Naresh Goyal promoted Jet Airways and Abu Dhabi based Etihad Airways is expected to conclude a 24% stake sale deal within a week, sources from Jet airways confirmed. This puts rest to the speculation that Jet airways will announce the deal on February 1, just when it is going to announce its third quarter results. The stake-purchase agreement with Jet, second largest domestic passenger market share, will make Etihad the first foreign carrier to buy into an Indian airline after the cabinet approved 49% foreign direct investment (FDI) by foreign carriers in domestic airlines.
Etihad Airways Chief Executive Officer (CEO) James Hogan and Jet Chairman Naresh Goyal met Ajit Singh, the civil aviation minister and Anand Sharma, the commerce minister. Hogan said discussions with Indian government officials on its bid to forge a deal with Jet Airways (India) Ltd. were “very good.”
A senior government official of the commerce ministry said, “The two executives told Anand Sharma that they will submit an application with the Foreign Investment Promotion Board (FIPB).”
Responding to the media on Air India’s apprehensions about the Jet-Etihad deal, Singh said after the meeting,“The government allowed FDI because looking at the whole aviation sector, we need the foreign management, their reach and technical expertise. It’s a very good move that Jet and Etihad are talking. The aviation sector should grow and competition should also grow.”
On issues relating to security and regulation, Singh said, "Once they sign the agreement, they will go through the regulatory requirements.
"Unless the deal is signed and approved, we can't say the deal is done. But I don't see any problems," he said in reply to a spate of questions.
Etihad, the Middle East’s third-largest airline, is in talks to buy 24 percent of Jet for about $300 million, a senior government functionary said in December. Jet can’t say when the deal will conclude, Goyal said earlier today.
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A stake in Jet will help Etihad tap into one of the fastest-growing aviation markets in the world where air travel is forecast to triple by 2021. Currently, Jet airways flies from 2 points in India and Etihad flies out from 10 points in India to Abu Dhabi. Etihad airways has already utilized over 85% of its bilateral rights and the civil aviation ministry is not in favour of granting further bilaterals to middle east carriers till the Indian carriers exhaust bilaterals from their side.
Etihad has miniscule market share compared to other big Gulf carriers Emirates and Qatar which rule the West Asian market. It has a fleet of 67 aircraft, which is nearly a third of Emirates and half of Qatar. In India, too, with less than 2% of the international market, it is a minor player compared to Emirates (over 13% share) and Qatar (over 5%). Etihad has 52 weekly flights to and from India, which is way below Emirates (185 flights) and Qatar (95 flights).
Experts believe that Jet-Etihad deal would help Etihad to bypass the limitation of bilaterals.
Moreover, Jet needs money to fund expansion and cut debt after several years of losses.
Etihad can feed in passengers seamlessly from Abu Dhabi across the country by using Jet Airways’ wide coverage of over 53 cities in India. Similarly, Jet could bring in passengers from Indian cities to Abu Dhabi, from where they could travel to any destination in West Asia and Africa where Etihad has excellent connectivity.
Shares of Jet rose as much as 4.34 percent and changed hands at 622 rupees.