Jet Airways
is in the final phase of sealing a deal to sell a 24% stake to Abu
Dhabi-based Etihad Airways. Jet founder and chairman Naresh Goyal and
Etihad CEO James Hogan have been meeting with ministers responsible for
finance, commerce and aviation in Delhi to apprise them of details of
the agreement. The Indian government in September last year allowed foreign direct investment of up to 49% in airlines.
The stake sale will help Jet retire some of its debt, which was $2.3 billion at the end of September. Etihad is expected to pay Jet about $300 million for the stake, according to sources close to the deal.
Jet is a strong and established brand with 25% of the domestic market share. It will give Etihad access to a huge Indian market, which despite recent challenges is projected to be among the fastest growing in the world in the next decade. In the past two years, Etihad has been strategically picking up stakes in airlines around the world including Air Berlin, Air Seychelles and Virgin Australia.
Two Middle Eastern carriers, Kuwait Airways and Gulf Air, had a 40% stake in Jet Airways in the mid-1990s. However, a change in Indian government regulations forced them to divest their stake to Goyal, who had emerged as one of the strongest lobbyists against allowing foreign airlines to invest in India. Ironically, his is the first carrier to benefit from the change in policy.
Analysts in Mumbai said Jet could use maintenance services in Abu Dhabi and import aviation fuel directly from the emirate to circumvent the huge sales tax on local purchases. For Jet, the deal provides access to a global network and ability to funding support that it could use to order more narrowbody aircraft.
The strengthening of Jet Airways’ Middle Eastern links could impact Indian flag carrier Air India in a significant way. The airline, through its low-cost arm Air India Express, connects almost all the major cities in the region. Viability of these short-haul international operations is likely to be hit with the new alliances. The government’s current position is that it will not allow Air India to be opened up to a strategic partner. However, other private airlines including SpiceJet and Go Air are negotiating with international airlines for possible stake sales.
atwonline.com
The stake sale will help Jet retire some of its debt, which was $2.3 billion at the end of September. Etihad is expected to pay Jet about $300 million for the stake, according to sources close to the deal.
Jet is a strong and established brand with 25% of the domestic market share. It will give Etihad access to a huge Indian market, which despite recent challenges is projected to be among the fastest growing in the world in the next decade. In the past two years, Etihad has been strategically picking up stakes in airlines around the world including Air Berlin, Air Seychelles and Virgin Australia.
Two Middle Eastern carriers, Kuwait Airways and Gulf Air, had a 40% stake in Jet Airways in the mid-1990s. However, a change in Indian government regulations forced them to divest their stake to Goyal, who had emerged as one of the strongest lobbyists against allowing foreign airlines to invest in India. Ironically, his is the first carrier to benefit from the change in policy.
Analysts in Mumbai said Jet could use maintenance services in Abu Dhabi and import aviation fuel directly from the emirate to circumvent the huge sales tax on local purchases. For Jet, the deal provides access to a global network and ability to funding support that it could use to order more narrowbody aircraft.
The strengthening of Jet Airways’ Middle Eastern links could impact Indian flag carrier Air India in a significant way. The airline, through its low-cost arm Air India Express, connects almost all the major cities in the region. Viability of these short-haul international operations is likely to be hit with the new alliances. The government’s current position is that it will not allow Air India to be opened up to a strategic partner. However, other private airlines including SpiceJet and Go Air are negotiating with international airlines for possible stake sales.
atwonline.com
No comments:
Post a Comment