayable in quarterly instalments over period of twelve years from the date of disbursement of respective loan. Interest rate is linked with LIBOR plus margin.

Note : During the year, the Company finalized an agreement with Godrej Buildcon Private Limited, Mumbai (GBPL) for the development of its plot of land situated at Bandra Kurla Complex, Mumbai. This land has been taken on long term lease from MMRDA. Consequent to the said agreement, the Company has received a sum of Rs. 50,000 lakhs which includes an advance of Rs. 36,500 lakhs disclosed as 'Other Long Term Liabilities' above and the balance towards :

(a) Reimbursement of Rs. 10,282 lakhs which were charged to the Statement Profit and Loss in the earlier years. The same has been credited to Statement of Profit and Loss during the year, included in 'Other Non-Operating Income' under 'Other Income' (Refer note 24).

(b) Reimbursement of certain costs incurred on such land retained as Capital Work-in-Progress amounting to Rs. 3,218 lakhs.

Redelivery of Aircraft :

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, given below is the movement in provision for Redelivery of Aircraft.

The Company has in its fleet certain Aircraft on operating lease. As per the terms of the lease agreements, the Aircraft have to be redelivered to the lessors at the end of the lease term in certain stipulated technical conditions. Such redelivery conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and the cost of ferrying the Aircraft to the location as stipulated in the lease agreements.

The Company, therefore, provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease period.

Security and Salient Terms :

a. Loans aggregating to Rs. 150,901 lakhs (Previous year Rs. 180,301 lakhs) are secured by way of hypothecation of Inventories (excluding Aircraft fuel), Debtors (excluding credit card receivables), Ground Support Vehicles / Equipments (excluding trucks, jeeps and other motor vehicles), Spares (including engines) and Data Processing Equipments.

b. Loan of Rs. 25,000 lakhs (Previous year Rs. Nil) is secured by an undertaking from the Company to remit the balance sale proceeds from sale and lease back of four (4) Aircraft.

c. Buyer's credit of Rs. 9,770 lakhs (Previous year Rs. Nil) is secured by exclusive charge over two New CFM Engines and Quick Engine Change kits.

d. The rates of interest for the above said loans ranges from 200 base points to 850 base points over LIBOR plus Margin for Foreign Currency Loans and 12 % to 15 % for Rupee Loans.

a) Frequent Flyer Programme :

The Company has a Frequent Flyer Programme named 'Jet Privilege', wherein the passengers who frequently use the services of the Airline become members of 'Jet Privilege' and accumulate miles to their credit. Subject to certain terms and conditions of 'Jet Privilege', the passenger is eligible to redeem such miles lying to their credit in the form of free tickets.

Note :

a) Depreciation on all owned tangible assets (including Simulators) other than Aircraft was before previous year provided on Written Down Value method. During the previous year, in order to reflect a more appropriate preparation / presentation of financial statements, the Company had changed the method of Depreciation on all owned tangible assets (including Simulators) other than Aircraft from Written Down Value Method to Straight Line Method w.e.f. 1st April, 2010 and the surplus amount of Rs. 12,225 lakhs arising from retrospective computation has been accounted and disclosed under Exceptional Items for the year ended 31st March, 2011.

b) Due to unusual and steep depreciation in the value of the Rupee over the last nine months, the unrealized exchange loss (net) has been considered by the Company to be exceptional in nature. The unrealized exchange Gain / (Loss) refers to the Notional Gain / (Loss) arising out of the restatement of the unhedged portion of foreign currency monetary assets and liabilities (other than asset backed borrowings).

1. CONTINGENT LIABILITIES AND COMMITMENTS (To the extent not provided for)

A. Contingent Liabilities

Rs. in lakhs

Particulars As at 31st March, 2012 2011

(a) Guarantees :

i. Letters of Credit Outstanding 132,530 139,345

ii. Bank Guarantees Outstanding 113,112 64,767

iii. Corporate Guarantee given to Banks and Financial Institution against credit facilities, and to Lessors against financial obligations extended to Subsidiary Company :

- Amount of Guarantee 53,598 42,166

- Outstanding Amounts against the Guarantee 53,074 42,166

(b) Claims against the Company not acknowledged as debt (Refer note below) :

i. Service Tax Demands in Appeals 141,359 127,714

ii. Fringe Benefit Tax Demands in Appeals 8,945 8,513

iii. Pending Civil and Consumer Suits 4,180 4,883

iv. Inland Air Travel Tax Demands under Appeal 426 426 Amount deposited with the Authorities for the above Demands 105 105

v. Octroi Nil 2,899

vi. Customs 143 -

vii. Income Tax Demands in Appeals 29,937 29,173

viii. The Company had acquired 100% of the shareholding of Sahara Airlines Limited (SAL) (now known as Jet Lite (India) Limited) in April, 2007. As per the Share Purchase Agreement (SPA) as amended by the subsequent Consent Award, the mutually agreed sale consideration was to be paid to the Selling Shareholders (SICCL) in four equal interest free instalments by 30th March, 2011. As a result of certain disputes that arose between the parties, both the parties had filed petitions in the Hon'ble Bombay High Court for breach of SPA as amended by the subsequent Consent Award. The Hon'ble Bombay High Court delivered its Judgment on 4th May, 2011 whereby SICCL's demand for restoration of the original price of Rs. 200,000 lakhs was denied and the Purchase Consideration was sealed at the revised amount of Rs. 145,000 lakhs. However, in its judgment, the Hon'ble Bombay High Court has awarded interest at 9% p.a. on the delayed payments made to SICCL largely on account of ongoing legal dispute. In view of this Order, a sum of Rs. 11,643 lakhs became payable as interest which has been duly discharged by the Company. As a result of this discharge, the undertaking given by the Company in April 2009 for not creating any encumbrance or alienation of its moveable or immoveable assets and properties in any manner other than in the normal course of the business, stands released.

Though the Company had complied with the order of the Hon'ble Bombay High Court, based on legal advice, it filed an appeal with the Division Bench of the Hon'ble Bombay High Court contesting the levy of interest. SICCL also filed an appeal with the Division Bench of the Hon'ble Bombay High Court for restoration of the purchase consideration to Rs. 200,000 lakhs and for interest to be awarded at 18% p.a. as against the 9% p.a. awarded by the Hon'ble Bombay High Court.

The Division Bench of the Hon'ble Bombay High Court heard the matter and vide its order dt.17th October, 2011 dismissed both the appeals as being not maintainable in view of jurisdictional issue. The Company has since filed Special Leave Petitions (SLP) before the Hon'ble Supreme Court challenging both the orders of 4th May, 2011 and 17th October, 2011. SICCL had earlier filed a SLP before the Hon'ble Supreme Court for increased compensation and interest.

Both the SLPs, filed by Jet Airways as well as SICCL, came up for hearing before the Supreme Court. The Supreme Court directed the parties to file the Counter and Rejoinder which has since been filed. The Supreme Court also recorded that the statement made by Jet Airways, as recorded in the order dated 6th May, 2011 passed by the Hon'ble Bombay High Court, would continue till further orders.

Pending adjudication of the matter by the Hon'ble Supreme Court, the interest payment of Rs. 11,643 lakhs effected by the Company on 5th May, 2011 has not been recognized in the Statement of Profit and Loss.

Note : The Company is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse impact on its financial conditions, results of operation or cash flows. Further, claims by parties, in respect of which the Management has been advised that the same are frivolous and not tenable, have not been considered as contingent liability as the possibility of an outflow of resources embodying economic benefits is highly remote.

2. FOREIGN EXCHANGE DIFFERENCES

Hitherto, the Company was following the option offered by notification of the Ministry of Corporate Affairs (MCA) dated 31st March, 2009 under the Companies (Accounting Standards) Amendment Rules, 2006 which amended Accounting Standard (AS) 11 "The Effects of Changes in Foreign Exchange Rates" by introducing Para 46 and based on further extension up to 31st March, 2012, the Company continued to exercise the same up to 30th September, 2011. In December 2011, the MCA issued a further notification dated 29th December, 2011 extending the said option under Para 46 and providing additional option under Para 46A amending AS 11. The Company opted to apply provisions under Para 46A of AS 11 with effect from 1st April, 2011. In line with the said notification, the Company has amortized the exchange difference as detailed in the Accounting Policy L in Note 1. The unamortized portion of Rs. 14,094 lakhs (Previous year Rs. Nil) accumulated in FCMITDA as on 31st March, 2012 has been bifurcated and disclosed as Other Current Asset (Rs. 7,034 lakhs (Previous year Rs. Nil)) and as Other Non-Current Asset (Rs. 7,060 lakhs (Previous year Rs. Nil)). Further, the amount of exchange difference adjusted to the tangible asset during the year is Rs. 110,567 lakhs (net loss) [Previous year Rs. 4,246 lakhs (net gain)] and the unamortized balance (carried as part of tangible asset), as at the year end, aggregates to Rs. 201,216 lakhs (Previous year Rs. 90,649 lakhs).

3. DISCLOSURE ON DERIVATIVES

In the past, the Company had entered into derivative contracts i.e. interest rate swaps (IRS) in order to hedge and manage its foreign currency exposures towards foreign currency borrowings. Such derivative contracts, were in the nature of firm commitments and were entered into by the Company for hedging purposes only and not for any trading or speculation purposes.

Nominal amounts of IRS entered into by the Company in the past and the amount outstanding as on 31st March are as under :

The Company continues to account for the above said IRS in line with the pronouncement of The Institute of Chartered Accountants of India for "Accounting for Derivatives" along with principles of prudence as enunciated in Accounting Standard (AS-1) "Disclosure of Accounting Polices".

On that basis, the changes in the fair value of the derivative instruments as at 31st March, 2012 of Rs. 1,384 lakhs (Previous year Rs. 4,817 lakhs) has been credited (net gain)] to the extent of reversal of net loss charged to the Statement of Profit and Loss in earlier years and disclosed as an exceptional item. The credit on account of derivative gains has been computed on the basis of MTM values based on the confirmations received from the counter parties and the cumulative net notional loss up till the balance sheet date is Rs. 3,772 lakhs (Previous year Rs. 5,156 lakhs).

4. The Company has Equity and Preference investments aggregating to Rs. 164,500 lakhs (Previous year Rs. 164,500 lakhs) in Jet Lite (India) Limited, a wholly owned Subsidiary, and has advanced an amount of Rs. 128,239 lakhs (Previous year Rs. 152,951 lakhs) as interest free loan outstanding as on 31st March, 2012. The said Subsidiary has improved its operating revenue over previous year but due to uncontrollable rise in fuel cost and a steep decline in the value of Rupee during the year, the results finally turned out to be negative and the Subsidiary Company continues to show a negative net-worth of Rs. 141,826 lakhs as on 31st March, 2012 (Previous year Rs. 123,533 lakhs). The Company appointed a reputed valuer to reassess its exposure in the said Subsidiary as on 31st March, 2012 and the valuer, based on revised business plans as approved by the Board of Subsidiary Company, has concluded that no impairment is necessary at this stage. Such assessment considered in future softening of fuel price and no further devaluation of rupee against USD. The Company continues to provide financial support to the Subsidiary's operations and expects improved performance in the near future. Accordingly, the financial statements of the Subsidiary Company continue to be prepared on "Going Concern" basis and no provision is considered necessary at this stage in respect of the Company's investments in and the loans outstanding from the said Subsidiary.

5. EMPLOYEES BENEFITS

A. Defined contribution plans :

The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees. The Company recognized Rs. 3,528 lakhs (Previous year Rs. 3,224 lakhs) for provident fund contributions in the Statement of Profit and Loss.

B. Defined benefit plan :

The Company provides the annual contributions as a non-funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under :

i. On Normal retirement / early retirement / withdrawal / resignation :

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of continuous service.

ii. On death while in service :

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity was carried out at 31st March, 2012 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The following table sets out the status of the gratuity plan and the amounts recognized in the Company's financial statements as at 31st March, 2012.

C. Other Long Term Employee Benefit

The obligation of Compensated Absences (non-funded) for the year ended 31st March, 2012 amounting to Rs. 1,074 lakhs (Previous year Rs. 598 lakhs) has been recognized in the Statement of Profit and Loss, based on actuarial valuation carried out using the Projected Unit Credit Method.

6. During the financial year 2009-10, the Company entered into a "Power by the Hour" (PBTH) Engine Maintenance agreement with a Service provider for its Next Generation Boeing 737 Aircraft fleet future engine shop visits. Subsequent to such arrangement, the Company continues to expense out the monthly cost of PBTH at the rate specified in the contract with the service provider to the Statement of Profit and Loss and treat the variable rental payable to the Lessors as receivables to the extent considered good of recovery for set off against future claims reimbursable by the Lessors on each engine shop visit. The Company has recognized such expected refunds of variable rentals from lessors towards future engine repairs based on joint validation of the Company's maintenance plan with the service provider. Accordingly, the variable rent of Rs. 45,437 lakhs (Previous year Rs. 21,403 lakhs) up to balance sheet date has been grouped under "Contribution Receivable from Lessors" which is further bifurcated into current and non-current based on expected engine shop visits in next 12 months and beyond 12 months. The above amount also includes Rs. 11,866 lakhs recognized by the Company during the year for the expected refunds of variable rentals of past years towards engines accrued up till 31 st March, 2009 and is disclosed as an exceptional item in the Statement of Profit and Loss.

7. LEASES

The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on 'Leases', the future minimum lease payments on account of each type of lease are as follows:

The salient features of a Finance Lease / Hire Purchase Agreement are :

- Option to purchase the Aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount or at the end of the Hire Purchase term on payment of a nominal option price.

- In the event of default, the Hirer / Lessee is responsible for payment of all costs of the Owner including the financing cost, and other associated costs. Further a right of repossession is available to the Owner / Lessor.

- The Hirer / Lessee is responsible for maintaining the Aircraft as well as insuring the same.

- In the case of Finance Lease, the property passes to the Lessee on payment of a nominal option price at the end of the term.

B. Operating Leases

a) The Company has taken various residential / commercial premises under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

The future minimum lease payments in respect of non-cancellable period, as at 31st March, 2012 are as follows :

The Salient features of an Operating Lease agreement are :

- Monthly rentals paid in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in the respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- In case of delayed payments, penal charges are payable as applicable.

- In case of default, in addition to repossession of the Aircraft, damages including liquidated damages are payable.

- The Lessee is responsible for maintaining the Aircraft as well as insuring the same. The Lessee is eligible to claim reimbursement of costs as per the terms of the lease agreement.

- The leases are non-cancellable.

c) Details of future minimum lease income in respect of five (5) Aircraft [Previous Year seven (7)] given on non-cancellable Dry Lease, as at 31st March, 2012 is as follows :

The Salient features of Dry Lease agreements are :

- Aircraft are leased without insurance and crew.

- Monthly rentals paid are in the form of fixed and variable rentals. Variable Lease Rentals are payable at a predetermined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in respective lease agreements.

- The Lessee neither has an option to buyback nor has an option to renew the leases.

- These dry leases are non-cancellable.

8. SEGMENT INFORMATION

a) Primary Segment : Geographical Segment

The Company, considering its level of international operations and internal financial reporting based on geographic segment, has identified geographic segment as primary segment.

The geographic segment consists of :

i. Domestic (air transportation within India)

ii. International (air transportation outside India)

Leasing operations are classified into (i) or (ii) above based on the domicile of the lessee being within or outside India.

Revenue and expenses directly attributable to segments are reported based on items that are individually identifiable to that segment, while the remainder of the expenses are categorized as unallocated which are mainly employee remuneration and benefits, other selling and distribution expenses, other operating expenses, Aircraft lease rentals, depreciation / amortization and finance cost, since these are not specifically allocable to specific segments as the underlying assets / services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to these revenue and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total revenues.

The Company believes that it is not practical to identify fixed assets used in the Company's business or liabilities contracted, to any of the reportable segments, as the fixed assets are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

9. PREVIOUS YEARS FIGURES

The Revised Schedule VI has become effective from 1st April, 2011 for the preparation of Financial Statements. This has significantly impacted the disclosure and presentation made in the Financial Statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

 
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