Jet Airways’s 24% stake sale deal with Etihad Airways today
crore.
A fresh issue of equity, as proposed in the deal with Etihad, will improve Jet's debt-to-equity ratio, allowing it to borrow more if need be.
“From Jet Airways' perspective, the most significant advantage from a potential deal would mean more equity and access to loan funds,” a recent report from HSBC Global Research said. “The main benefit to Etihad could probably largely be from better traffic feed from India into Abu Dhabi.”
On a rough reckoning, analysts estimate that an equity infusion of Rs 1,600 crore would also lower Jet's FY14 net debt to Ebitda from 6 times to 4 and increase the interest coverage ratio from 1.8 times to 2.1.
Etihad is expected to put in place an Indian team to fully utilise the synergies with Jet Airways. The West Asian airline started in 2003 and has a fleet of 67 aircraft, which it plans to scale up to 158 by 2020. Jet Airways and Etihad already have a codeshare agreement wherein they can sell tickets on each other's flights.
But an equity purchase in Jet Airways will allow Etihad greater access to India and it would be able to offer greater competition to Dubai-based Emirates. Currently, the Abu Dhabi to India route has 119 weekly flights, which is significantly less than the Dubai to India route, which has 352 weekly flights and is dominated by Emirates.
Jet Airways along with its low-cost brand Jet Konnect has over 500 daily flights to 73 destinations in India and abroad.
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