After months of uncertainty, Etihad Airways is set to
invest $379 million (Rs 2,050 crore) to acquire a 24 per cent stake in Jet
Airways.
This is part of a $600-million commitment to strengthen
the partnership between the two airlines. The current deal values Jet at around
Rs 8,500 crore. Under the agreement, the Abu Dhabi-based airline will subscribe
to 2.72 crore new shares of Jet Airways at Rs 754.74 a share. The share
allotment is at a substantial premium to the scrip’s closing price of Rs 573.15
on the NSE on Tuesday.
With the Jet Airways board approving the investment
agreement, the company will hold an EGM on May 24 to seek a final nod from
shareholders. This deal will not trigger an open offer for other shareholders
in Jet since it is below the trigger-limit. However, Jet still has scope to
bring in other investors, as the policy allows foreign airlines holding up to
49 per cent in a domestic carrier. JOINT STATEMENT
A joint statement put out by the two airlines said:
“Etihad Airways’ wider overall commitment includes the injection of $220
million to create and strengthen a wide ranging partnership between the two
carriers.”
Of this, Etihad has already paid $70 million to Jet
Airways for the purchase of three pairs of slots at London Heathrow airport
through a sale and lease back agreement.
The remainder, $150 million, will form a majority equity
investment stake in Jet’s frequent flyer programme. It is likely to take up to
six months to get all the regulatory and corporate approvals for this
investment to be approved, the statement adds. After the share purchase
agreement is cleared by regulatory authorities, ownership and control will
remain in Indian hands with Naresh Goyal as non-executive Chairman of Jet
Airways, the joint statement said. The FDI investment will see Jet Airways add
more flights from Delhi and Mumbai, apart from launching new flights from
Hyderabad and Bangalore to Abu Dhabi.
In an effort to bring down costs Jet and Etihad will
explore joint purchasing opportunities for fuel, spare parts, equipment and
catering supplies as well as insurance and technology services.
Jet pipped its
arch rival Kingfisher Airlines, which at one time was supposed to be in talks
with Etihad for a stake sale.
Officials of SpiceJet and IndiGo were not available for
comment on the impact of the Jet-Etihad agreement on their plans or operations.
However, earlier, both the airlines had said that they
were in no hurry to conclude any deals with a foreign airline partner.
Industry impact
The IndiGo Airlines Chief Executive, Aditya Ghosh, had
told newspersons that with the airline reporting profits since inception they
were under no pressure to rope in a foreign partner.
Aviation analysts
feel that the deal may impact Air India adversely. “This deal will completely
wreck Air India, especially its international operations, as this changes the
landscape of international aviation out of India in Jet Airways’ favour,” said
Kapil Kaul, regional head of the Centre for Asia Pacific Aviation
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