Etihad deal will provide Jet Airways with a deeppocketed global partner

Jet Airways has finally pushed through its 24-per cent stake sale to Abu Dhabi-based airline Etihad Airways for $379 million (approx Rs 2,050 crore) after several months of hectic negotiations. Mumbai-based Jet informed the Bombay Stock Exchange on Wednesday that its Board has approved the allotment of 27.3 million shares at Rs 754.74 ($13.90) a piece on a preferential basis to Etihad.

The price represents a 31.7 per cent premium to Jet's closing share price on Tuesday. "This strategic investment with a $600-million commitment from Etihad will help further strengthen Jet Airways' financial position," Jet said.

Etihad has also committed an investment of another $220 million (Rs 1,197 crore), which will help further strengthen Jet's financial position. $70 million of this investment has already been paid to Jet for its three slots at Heathrow Airport as part of the code-sharing agreement.

An additional $150 million will be invested in the next months by Etihad by way of a majority equity investment in Jet's frequent flyer programme Jet Privilege. As part of this agreement, the airlines will gradually expand existing operations and introduce new flights from 23 cities in India to Abu Dhabi.

Substantial ownership and effective control will remain with Indian nationals with Jet promoter Naresh Goyal as non-executive chairman holding 51 per cent of the company.

Jet has already placed a request with the civil aviation ministry for allowing it to operate flights from 23 Indian cities to Abu Dhabi in the long and medium term, for which it requires over 41,000 seats per week by 2016.

The deal would give UAE's flagship carrier a bigger foothold in India's fast-growing aviation market and provide Jet with a deeppocketed global partner. Jet has reported loss in six of its past eight quarters and is burdened with a total debt of $2.16 billion (Rs 11,664 crore) as of December-end.

The Jet-Etihad deal comes after Asia's biggest low-cost airline AirAsia announced it would set up a no-frills carrier in India with the Tata conglomerate. The AirAsia-Tata venture is expected to start operations by June-July. Currently, Jet's market share in the aviation space is at 26.2 per cent, a little behind IndiGo with 27.4 per cent and national carrier Air India at 20.7 per cent.

According to Kapil Kaul, head, (South Asia), Centre for Asia Pacific Aviation, Etihad will be a valuable asset to Jet.

Courtesy: Mail Today