NEW DELHI: Shares in Jet Airways surged as much as 19.7
percent yesterday after TV channel ET Now cited unidentified sources as saying
Etihad Airways was close to a deal to purchase a 24 percent stake in the Indian
carrier.
Abu Dhabi’s Etihad
has already paid a “token” amount of $70m, and will likely pay $400m in the
first tranche of the deal, the channel reported. Etihad said it did not have an
immediate comment.
Indian TV channels
said Etihad had bought Jet’s slots at London’s Heathrow airport for $70m, but
did not say whether that was a part of the stake buy agreement.
Jet shares were up
17.3 percent as of 0831 GMT, after having risen as much as 19.7 percent earlier
in the day. Shares of smaller rival SpiceJet also surged 9.4 percent to 37.85
rupees.
The Jet-Etihad
deal would be the first since India relaxed ownership rules in September and
allowed foreign carriers to buy up to 49 percent in local carriers, which are
battling stiff competition and high operating costs.Malaysia’s AirAsia Bhd,
Asia’s largest budget carrier, also plans to launch a regional airline in India
in a venture with the Tata group, marking a return to aviation for India’s
biggest business house, and betting on potential growth despite near-term
issues.
Etihad, launched in 2003, is on a buying spree to compete
with regional rivals Emirates and Qatar Airways. The Gulf carrier has taken
stakes in Virgin Australia and Aer Lingus and raised its shareholding in Air
Berlin and Air Seychelles.
Top executives
from Etihad and Jet met Indian ministers earlier this month, but the deal faced
a set-back later as the Gulf carrier’s chairman said the deal needs to be
revised.
Jet shares have
fallen more than 27 percent since then through Tuesday.
Etihad will have
to find a way around Jet’s complicated shareholding structure before a deal can
be finalised.
Tail Winds Ltd,
the Isle of Man-based investment vehicle of Jet founder Naresh Goyal, currently
holds 79.99 percent of Jet Airways.
According to
Indian rules, foreign companies can hold a maximum 49 percent stake in local
carriers, but so-called non-resident Indians like Goyal are exempted.
Goyal is likely to
convert shares owned by its holding company into his personal stake to comply
with foreign investment regulations, an Indian government source has said.
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