Deal to be a game-changer for Jet AirwaysThe strategic investment by the

Abu Dhabi-based Etihad Airways in Jet Airways could be a game-changer for the latter and its shareholders. According to the deal, Jet will be issuing 27.2 million shares to Etihad for Rs 754.7 apiece totalling Rs 2,060 crore. In the short term, the deal brings much-needed cash and will help Jet improve its debt-laden balance sheet and improve its financial ratios. In the long term, too, the strategic alliance with Etihad will make Jet more competitive in the domestic market as well as on international routes, which now account for 60 per cent of its revenues and operating profits. Jet’s stock, which scaled to its two-year high of Rs 625 levels in December 2012, is thus expected to rule firm on Thursday.
The deal could be a game-changer for Jet. Says Sharan Lillaney of Angel Broking, “The deal is a positive as Jet will be able to refinance its high-cost debt and improve its cash flows. In addition to improving its balance sheet, the company can also look at expansions, both in the domestic as well as international markets.” On the valuations front, the deal implies a market capitalisation to sales of 0.3-0.4 times (and 31 per cent premium to current market price), a decent premium, believe analysts. This could set a benchmark for similar deals in future, says Lillaney.
On the operational front, the deal will convert two competitors into partners and help reduce costs and at the same time expand their network, says Lillaney. Among the smaller areas of co-operation could be parking and landing slots, ground handling and aircraft maintenance. While asset utilisation could be optimised, the two would also be in a position to offer wider options to their customers. More importantly, an improvement in cash flows also means Jet will be able to bargain for higher discounts on airport charges and fuel. Oil marketing companies (OMCs) give a cash discount to the tune of 5-10 per cent on aviation turbine fuel (ATF). More, any loans or guarantees from Etihad will also help Jet Airways bring down its costs.
On the business front, the macro environment is also turning positive, with a fall in crude oil prices. Given the 17 per cent fall in crude oil prices since mid-February, expect Jet to benefit given that fuel accounts for 45 per cent of its operating costs.
“Expect airlines to pass on the benefits of fuel price cuts to consumers, which will stimulate flagging demand and help shore up their passenger loads,” says an analyst with a domestic brokerage. Passenger demand has been on the decline for six months, forcing all airline companies to launch discount schemes earlier this year, despite the drop in capacity and lower competition on account of grounding of Kingfisher Airlines. However, post the recent five per cent cut by OMCs last week, analysts expect more cuts next month. In the medium term, analysts expect demand to perk and with prices likely to remain firm, they expect loads and yields to improve.

Jet Airways, which came out with its IPO in 2005 at Rs 1,100 a share, has been quoting below the offer price since early 2006. Despite a 70 per cent rally in the past six months, in anticipation of the deal, the stock is still trading at half of its IPO price (while the Sensex has tripled in value). A lot of this can be attributed to Jet reporting losses (on a net basis) since FY07, due to the combined effect of poor yields on domestic routes, high fuel prices and interest and depreciation charges on acquiring new aircraft. Between FY06 and FY09, Jet quadrupled its fleet size at a cost of nearly Rs 14,000 crore, largely financed through debt. This started hurting when air fares in India tumbled and ATF prices soared leading to losses. During the last few years, Jet’s debt has been at elevated levels (debt-equity ratio of 11, one of the highest among BSE 500 companies). While the deal with Etihad might not result in an immediate turnaround in Jet Airways’ financial performance, it will improve debt-equity to a manageable level of 3.8 and support its share price, thereby lessening the pain for shareholders. The downside to the deal is the nearly 32 per cent dilution in Jet’s equity capital (and in EPS proportionately). The sting from dilution, though, will be less given that Etihad is acquiring equity in Jet Airways at 31.5 per cent premium to its last closing price of Rs 573. This could spark a rally in Jet’s share price on Thursday. The deal price could also become a benchmark if Jet raises further equity in the near term.
The disappointment, however, is that the deal will not result in any open offer for minority shareholders. This may cap any potential short-term rally and also prove to be a dampener for traders who may have built-up positions hoping to tender shares at premium to Etihad. They may now have to wait for the deal to materialise into operational and financial gains for Jet to make their profits.

http://www.business-standard.com/article/markets/deal-to-be-a-game-changer-for-jet-airways-113042400652_1.html

 

 

 

 

Better connectivity, alternative hub for Indian passengers

The Jet-Etihad deal signed today would help the foreign carrier expand its footprint in India and turn Abu Dhabi into an alternative hub (apart from Dubai) for Indians travelling to the US and Europe. However, for domestic low-cost carriers and government-owned Air India, it would mean more competition in domestic skies and loss of business in the international market.
With a market share of only two per cent from India (compared with Emirates’ 13 per cent), Etihad runs 52 flights a week (compared to 185 Emirates flights) to ten cities in India. But that could change dramatically. An extended code-sharing agreement with Jet (now limited to only seven cities) in India would mean it could tap passengers seamlessly to fly to Abu Dhabi and to the US or Europe from 53 cities where Jet has services, virtually giving Etihad access to the entire country. At the moment, as part of the deal it has decided to extend their relationship to 23 cities.
According to a press release issued by the civil aviation ministry today, the ministry today enhanced air traffic rights between India and Abu Dhabi. L M Kapanaiah, India’s ambassador to the UAE, said the weekly number of seats between India and Abu Dhabi had been raised to 50,000 each over the next three years.
Most aviation experts say such a massive increase in capacity isn’t justified, as the market to Abu Dhabi isn’t expected to grow so fast from India suddenly. Etihad would benefit by securing access to fly directly to more Indian cities, increasing frequencies in existing cities from where it operates and feeding its hub from where passengers could fly further. Sources said it had sought the cap of seven weekly flights from Delhi and Mumbai be removed. It had also demanded flights from Goa, Pune and Amritsar. Clearly, this could pose a direct challenge to Dubai, the largest west Asian hub from where Indian passengers travel to the US and Europe, where Emirates has a monopoly.
Jet Airways would also benefit from the deal. It could offer an alternative route for Indian passengers to fly to other west Asian destinations, cities in Africa and the US, as well as Europe, apart from its hub in Brussels.
The airline could also leverage Etihad’s strong presence in Europe by bringing Indian passengers through Abu Dhabi. That is a win-win situation for both sides, as in Europe, Jet currently has flights only to Brussels, Milan and London on its own (through code-sharing agreements with Brussels Airlines and Thalys, it offers seamless connectivity to 14 additional cities). Etihad, however, has a huge network in Europe; it directly flies to 17 destinations and, through its elaborate code-sharing agreements with 13 airlines, offers seamless connectivity to 88 cities.
The India-North America market is one of the largest and most lucrative, in terms of business. Currently, Jet Airways flies only to Newark and Toronto and, through code-sharing agreements with United and Air Canada, offers connectivity to all key markets in North America. But Etihad could provide an alternative to Indian flyers — they could fly seamlessly from Abu Dhabi to Chicago, New York and Washington, apart from Toronto. And, through its code-share with American Airlines, it could allow Indians to fly all across the US.
In case the two synergise operations, it could lead to cost benefits. The two airlines could leverage their clout while buying fuel; they could also leverage their bargaining power with Boeing, as Etihad has just ordered 50 aircraft from the American company, most of which are Dreamliners, in association with Air Berlin. Most of the Jet Airways fleet is accounted for by Boeing aircraft. As such, the two could sign integrated deals in the future. Also, the two could pare costs by using each other’s ground operations at hubs. They could also integrate sales and distribution efforts, creating joint offices, general sales agents and single marketing teams at certain offline stations.
However, for Indian airlines, including low-cost carriers and Air India, the deal might not be good news. The alliance, analyst say, would have an adverse impact on Air India’s business in West Asia, the US and Europe. This was a key reason why the Indian government, until recently, was chary to opening up bilaterals in these routes, especially from Dubai, where the seat capacity is exhausted.
Domestic low-cost carriers say a code-sharing agreement between the two airlines in domestic skies to connect passengers to international destinations could have an adverse impact on their business. “About 15 per cent of the low-cost carrier domestic business comes from passengers flying onward to international destinations. With a code-share agreement between Jet and Etihad, these passengers would fly only Jet. We would lose business,” says a senior executive of a low-cost carrier.
He adds the Jet-Etihad alliance is bound to take away business from Emirates on the Indian-Dubai route. “Earlier, Emirates did not bother about right pricing in the India-Dubai sector, as most passengers were going onward — from Dubai to the US. However, now, with the new challenge, they are bound to drop fares on the India-Dubai sector, as they would have more seats to offer. And, this would have an impact on low-cost carriers that only fly point-to-point internationally. So, our fares would be under pressure,” he added.

http://www.business-standard.com/article/companies/better-connectivity-alternative-hub-for-indian-passengers-113042400398_1.html

 

Jet promoters may sell stake through offer-for-sale

The promoters of Jet Airways were likely to pare their stake in the company before a deal was sealed with Etihad Airways, sources said. They felt the promoters would sell shares through an offer-for-sale (OFS), to comply with the minimum 25 per cent public shareholding norm before the June deadline.
Share allotment through the preferential route to UAE-based Etihad would entail equity dilution in Jet. Subsequently, the shareholding of existing promoters would fall to 60.8 per cent. However, the Securities and Exchange Board of India (Sebi) doesn’t allow meeting the public shareholding norm through this route.
Currently, promoter shareholding in Jet stands at 80 per cent. A source said the rationale behind planning the OFS before the Etihad deal was uncertainty on securing the requisite shareholder approval, as well as other approvals, before June. Also, if Etihad is inducted as a promoter shareholder, a 12-week cooling-off period would be applicable, making it impossible to launch the OFS before June.
According to Sebi norms, a promoter or promoter group entity should not purchase or sell shares of the company 12-weeks period before an OFS.
Securities law experts said it would be interesting to watch whether Sebi considered Etihad a promoter shareholder or a public shareholder. If both Jet and Etihad are looked at as persons acting in concert, it would complicate matters, as this could even trigger an open offer. “Whether Etihad is branded a promoter or not is an open issue. There is no perfect answer to that,” said Sandeep Parekh, founder, Finsec Law Advisors. “If you are in control of the company, you are a promoter. A private equity investor is not a promoter, as its interests are aligned to that of a minority shareholder. This (Etihad) is something that falls in grey area.”
He added it would depend on Etihad’s self certification—“whether they want to call themselves a promoter or not”.
If the Etihad deal happens first, Jet promoters would have to dilute or sell the excess five per cent, either through an OFS or an institutional placement programme---the two routes specified by Sebi to meet the 25 per cent public shareholding norm.
J N Gupta, founder of Stakeholder Empowerment Services, a proxy advisory form, believes given the business relationship between Jet and Etihad, they are persons acting in concert. “It’s a subjective decision that would depend on factors that include whether Etihad is getting any board seat or day-to-day control. The control would be evident not only from shareholding, but from other factors, too.”
According to takeover code regulations, if Jet and Etihad are persons acting in concert, Etihad would have to make a 26 per cent open offer to Jet’s minority shareholders.
Lawyers said given the public shareholding requirement and other complexities, Etihad would be better off as a public shareholder. However, a lot would depend on the views the regulator and the court took, they said

http://www.business-standard.com/article/companies/jet-promoters-may-sell-stake-through-offer-for-sale-113042400526_1.html

 

Etihad checks into Jet with 24% stake

Rs 2,054-cr deal struck at 31% premium over Jet's current stock price to bring down

After eight months of hard bargaining, the Naresh Goyal-promoted Jet Airways on Wednesday sealed a deal with Abu Dhabi-based Etihad Airways, under which the latter will pick a 24 per cent stake in the country’s second-largest domestic airline for Rs 2,054 crore ($379 million). Besides, under a wider overall commitment, Etihad will inject another Rs 1,192 crore ($220 million) into Jet.After AirAsia’s tie-up with Tata Sons earlier this year, this is the second major deal in the aviation space since the government last year allowed foreign airline companies to hold up to 49 per cent stake in Indian ones.
Wednesday’s deal is expected to help Jet, which had made a Rs 1,236-crore loss in 2011-12 and has around Rs 12,000 crore of debt on its books, expand its global footprint and overcome financial difficulties.For Etihad, which has, over the years, followed a strategy of alliances and stake buys for quick growth, the move will help gain a larger market share in India for the international skies (see chart).
Goyal owns 80 per cent in the airline, which he founded in 1993. Of this, 79.99 per cent is owned through the Isle of Man-registered Tail Winds Ltd. After the deal, his shareholding in the airline will come down to 51 per cent. On Wednesday, the airline’s board had decided to allot 27 million preference shares to Etihad at Rs 754.73 apiece — a premium of 31 per cent on the airline’s current stock price of Rs 573.85.
In a notification to stock exchanges, the airline said its board had approved the signing of an investment agreement with Etihad and would seek shareholders’ approval at an extraordinary general meeting.
It is learnt Etihad would get three seats, including the position of vice-chairman, on the Jet board. At present, there are seven directors on the board. Besides bringing in fresh equity, Etihad would also provide guarantees on loans that Jet plans to avail of from local or foreign banks.
In a joint press statement, Etihad said its wider overall commitment to Jet included the injection of another Rs 1,192 crore ($220 million) to create and strengthen a wide-ranging partnership.
As part of this, Rs 813 crore ($150 million) would be invested by Etihad by way of a majority equity investment in Jet’s frequent-flyer programme, ‘Jet Privilege’ — subject to appropriate regulatory and corporate approvals and final commercial agreements expected to be completed within six months. The two together have 4.4 million frequent flyers.
Etihad has already struck a deal to pay Rs 379 crore ($70 million) to buy Jet’s three pairs of slots at Heathrow Airport through a sale-and-lease-back agreement announced on February 27. Jet Airways continues to operate flights to London utilising these slots.

Under the strategic partnership, the airlines would gradually expand existing operations and introduce new routes between India and Abu Dhabi, providing a wider choice to the travelling public. They would combine their network of 140 destinations, with Jet establishing a Gulf gateway in Abu Dhabi and expanding its reach through Etihad’s growing global network.
Also, passengers from 23 Indian cities would benefit from direct connections to international destinations. New flights from Jet’s home hubs and metro airports would further strengthen its current operations from these airports.
Etihad CEO James Hogan said the alliance was expected to bring immediate revenue growth and cost synergy opportunities, with initial estimates of a contribution of $700 million for both airlines over the next five years. “The Indian market is fundamental to our business model of organic growth partnerships and equity investments. This deal will allow us to compete more effectively in one of the largest and fastest-growing markets in the world.”
“For Jet, this transaction further strengthens its balance sheet and, more importantly, underpins future revenue streams that will accelerate our return to sustainable profitability and liquidity,” Goyal said.
The airline would explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies, as well as external services, such as insurance and technology support. Other areas of cooperation would include joint training of pilots, cabin crew and engineers, as well as maintenance of common aircraft types and consolidation of guest loyalty programmes. A joint project management office would be set up to ensure delivery of all synergy benefits to both parties.

http://www.business-standard.com/article/companies/etihad-checks-into-jet-with-24-stake-113042400180_1.html

Jet-Etihad deal to bring immediate revenue growth: James Hogan, Etihad Airways

NEW DELHI: Indian market is fundamental to our business model, said James Hogan, President and CEO of Etihad Airways on Wednesday. Speaking after Jet AirwaysBSE 12.76 % and Etihad announced their deal, Hogan said the airline will invest $150 million in Jet's privilege programme.
"The Indian market is fundamental to our business model of organic growth partnerships and equity investments. This deal will allow us to compete more effectively in one of the largest and fastest-growing markets in the world," Hogan said.
Stating that the deal will provide global growth opportunities to both the companies, Hogan added that it will bring immediate revenue growth. "The deal is expected to bring cost synergy opportunities," he added.
"Our initial estimates are of a contribution of several hundred million dollars for both airlines over the next five years," he said.
Hogan said, "We are pleased to have reached this significant stage in India with Jet Airways and are certain the partnership will bring significant benefits and opportunities for global growth to both airlines."
"We look forward to collaborating with Jet Airways and constructively working together with them and their stakeholders to build a sustainable, competitive and profitable airline," he said. The substantial ownership post the deal will remain with Indian nationals, Etihad said.
In a major Foreign Direct Investment ( FDI) move in the aviation sector, Jet Airways agreed to sell 27.3 million shares to Etihad Airways. Jet Airways will sell the shares at Rs 754.73 per share.
In an intimation to the stock exchanges Jet Airways announced that the Board of Directors of the company approved, subject to compliance with applicable laws and regulations and other necessary approvals, the issuance, by way of a preferential allotment 27.3 million equity shares (24% of Jet's equity) of the face value of Rs. 10/- (Rupees Ten only) to Etihad Airways PJSC at a price of not less than Rs. 754.7361607.
The approval of the shareholders for such issuance and allotment will be sought at an Extraordinary General Meeting to be held in this regard, Jet informed the stock exchanges.
The Board of Directors has granted approval for the Company and Etihad PJSC to enter into inter alia, the Investment Agreement in relation to such issuance and allotment and other documents incidental thereto.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/Jet-Etihad-deal-to-bring-immediate-revenue-growth-James-Hogan-Etihad-Airways/articleshow/19713246.cms

Jet-Etihad Deal: Good news for aviation and for economy

The infusion of $379 million by Abu Dhabi-based Etihad Airways in Jet Airways, India's largest private airline , is good news on multiple counts. The proposed deal is a tangible benefit of the government's policy reform announced last September easing ownership rules to allow foreign carriers to own up to 49% in local airlines.
It signals an overall improvement in the country's investment climate.
Jet AirwaysBSE 12.79 % will sell 27.26 million shares in a preferential offer of new shares to Etihad at Rs 754.74 per share. This represents a 32% premium to the company's closing price on Tuesday, higher than the reported 5.5% premium Singapore Airlines paid to raise its stake in Virgin Australia Holdings to 19.9 % in another transaction on Wednesday.
The newly-issued shares will represent 24% of Jet's expanded share capital. Jet can use the money to retire a part of its debt that aggregated to around $2.1 billion at the end of December, thereby improving its finances.
The present tie-up comes in the wake of a joint venture between AirAsia and the Tatas for a new lowcost airline that was proposed and has received the government's permission. Greater investment in Indian civil aviation will mean good news for passengers. Foreign carriers can offer expertise, connectivity and convenience, besides funds.
At the same time, these developments mean more intense competition among Indian carriers, at a time when they show some signs of emerging from the red. The worst affected would be Air India, whose ridiculously high debt-equity ratio virtually cripples its financial performance .
A way has to be found to convert debt into equity and put the airline under professional management, insulated from the owner, the government. Another issue is accessing new capital. Banks, bitten by KingfisherBSE 1.46 %, would be twice shy. Indigo might be able to go public successfully . Others would need to engineer new sources. A little help from the government will not be amiss.

http://economictimes.indiatimes.com/opinion/editorial/jet-etihad-deal-good-news-for-aviation-and-for-economy/articleshow/19719731.cms

Investors should stick to Jet Airways shares as co to get boost from international business

Long-term investors should hang on to the stock of Jet AirwaysBSE 12.90 % as the company's more profitable international business will receive a major boost due to the synergies involved in Etihad Airways checking in as a strategic investor.

 India's largest private sector airline has said it will raise Rs 2,050 crore by selling 24% stake to Abu Dhabi-based Etihad Airways by issuing preferential shares. At Rs 754 per share, the deal is at a premium of 31% to Jet's closing price of Rs 574 on Tuesday on BSE. The premium on aviation deals across the globe in the recent past has varied widely, ranging from 12% and 80%.

 Sharan Lillaney, aviation analyst with Angel Broking, thinks the deal is fairly valued. "The deal commands a market capitalisation-to-sales ratio of 0.3, which is quite attractive. Etihad is getting stake in India's largest airline company and it works well in the long-term."

 Jet Airways will plainly benefit from the global presence of Etihad Airways. In the last five years, Etihad has expanded by buying small stakes in various international airlines including Virgin Australia, Ireland-based Aer Lingus, Air Seychelles and German carrier Air Berlin. Such acquisitions have given it a wide presence through joint marketing of routes and code-sharing agreements.

 There are two ways for Jet to utilise the funds. It can marginally lighten the balance sheet by reducing its mammoth debt of around Rs 13,000 crore. It may also use some of the money to expand operations overseas, especially in Abu Dhabi.

 "Jet will be able to not only reduce debt but also chalk out strong expansion plans in the Middle East," said Rasheesh Shah, aviation analyst, ICICI Securities. Currently, of its 21 international destinations, 10 belong to the Gulf region.

 The bilateral treaty currently in place between India and the UAE allows exchange of 13,000 airline seats per week which has which has been increased to close to 50,000 seats. This will enable Jet Airways to use Abu Dhabi as a hub and connect Indian travellers to Europe and North America where Etihad has a strong presence. Using Abu Dhabi as a hub will also reduce Jet's fuel costs since it would get ATF at a cheaper price in the oil-surplus country. At present, fuel costs account for 42% of its net sales

http://economictimes.indiatimes.com/markets/stocks/stocks/in/news/Investors-should-stick-to-Jet-Airways-shares-as-co-to-get-boost-from-international-business/articleshow/19717137.cms

 

Etihad to co-pilot Jet Airways

In the first such deal after foreign direct investment norms for the airline industry were liberalised in September last year, the Abu Dhabi-based Etihad Airways will pick up a 24 per cent stake in the troubled carrier, Jet Airways, at a cost of Rs. 2,058 crore ($379 million).

On Wednesday, the Board of Directors of the Indian carrier approved the stake sale in terms of which Etihad will be investing $600 million, including $70 million paid to Jet for its landing rights at London Heathrow airport. Within the next six months, the gulf carrier will also buy a majority stake in Jet’s frequent flyer programme, JetPrivilege, for $150 million.

With expanded code-sharing and a combined network of 140 destinations, the Etihad-Jet marriage promises to offer significant passenger benefits.

Jet’s passengers from 23 cities will gain direct access to Etihad’s global network. The Indian carrier will enhance its services from its primary hubs of Delhi and Mumbai, and introduce new flights from Hyderabad and Bangalore. The strategic alliance will bring additional traffic, frequencies and revenues to metro airports, as well as other airports of the Airports Authority of India (AAI), the airlines said in a joint statement. They will open new India-Abu Dhabi routes, and Jet will establish a Gulf gateway for flights to the U.S., Europe, Africa and the Middle East.

Etihad Airways currently flies to nine Indian destinations with a total of 63 flights a week. The partnership will also help to drive a significant increase in traffic growth through Abu Dhabi International Airport, as well as Jet Airways’ hubs of Mumbai and Delhi.

For both airlines, the key benefits will flow from synergies and cost savings in many areas, including fleet acquisition, maintenance, product development and training. The airlines will explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies.

http://www.thehindu.com/todays-paper/tp-national/etihad-to-copilot-jet-airways/article4652806.ece

 

Visa-on-arrival in 5 more airports

The government has extended the visa-on-arrival (VoA) facility for tourists at five more international airports, besides Delhi, Mumbai, Kolkata and Chennai.

The third inter-ministerial coordination committee on tourism meeting took the decision that would cover the Goa, Thiruvananthapuram, Bangalore, Hyderabad and the Kochi airports, officials in the Tourism Ministry said.

The committee was constituted at the initiative of the Prime Minister’s Office. The government has permitted the facility for citizens of Japan, Singapore, Finland, Luxembourg, New Zealand, Cambodia, Laos, Vietnam, Philippines, Myanmar and Indonesia. As many as 2,107 VoAs were issued in March, compared to 1,287 issued in the same month last year, registering a growth of 63.7 per cent.

From January to March 2013, a total of 5,744 VoAs were issued, compared to 3,905 in the corresponding period in 2012, registering a growth of 47.1 per cent.

http://www.thehindu.com/todays-paper/tp-national/visaonarrival-in-5-more-airports/article4652088.ece

 

Mangalore airport to begin cargo operations from May 1

Air cargo operations from Mangalore international airport would begin from May 1.

 J.T. Radhakrishna, Director of Mangalore International Airport, said this while addressing members of the Kanara Chamber of Commerce and Industry (KCCI) here on Tuesday evening.

 He said the air cargo complex at the airport was inaugurated by the Civil Aviation Minister Ajit Singh on March 18. Initially, only belly cargo would be allowed on passenger aircraft. Depending on the potential for air cargo, special cargo flights could be thought of in future, he said.

 Melwin D’Silva, Station Manager of Air India, Mangalore, said Air India Express (AIE) operates flights from Mangalore to all the major destinations in the Gulf region. Stating that AIE would be happy to carry cargo to these destinations, he said on average 1.5 tonnes of cargo can be carried on each passenger flight to the Gulf destinations.

 Radhakrishna said Mangalore airport had recorded a 20 per cent growth in passenger traffic in 2012-13. The airport, which was operating three flights a day, is now operating 20 flights a day, he said.

 Shreenivas Phani, Assistant Commissioner of Customs, Mangalore, spoke on the modalities involved in the handling of air cargo.

 Mohammed Ameen, President of KCCI, urged the members to make the best use of facilities available at the air cargo complex in Mangalore.

http://www.thehindubusinessline.com/industry-and-economy/logistics/mangalore-airport-to-begin-cargo-operations-from-may-1/article4649862.ece

Gateway Abu Dhabi’ to become a reality for Jet Airways

The deal between Jet Airways and Etihad and the increase in the number of flights Indian carriers can operate to Abu Dhabi will pave the way for Jet to create a ‘gateway in Abu Dhabi’ for expansion.

 After creating its first international hub in Brussels in 2007, Jet now plans to use Abu Dhabi as a gateway, as it looks to use the additional seats it has been allowed to operate from India to Abu Dhabi and onward.

Initially, the airline plans to connect 23, mostly Tier 2 and 3 cities in India, to Abu Dhabi, and then provide onward connections to Iraq, Iran, Kuwait, Saudi Arabia, Beirut, Amman and Cairo.

The airline will also provide connections to Nairobi and Addis Ababa in Africa and eventually to the US and Canada.

In North America, it will look at Newark, Chicago, Washington DC, San Francisco and Los Angeles.

A small beginning in the creation of the gateway at Abu Dhabi will be made on May 16, when the airline will launch a daily service from Kochi to Abu Dhabi and fly onward to Kuwait.

 “We can start calling it a gateway when three or four more onward flights become operational, which we see happening by the end of the year,” a senior Jet official told Business Line. The airline plans to deploy narrow-body aircraft, such as the Boeing 737, to connect smaller markets to Abu Dhabi and onward to West Asia and Africa, while wide-body aircraft — Boeing 777 and Airbus A330 — will be used to operate long-haul flights.

The airline plans to operate its own fleet to markets where there is huge traffic potential , while it will use its growing relationship with Etihad to pick up passengers from cities like Arbil in Iraq.

Brussels hub

At the moment, Jet Airways is silent about what will happen to the hub in Brussels.

 Officials from the airline say they will look to operate non-stop flights to Europe from India.

As for the hubs in Delhi and Mumbai, the officials maintain that these will remain domestic and foreign connection hubs.

Thanks to Delhi being a hub, they say, Jet has become the largest one-stop carrier between London and Bangkok.

http://www.thehindubusinessline.com/companies/gateway-abu-dhabi-to-become-a-reality-for-jet-airways/article4651163.ece

Etihad winging into a major market

Strategic advantages and imperatives have driven Etihad to pay Jet the 35.1 per cent premium to market price for a 24 per cent stake in India’s No 2 carrier. India is considered among the big growth markets notwithstanding the recent slump in domestic passenger traffic in the country. Growth in domestic and international traffic in and out of India is expected to be far higher than in Etihad’s home turf. The stake buy in Jet allows Etihad to get some of this action. In particular, Jet could provide significant feeder traffic from India to Etihad’s hub, Abu Dhabi, for travel beyond to destinations such as the US. In this context, the ongoing talks over the bilateral air services agreement between India and the UAE assume significance. The proposal to increase the seat allocation between India and Abu Dhabi from close to 14,000 seats a week to over 42,000 seats, if approved, will provide a shot-in-the-arm for the Etihad-Jet combine. Etihad would surely have factored in this significant market expansion when deciding to invest in Jet Airways. But the proposal is facing opposition from private airport operators in India that have made big investments. They contend that West Asian hubs such as Dubai and Abu Dhabi channelling traffic from India will impede the chances of an Indian aviation hub emerging.

Etihad, though, is equipped to risk the gamble. Like some of its West Asian counterparts, say, Emirates Airlines, Etihad is financially in a sweet spot. Flush with cash which it needs to deploy effectively, Etihad has been on a shopping spree and has picked stakes in Air Seychelles, Aer Lingus and Virgin Australia. The investment in Jet seems part of the pattern.

http://www.thehindubusinessline.com/companies/etihad-winging-into-a-major-market/article4651161.ece

 

Air pockets ahead for Air India

The Jet Airways-Etihad deal may have a negative impact on Air India’s operations but that was to be expected of any such deal following the policy allowing foreign direct investment in Indian carriers, according to Thulasidas, former Chairman and Managing Director, Air India.

 Reacting to the strategic investment by the Abu Dhabi-based airline in Jet, he said the Government cannot have a policy for a sector keeping in mind the interest of just one public sector undertaking.

 At the same time, as the owner of Air India, it is the Government’s responsibility to take care of its interest, he added. This deal will mean more intense competition not only for Air India but to all the other airlines operating out of India.

This is not the first time the Government’s policy has affected Air India. In the past, the Government had followed liberal bilateral policy granting foreign countries the right to operate more services. That has impacted the national carrier’s operations.

 Thulasidas said the Government’s policy was aimed at attracting foreign investment into airlines. From that point of view, it is a positive development. If this alliance is going to benefit Indian passengers, it would be good for the Indian aviation sector. As far as the Indian carriers are concerned, the impact may be different.

Asked if it will have a negative impact on Indian airports (as Jet can fly passengers directly from 23 cities in India to Abu Dhabi), Thulasidas said the impact could be both ways.

Jet can also bring passengers from other countries to India and fly them from here to other international destinations. This will help Indian airports.

Aviation hub

Unlike Dubai or Qatar, Abu Dhabi is yet to develop as a major aviation hub. But what India should do is to develop own hubs.

Delhi and Mumbai will develop gradually into such hubs, he said.

As for Jet Airways, going by the press statement, the deal would help in its expansion plans.

Since Etihad’s stake is under 26 per cent, it cannot block any special resolution as Jet retains controlling majority.

http://www.thehindubusinessline.com/companies/air-pockets-ahead-for-air-india/article4651164.ece

 

Win-win for both Jet and Etihad airlines

Etihad will benefit more from the deal with jet as this will give the Abu Dhabi-based airline a foothold in the growing Indian aviation sector, said Kapil Kaul, regional head of the Centre for Asia Pacific Aviation (CAPA).

The deal will also be a positive for Jet, the second biggest airline by market share after IndiGo, as this gives it capital and expertise, he added.

With debt of over Rs 10,000 crore (as on March-end 2012) piling up on the airline's books, the deal has come as a breather for Jet. “Jet Airways will get the funds to clear its debt and it will help Jet increase its share in the domestic market too.

Etihad has a strong international presence. Jet will increase its international operations through code sharing with Etihad,” said Sharan Lillaney, aviation analyst, Angel Stock Broking.

Analysts feel that the deal could re-define the airline business in India. “For Etihad, this is a big positive as it will be able to corner the Indian traffic going overseas, especially to West Asia and Singapore. The domestic and overseas traffic are inter-related. Jet Airways will also gain on passengers who fly overseas,” said Ramesh K Vaidyanathan, Managing Director, Advaya Legal.

Jet is likely to gain three-four per cent market share in the next few months.

This will happen at the expense of SpiceJet and IndiGo (which will lose one-two per cent each) and Air India, which will also lose some traffic.

 

Jet will also gain from improved Corporate Governance, more professional management and more funds. The fresh funds might be deployed by Jet for aircraft acquisition, Vaidyanathan added.

http://www.thehindubusinessline.com/industry-and-economy/logistics/winwin-for-both-jet-and-etihad-airlines/article4651160.ece

Jet-Etihad deal: A rewarding long-haul

From humble beginnings in the early 1970s as a general sales agent for a number of airlines to become the promoter of the first domestic airline to sell a stake to a foreign airline, it has been a long journey for Jet Airway’s promoter Naresh Goyal.

 In the process, Goyal has courted controversy. Questions have been raised over where the funding for his airline came from or how permission to fly international destinations came hours before his company listed on stock exchanges. His perceived ability to swing Government policy is another point that has given rise to much speculation.

Goyal, it is widely rumoured, was earlier not in favour of allowing foreign airlines to pick a stake in domestic carriers. But, now, he will be the first one to benefit from the policy change.

Goyal, who will turn 63 in July, has remained undeterred by all this.

Others who see Goyal in a different light talk of his humble nature. It is not uncommon to find him in the economy section of an aircraft of his airline if the business or first class section are full up with paying passengers.

Every one is agreed on thing though — Goyal, regarded as a superstitious person (he is known to make an imaginary ‘om’ on the aircraft that he is flying in) — is highly focused and ambitious. This is, perhaps, how he has managed to stay ahead.

 

Under him, Jet was the first private sector Indian carrier to set up a hub abroad, in Brussels in 2007. Jet, along with the now-defunct Air Sahara, was also the first to be allowed to fly on international routes. Goyal was also smart enough to take a cautious view when it came to ordering aircraft. He was the only one who called for restraint in the Indian market when everyone else was ordering aircraft to take advantage of the growing demand.

 It is said that Goyal has not missed a single IATA annual general meeting since the early 1970s. These meetings are attended by the who’s who of the global aviation industry. He is said to be on first name basis with most airline bosses and other movers and shakers in the industry.

Political support

Probably realising that no business can survive without the tacit support of the powerful, Goyal has managed to keep politicians across parties in good humour.

‘No’ is a word that does not exist in Goyal’s vocabulary be it for expanding his business or for his personal whims. There is this tale about how while on a tour of a western country, Goyal managed to get the waiter to rustle up a spicy Indian dish rather than what the restaurant was providing

http://www.thehindubusinessline.com/industry-and-economy/logistics/jetetihad-deal-a-rewarding-longhaul/article4651159.ece

Etihad picks up 24% stake in Jet Airways for Rs 2,050 cr

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

http://www.thehindubusinessline.com/industry-and-economy/logistics/etihad-picks-up-24-stake-in-jet-airways-for-rs-2050-cr/article4650080.ece?homepage=true

 

More choices for desi globetrotter

NEW DELHI: The Indian globetrotter will now be spoilt for choice. The Jet-Etihad deal could lead to a massive hike in connectivity between India and the rest of the world through Abu Dhabi - along with the existing hub in Dubai. The additional connectivity would come through a hike in flying rights between India and Abu Dhabi, which both the airlines have sought. With both Emirates and Etihad competing to get Indian flyers, a price war is on the cards and the price-conscious traveller can have the last laugh as the Sheikhs of Abu Dhabi and Dubai fight for them.

 Apart from flyers, the Jet-Etihad deal is a win-win for both the airlines as well. Jet will have access to low cost funds of Abu Dhabi - apart from cheap jet fuel -to fund its ambitious expansion plans in both the international and domestic arenas. Etihad can now hope to increase it 2% share of international travellers flying to and from India closer to market leader Emirates' 13%.

 Etihad president and CEO James Hogan said: "The Indian market is fundamental to our business model of organic growth partnerships and equity investments... It (the deal) is expected to bring immediate revenue growth ... with our initial estimates of a contribution of several hundred million dollars for both airlines over the next five years." Jet promoter Naresh Goyal said: "It is a win-win situation for all our stakeholders, especially our guests, who will now have access to a much expanded global network."

 Indian carriers and Etihad currently have 13,000 weekly seats each. Jet had sought an enhancement of 42,000 seats per week and Etihad also wants a similar hike. On Wednesday, India and Abu Dhabi agreed on letting their airlines add almost 37,000 seats per week over the next three years. Etihad currently operates 59 flights a week to nine Indian cities, while Emirates has 185 flights a week from 10 cities and Qatar has 95 flights per week from 12 cities. Since international traffic is growing at over 10% per annum, Etihad - like Emirates - wants as much traffic from India as possible to fill up its wide-bodies flying to and from rest of the world.

 The Indian market is expected to grow to 42 million international travellers over the next five years. Now Jet, along with the foreign airlines, is armed to compete to get this traffic. Jet sources say the airline will now get low-cost funds from Abu Dhabi and expand rapidly. "Etihad places huge aircraft orders and thus gets a good price from manufacturers. Now, Jet too can get planes at the same price. And, instead of 14% interest rate for loans in India, it will get loans at 3% to 4% from Abu Dhabi," said a Jet source.

 Jet has 46 Boeing 737s on order that will be delivered over the next five years. The airline is now planning to expedite deliveries and reclaim the number one domestic airline by market share slot that it ceded to IndiGo last year.

 

Apart from these commercial reasons, a senior Jet official said Goyal wanted Jet to be an Indian MNC with presence across the globe. "Let us be India's ambassadors abroad in as many places as possible. The tricolor (that is all on Indian airlines' aircraft) should fly as far and wide as possible," Goyal is learnt to have told his team, while finalizing the airline's network. This deal means that well-run Indian carriers can also hope to have foreign airlines on board and get funding. SpiceJet and GoAir could be first off the block after Jet. IndiGo, though being chased by many foreign airlines, has not shown any interest in them for offloading stake.

http://timesofindia.indiatimes.com/business/india-business/More-choices-for-desi-globetrotter/articleshow/19716547.cms

Jet-Etihad deal: Jet Airways will sell 24% stake to Etihad for Rs 2,046 cr

Jet Airways will sell a 24 per cent stake to Abu Dhabi-based Etihad for $ 379 million (approx Rs 2,046 crore). As part of the Jet-Etihad deal announced on Wednesday, Etihad will invest $ 220 million (approx Rs 1,190 crore) in Jet to create and strengthen a wide-ranging partnership. This will include $ 150 million (approx Rs 810 crore) as majority equity investment in Jet Airways's frequent flyer program Jet Privilege, and $ 70 million (Rs 378 crore) towards three pairs of slots at Heathrow through a sale and lease back agreement, Jet said in a statement.

After the deal, the promoters' stake in Jet is expected to come down from around 80 per cent to 60 per cent.

Jet informed BSE that it was in talks with Etihad on January 3 — the first such deal after the government allowed foreign carriers to buy stake in Indian airline companies in September 2012. Before the deal, officials from Etihad and the Indian civil aviation ministry met to sort out issues like bilateral rights. The deal will give Etihad access to a huge market that has potential to grow at 7-8 per cent for the next decade. Jet will get capital, expertise and access to Etihad's global network and base in Abu Dhabi.

Jet plans to connect 23 Indian cities to the world through Abu Dhabi, which will be its new international hub. It will also keep its other hub in Brussels.

"The airlines will explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies, as well as external services such as insurance and technology support. Other areas of co-operation will include joint training of pilots, cabin crew and engineers, as well as maintenance of common aircraft types and the consolidation of guest loyalty programs," the Jet Airways release said.

http://www.indianexpress.com/news/jet-will-sell-24-pc-stake-to-etihad-for-rs-2046-cr/1107361/