UAE-based Etihad Airways, which has 24% stake in Jet Airways, is likely to raise it to 49%, the maximum possible for foreign carriers to have in a domestic scheduled passenger airline.
Industry sources aware of the development told FE that recently the two sides have reached an agreement to this effect after talks over valuation got finalised. Since the country’s foreign direct investment for the aviation sector allows foreign carriers to have up to 49% stake via the automatic route, the move will not require the approval of the Foreign Investment Promotion Board.
However, Jet’s shareholder agreement with Etihad will be vetted as it was done earlier to ensure that management and ownership remains in Indian hands.
The source said that Jet, which has a total debt of R11,920 crore at the end of the December quarter, wants to raise convertible bonds worth $300-400 million for which Etihad has agreed. Once the conversion takes place, Etihad’s stake will increase to 49%. Jet will use the funds to pare its debt and expand its services.
When contacted, Jet Airways’ said, “this information is entirely speculative.”
Etihad Airways had acquired 24% stake in Jet Airways for $349 million in 2013.
Interestingly, on Thursday Jet Airways decided to increase the number of the daily flights to Dubai from the airlines’ hubs in Mumbai and Delhi. The airline will launch a sixth daily frequency from Mumbai to Dubai from March 1. With the introduction of this new flight, Jet Airways will offer the maximum number of daily flights between the two cities. Jet will also launch a third daily flight between Delhi and Dubai, which is scheduled to start from March 27. With the launch of the new flights, Jet Airways will operate eleven daily flights between India and Dubai which also includes flights from Kochi and Mangalore.
The sources said that these decisions were taken after agreement over stake increase, etc got finalised.
“Last year Jet Airways managed to recover financially as a result of a slump in oil prices. As and when jet fuel prices increases, the company will need additional money to reduce the debt. They cannot compete with foreign airlines internationally so it is good policy to feed passenger to Etihad from different parts of India,” said an aviation expert.
In the past nine months the number of passengers carrier by Jet Airways increased by 18% y-o-y to 19.81crore passengers across all the routes in which the full service carrier operates. The code sharing traffic for the airline also increased by 86% y-o-y during the same period. In the quarter ending December 31, the net profit of Jet Airways increased by 1510% y-o-y to R467 crore when compared to R29 crore in the corresponding period.
Jet Airways, together with Etihad Airways, now has the largest market share in Indian international traffic. Jet Airways Group currently operates a fleet of 116 aircraft, which includes Boeing 777-300 ERs, Airbus A330-200/300 and Boeing 737s and ATR 72-500/600s.