Dubai: Etihad Airways’ long-awaited tie-up with Indian full-service airline Jet Airways has received final approval by Indian authorities. Etihad is now set to take its 24 per cent equity stake in the Indian airline and subsequently expand its network.
In a joint press release, the two airlines announced on Wednesday they had received “all requisite Indian regulatory approvals”.
Due to stringent foreign investment laws in India, the deal had been subject to Indian government cabinet and other regulatory approvals.
Under the new agreement, which sees Etihad Airways take a 24 per cent equity stake in Jet Airways, Etihad Airways President & Chief Executive Officer James Hogan, and its Chief Financial Officer James Rigney have been appointed as additional directors on the Jet Airways board.
In the press release, Naresh Goyal, Chairman of Jet, stated: “The infusion of foreign direct investment in the aviation sector will result in economies of scale, grow traffic at our airports, and create job opportunities.”
The tie up process between the two airlines will begin immediately.
John Strickland, Director at UK-based aviation advisory JLS Consultancy, said in an e-mailed statement the deal is positive for Etihad to significantly enhance their access to the Indian market but acknowledged that Jet’s financials were a cause for concern.
“Their chosen partner has financial problems, which must be addressed in order to turn the business around,” he stated, adding that it would not be helped by the complexity of the Indian market.
The new equity arrangement is likely to give Etihad Airways a strategic advantage in gaining a significant foothold in the lucrative Indian market. It could also impact Emirates and Qatar Airways’ market share on the Gulf-Indian routes.
Andrew Charlton, managing director of the Europe-based strategic advisory, government and public affairs firm Aviation Advocacy, stated in an email that the importance of the deal was inflated by the industry. “The antiquated regulations require that airlines are substantially owned and effectively controlled by nationals of the country of the flag on the side,” he stated.
Traditional airline regulations have become a challenge for India which, according to Charlton, has strictly enforced these rules in the past.
Charlton agrees with Strickland in that the deal could quite possibly land Etihad substantial market share. “India is a huge market and this deal gives Etihad a real head start,” he stated, following on that the it would provide Etihad with better access to “limited Indian routes that have limited domestic competition and external competition due to by artificial regulatory restraints.
The long-awaited announcement is the latest in equity stakes made by Etihad. Earlier this week the airline announced it had taken a 33.3 per cent stake in European regional carrier Darwin Airlines, which has since been re-branded Etihad Regional – operated by Darwin Airlines.