Jet Airways in stake sale talks with Etihad

AFP/New Delhi

Loss-making carrier Jet Airways said yesterday that it was in talks with Etihad Airways about selling a stake to the Abu Dhabi-based airline.

“These discussions are in progress but no terms have been firmed up at present,” Jet said in a statement to the Bombay Stock Exchange.

Jet shares rose as much as 6.1% to Rs615.4 at the BSE, reacting to the news. Its shares have jumped over 60% since the government relaxed rules for foreign investment in the aviation sector.

The airline said an “appropriate announcement” would be made once the terms of the investment by Etihad were finalised.

Jet said that “various structures” are being explored.

“By its very nature, there cannot, at this stage, be a firm time line as to the progress of these negotiations, considering the complexity of trans-national transactions such as this,” the statement said.

The Business Standard newspaper reported yesterday that Etihad may pick up a 24% stake in Jet, valued at between Rs15 to 18bn ($270-320mn), quoting an unnamed aviation ministry official.

Tail Winds, the Isle of Man-based investment firm of Jet founder Naresh Goyal, currently holds nearly 80% of Jet Airways.

Several loss-making Indian airlines have been in talks with foreign carriers after the government last year opened up the aviation sector further to allow non-Indian airlines to invest in their counterparts in the country.

A deal between Jet and Etihad could make matters worse for ailing Kingfisher Airlines, which is in desperate need of cash to fly again and was in talks with Etihad to sell a stake.

“Jet-Etihad talks are on but it (Etihad) may not be in a hurry,” said an aviation analyst with a Mumbai-based brokerage, declining to be named.

“Valuation will be the most critical,” he said, adding that the balance sheets of most local airlines are weak.

Only one of India’s six main scheduled carriers - privately held low-cost carrier IndiGo -was in profit last year, helped by a strict business plan and on-time performance.

Indian carriers need money to fund expansion and cut debt after years of losses caused by intense air-fare battles and rising fuel costs.

Losses for Indian airlines come despite rising demand for airline travel spurred by the rising incomes of India’s middle classes.

Jet and Etihad may also consider a “marketing agreement,” another analyst said.