News Backgrounder
Done deal ... at last, for Etihad and Jet Airways
May 1st 2013
It has been a long time coming, but after months of complex negotiations Gulf operator, Etihad Airways, has finally tied the equity knot with India’s Jet Airways. Read More »
 |
| Shake on it: Etihad chief executive, James Hogan (left), and Jet Airways chairman, Naresh Goyal, after completing their long-running negotiations |
Etihad is the first overseas airline to take advantage of last year’s changes to New Delhi’s foreign direct investment (FDI) rules that allow foreign carriers to take stakes in local operators.
The Middle East carrier is spending a total of $599 million: $379 million for a 24% stake in Jet, a $150 million equity investment in Jet’s frequent flyer programme and another $70 million to buy the Indian airline’s three pairs of Heathrow slots through a sale and leaseback agreement.
“We are certain the partnership will bring significant benefits and opportunities for global growth to both airlines,” said Etihad chief executive, James Hogan.
“It is expected to bring immediate revenue growth and cost synergy opportunities, with our initial estimates of a contribution of several hundred million dollars for both airlines over the next five years.”
Hogan said the Indian market was fundamental to Etihad’s business model of organic growth partnerships and equity investments. The deal would allow the Gulf carrier to compete more effectively in one of the largest and fastest-growing markets in the world.
Forecasts predict the Indian market will grow to 42 million travellers in the next five years at a rate of 10% annually.
Jet chairman, Naresh Goyal, said the partnership would be a win-win situation for all. “This transaction further strengthens the balance sheet of Jet Airways and, more importantly, underpins future revenue streams, which will accelerate our return to sustainable profitability and liquidity,” he said.
 |
 |
| Etihad will take a 24% in Jet Airways after lengthy negotiations between the two carriers |
The deal is the latest move in Etihad’s strategy of creating a widespread network of partner airlines through equity investments. It has stakes in airberlin, Air Seychelles, Virgin Australia and Aer Lingus.
It is in a strong financial position. Last year, Etihad posted a net profit of $42 million, up from $14 million in 2011.
Key benefits will come from areas including fleet acquisition, maintenance, product development and training. The airlines will explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies, as well as external services such as insurance and technology support.
Other areas of co-operation will include joint training of pilots, cabin crew and engineers, as well as maintenance of common aircraft types and the consolidation of guest loyalty programmes.
