News Backgrounder
Patience paying off for Hogan
At press time, the landmark equity deal between Etihad Airways and India’s Jet Airways was close to Indian government approval after months of domestic political opposition lobbying
September 1st 2013
Etihad Airways chief executive, James Hogan, spent months in complex negotiations with Jet Airways head, Naresh Goyal, before the pair agreed in April to the Gulf carrier taking a 24% stake in one of India’s leading airlines. Since then the two carriers have been awaiting snail-paced clearance decisions by the Indian government.Read More »
But the fact the deal was still awaiting clearance by New Delhi late last month didn’t seem to bother the Australian-born Etihad chief.
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| 'We are breaking new ground here … you have to work through the bureaucratic process. Yes, we would have liked it to happen a little bit quicker' |
| James Hogan Chief Executive Etihad Airways |
“This is the first major foreign direct investment [by an airline] in India,” he told Orient Aviation during a visit to Sydney in August.
“We are breaking new ground and when you are breaking new ground obviously there are people who get concerned, they want to understand. You have to work through the bureaucratic process and that’s what we have done.
“Yes, we would have liked it to happen a little bit quicker, but what is more important is that you tick the boxes so we can go forward and cement a great partnership.”
Hogan said he believed the $379 million deal, which gained conditional approval from India’s foreign investment regulator, the Foreign Investment Promotion Board (FIPB) in July, should overcome its final hurdles before the end of August.
Following the FIPB green light, the deal still has to receive clearance from the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI) and the government’s Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister, Manmohan Singh.
Along the way, the partners have had to satisfy politicians and the SEBI and CCI about who would control Jet after the sale.
The FIPB announced its decision after Jet submitted an amended shareholding agreement to the finance and civil aviation ministries, which addressed those control and management issues. It is understood Etihad has agreed to have only two seats on the board of directors. Originally, it would have had four on the 10-member airline board.
News the deal appeared to be heading for completion came as Jet reported its second straight quarterly loss. In the three months to June, it suffered a net deficit of $58 million.
The Etihad deal is expected to help Jet reduce debt through improved network connectivity and rationalization of some of its operations, including pilot training and maintenance, with its Gulf partner.
| …. and now Air Serbia Etihad’s latest equity investment is in failing Serbian national airline, Jat Airways. The carrier, recently renamed Air Serbia, is the Abu Dhabi carrier’s sixth cash investment. It will acquire 49% of the Serbian carrier, which will give Etihad a strong foothold in the fast-growing markets of eastern Europe. Etihad launched flights between Abu Dhabi and Belgrade in June. The current Jat Airways fleet of 10 B737-300s will be retired. In the short term, they will be replaced by leased narrowbody aircraft, but in the longer term, Air Serbia will order new aircraft. Under the deal, Etihad will provide a $40 million loan facility, which will be converted into equity on January 1 next year, subject to regulatory approval. This will be matched by a cash injection from the Serbian government. Etihad and the government will each provide further funding through shareholder loans and other mechanisms, up to $60 million, to meet working capital requirements and support network development for the newly created Air Serbia. “We have tough decisions to make, but the financial investment by Etihad Airways and the government of Serbia, together with the positive impact of our joint management expertise and experience, will help ensure this airline, with its proud history, has an even brighter future,” said Etihad boss, James Hogan. In addition to India’s Jet Airways, Etihad has 29.21% in airberlin, 40% in Air Seychelles, 10.5% (soon to be increased to 19.9%) in Virgin Australia and 2.9% in Aer Lingus. |
