Jet and Spice in Talks

Friday, 30th November 2012 at 06:30am

After the official confirmation from the Indian government hit the newspapers that SpiceJet and Jet Airways are having negotiations with foreign investors, the shares of the two rival airlines skyrocketed by almost 20 percent.

According to the official, Jet Airways is reportedly having an ongoing negotiation with Abu Dhabi-based Etihad Airways while SpiceJet is courting Malaysia's AirAsia. The revelation came on the heels after the government amended its aviation law liberalizing its aviation industry making way for foreign investors to purchase a stake in any of its local airlines.

The official added that Jet Airways may close a deal in 45 days with Etihad Airways for a sale of a minority stake to the latter. The talks between SpiceJet and AirAsia, the budget airline leader, on the other hand, are at an initial stage.

India's erstwhile second-biggest airline, Kingfisher Airlines, is also on the lookout for possible investors. The country's three publicly-listed airlines are having difficult times to finance their ballooning debts while stemming its losses as competitions heat up. Their predicament has been a staple of both national and international media which prompted the government to ease up its restrictions on foreign investment in the aviation sector, particularly its airline business. The newly-amended law now allows foreign airlines to acquire stakes of up to 49% of a local airline.

Shares of Jet Air soared 18% in early trading this week in Mumbai Stocks Exchange before settling back down at 14.5% later that day. Before closing at 16.5 percent that day, the shares of SpiceJet went up as high as 19 percent earlier in the day.

According to Economic Times report, the top executives of Jet Airways flew to Abu Dhabi to meet with Etihad counterparts to discuss about the matter. Excerpts:

A top source from the civil aviation ministry too confirmed a deal between Jet and Etihad. "We are aware that the deal is progressing but to close a deal might take some time, may be a couple of months or so. Both the sides have appointed consultants as Etihad wants to make sure that they have a sound investment in the country as cost issues remain a concern about airline companies in India," he said.

The price increase in both airlines' shares have brought big smiles to investors this year. However, the latest price surges are way below the record highs both airlines achieved seven years ago. Jet Airways debuted in the stock market in 2005 at Rps 1,100, almost twice as high as last Monday's Rps573. That same period, SpiceJet hit a peak at Rps110.

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