Jet Airways crisis: Etihad Airways bid in cash-strapped airline comes as a sign of relief but hinges on finding another partner

The tension was palpable. Jet Airways employees, the banks who are owed $1.2 billion dollars by Jet Airways, customers of the airline, and several other interested parties were wondering how many people would submit a bid by the time it was 6 pm on 10 May, 2019. There were four interested parties who qualified when the bids for the airline were invited, including TPG, Indigo Partners, Etihad Airways and NIIF. In the end, there was only one who submitted a bid, which is Etihad Airways. Etihad’s bid to invest , came as a sigh of relief to everyone, as it saves them the embarrassment of having run a flop show of a bidding process. No one knows yet the terms set out by Etihad Airways with respect to investing in Jet Airways, given the bid is yet to be assessed. But Etihad Airways’ statement released on Friday evening may have some clues. Etihad said, “Etihad Airways today confirmed its interest to re-invest in a minority stake in India’s Jet Airways, subject to conditions. Etihad re-emphasizes that it cannot be expected to be the sole investor, and that, amongst other requirements, additional suitable investors would need to provide the majority of Jet Airways’ required recapitalization." Etihad has, in the past as well, assured it would like to invest in Jet Airways, as long as they got a waiver from making an open offer to acquire shares from the open market. Such a waiver was given to Ajay Singh when he acquired a stake in SpiceJet from the Marans, and has been denied to Etihad Airways in the past. So, this time, Etihad, in their carefully worded statement, has left out a clue that it would continue to want to be a minority partner (less than 50 percent), in Jet Airways. [caption id=“attachment_2693392” align=“alignleft” width=“380”]  A file image of a Jet Airways aircraft. PTI[/caption] Etihad Airways has more skin in the game than anyone else at the moment. Not just did Etihad Airways invest money in Jet Airways in 2013, they also bought out 50.1 percent of the JetPrivilege frequent flyer programme. With the grounding of the airline, JetPrivilege has lost a major client and the key USP of their rewards programme for the moment, which was a big attraction for people to sign up and accumulate their miles on JetPrivilege. So, it is in their interest to kickstart Jet Airways operations again. The Etihad Airways bid, and statement leaves many questions unanswered for now, however. It shifts the burden of finding other investment partners for Jet Airways on to the lenders and investment bankers. The bankers may turn to other unqualified bidders, but the options are not so great there. There is an unknown entity called Jason Unsworth , who claims to have a startup airline called Atmosphere Airlines which would like to invest in Jet Airways. However, going through his credentials, he has no expertise operating an airline, and has not even been able to take off his Atmosphere Airlines off the ground over the four years it has been registered as an airline. However, given Jet Airways is a listed firm, the statements made by this person have to be taken seriously and assessed, which is a distraction from the real job at hand to revive the airline. The other bidder seems to have Naresh Goyal as a part of his bid. This is not a situation that Etihad would like in the first place.

Etihad’s bid for Jet Airways is a sort of a surprise in the scheme of things for now. Etihad Airways itself, has run up $4.8 billion worth of losses over the past three years, is continuously reassessing its strategy to find the right fit for itself going forward. They have been looking out for loans worth $600 millions to put down payments on future aircraft acquisitions.

In this situation, it is a distraction, both from a strategy and capital allocation perspective, for Etihad Airways to be focusing on fixing another airline, while they should be busy mending their own house to reclaim their former glory. Under these circumstances, this bid is a big If. The bid seems to hinge on finding another partner, which is no where around, and the situation at Jet Airways is fast unravelling. The only people who might end up partnering with Etihad could be the NIIF, India’s sovereign wealth fund. But they are waiting for aviation to be classified as infrastructure before taking any steps towards it. Under the circumstances, the bid for Jet Airways might be stillborn, and it might not help saving the airline from being stalled for good. (The writer is a Mumbai-based business travel and aviation journalist, and the founder of the Indian frequent-traveller website Live From A Lounge (www.livefromalounge.com.)