Airline shares jump on Etihad's stake buy in Jet Airways

Shares of aviation companies rose on Thursday after after Gulf carrier Etihad Airways said it is taking almost a quarter stake in Jet Airways, which rose as much as 20% in the morning. Investors cheered the deal as Etihad will buy Jet shares at Rs 754.74 per share, a 19% premium to Thursday’s closing price of Rs 632.

Based on Tuesday’s closing price, the deal is happening at a 31.7% premium.

The deal sets a valuation benchmark for further investment in Indian airlines, with budget carrier SpiceJet Ltd  frequently the subject of stake sale reports.

Spicejet rose 18.24%, while Kingfisher Airlines Ltd  gained less than 1%.

Citigroup has raised India's Jet Airways Ltd target price to 766 rupees from 545 rupees previously, while maintaining its' buy' rating, after the deal. 

The investment bank says the cash infusion of $450 million gives Jet the leeway to pay down high cost debt while also being strategic for its international operations.