Jet Airways and Etihad To Seal Deal

Thursday, 28th March 2013 at 04:46am

After months of speculations, India's Jet Airways and Abu Dhabi-based Etihad Airways will finally sit on the negotiating table to seal the deal.

A person privy to the negotiations, confirmed that the deal would soon be formally closed when the heads of the two airlines will meet either this week or early next week at the latest. The deal would see Etihad acquiring 24% stake of Jet Airways, paving the way for the local airline to bail itself out of its mounting debt and, of course, expand its operations.

When sought for comments on the latest development, both spokespersons from the two airlines refused to issue statements.

Naresh Goyal is Jet Airways' major stakeholder with 80% stake through Tail Winds Ltd., a holding company that he owns.

With the new set up, Goyal will still own the majority stake with 51%, still through his holding company. Etihad, on the other hand, will subscribe to 24% of the total share. Though no official disclosure made as to how much would the acquisition cost to Etihad, the country's civil aviation ministry said that the Gulf carrier would likely shell out $300 million for the sale.

The resulting venture will require Jet Airways to seek approval from India's Securities and Exchange Board if it is going to be incorporated in India, this according to the ministry. This is because Goyal will have to transfer his shares from his holding company, Tail Winds, to the new entity.

With this regulatory process, it may take weeks, if not months, before the deal could be finalized.

However, according to the same person, speaking on condition of anonymity because of the sensitivity of the matter, the process could be shortened if Goyal will transfer part of his 80% stake, equivalent to 24% stake that Etihad is buying, to Etihad Airways.

Either way, he explained, would still result to Goyal owning 51% stake in Jet Airway and Etihad owning 24%.

The Gulf carrier and Jet have already agreed on the sale of the latter's three pairs of landing and departure slots at Heathrow Airport in London to the former at a cost of $70 million, though Jet will still keep the slots on lease for its own use.

India's airline operators, save for IndiGo's, have been desperately scouting for foreign partners to infuse capital for their cash-trapped and debt-saddled airlines. The Indian government amended its decades-long FDI policy on commercial airline ownership in September last year, resulting to the lifting of foreign ownership in a local airline from 24% to 49% maximum.

The easing of its FDI policy has paved the entry of foreign airlines interested to invest in India's huge but troubled industry. Recently, Malaysia-based AirAsia X, struck a deal with Tata group to set up a new airline.

Jet Airways was founded in 1992 and commenced operations in 1993. It has a current fleet of 117 aircraft and flies to 73 domestic and international destinations.

By: Pete Lee.