Jet Airways expected to finalise deal with Etihad next week

Mumbai: Indian billionaire Naresh Goyal will initiate a complex transaction this week or early next week to sell around 24 per cent in India’s leading carrier Jet Airways (India) Ltd to United Arab Emirates’ Etihad Airways, a person involved in the negotiations told The Wall Street Journal.

A deal to get Etihad on board will help Jet expand operations and retire part of its debt, while giving it access to Etihad’s global network. On the other hand, Etihad will get a bigger chunk of the fast-growing Indian air passenger market.

A Jet spokeswoman didn’t comment. An Etihad spokesman couldn’t be reached.

Goyal currently holds around 80 per cent of Jet Airways through his ownership in Tail Winds Ltd, a holding company registered in the Isle of Man.

The multi-part transaction being discussed for Jet Airways’ sale to Etihad will first involve the transfer of all of Goyal’s Tail Winds shares to a new company. Goyal will have a majority stake in the new entity, and continue to indirectly own 51 per cent of Jet Airways, the person familiar with the deal discussion said.

Etihad will subscribe to shares in the new entity, to ultimately own an indirect 24 per cent in the Indian airline, the person added. This person declined to give the transaction value.

However, a senior official in India’s civil aviation ministry had said in January that Etihad would likely pay about $300 million (Dh1.1 billion) for the purchase.

Regulatory approval

A senior civil aviation ministry official told The Wall Street Journal last week that Jet Airways’ officials have indicated that this new entity could be set up in India. If that happens, Goyal will need approval from the Securities and Exchange Board of India, the country’s capital markets regulator, to transfer his shares from Tail Winds.

This, and any other required regulatory approvals, could mean that final deal might not happen for several weeks.

Another alternative that is being considered for structuring the deal is for Goyal to transfer a part of the 80 per cent stake held in Tail Winds directly to Etihad, the person familiar with the deal discussions said.

Both options will end up with Goyal holding a 51 per cent stake in Jet Airways, and Etihad holding about 24 per cent, he added.

One sticky point for the negotiations between the two airlines has been the deal’s potential tax liability, according to the person familiar with the talks. Etihad wants a promise from Jet that it will pay any taxes that the Indian government might demand on the deal, the person added.

Seeking investments

Etihad has already agreed to buy Jet’s three pairs of landing and departure slots at London’s Heathrow airport for $70 million. Jet will continue to use the slots on lease.

Indian carriers have been aggressively seeking investments from foreign carriers since September, when the government allowed foreign airlines to buy up to 49 per cent stakes in Indian carriers. Local rules don’t allow foreign airlines to take management control of local carriers.

The move was aimed at helping India’s airlines whose bottom lines have been hit by high fuel prices and interest rates, along with stiff competition.

Another company interested in India’s aviation market is AirAsia Berhad. The Malaysian carrier last week said it had approached the Indian government to set up a budget airline with the Tata Group and another Indian investor.

Jet was incorporated in April 1992 and started operations as an air taxi operator in May 1993 with a fleet of four leased Boeing 737 aircraft.