Flight for survival: Jet-Etihad deal likely this week

New Delhi: Etihad Airways could make up its mind this week, after its board of directors takes a call on which Indian airline to pick for an equity investment.

The Abu Dhabi-based carrier has been talking to both, Jet Airways and Kingfisher Airlines, but top official sources once again indicated today that Jet could bag the deal.

They said all indications point to a deal being announced in the next 10 days and that Jet could offload 24% stake initially for anywhere between Rs 1,500-1,800 crore . These sources said that though Jet is a clear frontrunner, the Etihad management is yet to take a final call on which of the two Indian airlines it will invest in.

[caption id=“attachment_576411” align=“alignleft” width=“380”] Etihad has been playing a cat and mouse game with Jet and Kingfisher for the last few months, keeping both the airlines on tenterhooks. Reuters[/caption]

“Nothing is certain till the deal is signed, there should be a decision at the board meeting this week,” these sources said.

They also pointed out that any deal with Jet would be a complex one, with the first step being a restructuring of Jet promoter Naresh Goyal’s shareholding in the company. At present, Goyal holds 80% in Jet Airways through Tail Winds, a company established in the Isle of Man. The first step would be this equity getting converted to Goyal’s personal holding and getting an approval from the Indian Government.

Etihad has been playing a cat and mouse game with Jet and Kingfisher for the last few months, keeping both the airlines on tenterhooks. While talks with Jet’s Goyal have been stalled over the valuation of Jet’s 24% stake, with Kingfisher the deal has been stuck over Etihad’s refusal to take on any of the over Rs 7,000 crore debt on the airline’s books.

Many in the industry see Etihad playing a smart game by involving Kingfisher, an airline which has been grounded since October one and has been unable to present a viable revival plan to begin even skeletal operations to Indian regulator DGCA. Industry watchers say Kingfisher was brought into the picture purely to beat down valuation of Jet.

But several reports have indicated Kingfisher management’s regular updates to Etihad about its revival plan which has been submitted to the DGCA but not approved. Now, the airline’s flying permit has lapsed.

Meanwhile, Etihad and Jet already have a code-sharing agreement and a tie-up could make Jet a more formidable competitor to state-owned Air India while strengthening Etihad’s position against Dubai-based Emirates Airline, which carries a big chunk of the traffic between India and the Middle East.

Also, any such alliance would give Jet several advantages, the biggest being availability of cheaper fuel at Abu Dhabi and global connectivity through Etihad’s network. On its part, Etihad would gain access to smaller towns and cities in India and can feed Indian traffic to its global network.