Abu Dhabi: Etihad Airways will buy a 24 per cent stake in Jet Airways (India) Ltd. for about Rs 16 billion ($297 million) in a deal likely to be announced as early as this week, a senior official at India’s civil aviation ministry said on Monday.
“I would believe the deal is as good as done,” the official told The Wall Street Journal. The official didn’t want to be named, as he isn’t allowed to speak on private company deals. India’s Commerce Minister, Anand Sharma, said he will meet a delegation of Etihad executives in “a couple of days”. A statement issued by the minister didn’t say why the executives are meeting him. A senior executive at Jet Airways, India’s second-largest airline by market share, declined to comment. The likely deal will make Jet Airways the first beneficiary of a rule change last year that allowed foreign airlines to buy stakes of up to 49 per cent in Indian carriers.
It may also spawn other such agreements involving foreign airlines, which weren’t previously allowed to own stakes in local carriers. Budget carrier SpiceJet has recently said that it was in preliminary talks with foreign carriers for a stake sale. IndiGo, the local market leader owned by InterGlobe Aviation Ltd., is in talks for an alliance with UK carrier British Airways, three people familiar with the discussions said last week. British Airways’ parent, International Consolidated Airlines Group SA, and IndiGo, however, denied any talks for an investment by the UK company.
A deal between Jet Airways and Etihad will be bad news for India’s Kingfisher Airlines. The local carrier, grounded since October 1, said last month it was in talks with Etihad for a stake sale. Abu Dhabi-based Etihad had previously said it was in talks with some Indian carriers, but had not named any targets.
An analyst said Jet Airways was the real target for Etihad.
“Kingfisher was never really a takeover bet for Etihad, but the presence of another airline in the race may have helped Etihad to negotiate valuations better with Jet,” said Sharan Lillaney, analyst at Indian brokerage firm Angel Broking.
A stake sale would give Jet Airways much-needed cash to reduce debt — $2.3 billion at the end of September — and battle the woes of a demand slowdown in the aviation industry and high input costs.
Between January and November 2012, domestic air traffic fell almost 3 per cent to 55 million passengers, according to government data. It would also give the airline more access to new destinations, especially long-haul destinations in the West through easier interline and codeshare agreements.
Etihad in turn will get a bigger chunk of India’s overseas fliers. Gulf airlines such as Emirates, Air Arabia and Etihad carry the biggest chunk of international traffic out of India, but their flights to India are limited by bilateral air-traffic agreements.
