After months of uncertainty, Etihad Airways is set to invest $379 million (Rs 2,050 crore) to acquire a 24 per cent stake in Jet Airways.

This is part of a $600-million commitment to strengthen the partnership between the two airlines. The current deal values Jet at around Rs 8,500 crore. Under the agreement, the Abu Dhabi-based airline will subscribe to 2.72 crore new shares of Jet Airways at Rs 754.74 a share. The share allotment is at a substantial premium to the scrip’s closing price of Rs 573.15 on the NSE on Tuesday.

With the Jet Airways board approving the investment agreement, the company will hold an EGM on May 24 to seek a final nod from shareholders. This deal will not trigger an open offer for other shareholders in Jet since it is below the trigger-limit. However, Jet still has scope to bring in other investors, as the policy allows foreign airlines holding up to 49 per cent in a domestic carrier.

JOINT STATEMENT

A joint statement put out by the two airlines said: “Etihad Airways’ wider overall commitment includes the injection of $220 million to create and strengthen a wide ranging partnership between the two carriers.”

Of this, Etihad has already paid $70 million to Jet Airways for the purchase of three pairs of slots at London Heathrow airport through a sale and lease back agreement.

The remainder, $150 million, will form a majority equity investment stake in Jet’s frequent flyer programme. It is likely to take up to six months to get all the regulatory and corporate approvals for this investment to be approved, the statement adds. After the share purchase agreement is cleared by regulatory authorities, ownership and control will remain in Indian hands with Naresh Goyal as non-executive Chairman of Jet Airways, the joint statement said. The FDI investment will see Jet Airways add more flights from Delhi and Mumbai, apart from launching new flights from Hyderabad and Bangalore to Abu Dhabi.

In an effort to bring down costs Jet and Etihad will explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies as well as insurance and technology services.

Jet pipped its arch rival Kingfisher Airlines, which at one time was supposed to be in talks with Etihad for a stake sale.

Officials of SpiceJet and IndiGo were not available for comment on the impact of the Jet-Etihad agreement on their plans or operations.

However, earlier, both the airlines had said that they were in no hurry to conclude any deals with a foreign airline partner.

Industry impact

The IndiGo Airlines Chief Executive, Aditya Ghosh, had told newspersons that with the airline reporting profits since inception they were under no pressure to rope in a foreign partner.

Aviation analysts feel that the deal may impact Air India adversely. “This deal will completely wreck Air India, especially its international operations, as this changes the landscape of international aviation out of India in Jet Airways’ favour,” said Kapil Kaul, regional head of the Centre for Asia Pacific Aviation.

>ashwini.phadnis@thehindu.co.in

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