Etihad Airways is in talks with a partner to jointly bid for Jet Airways which has been put up for sale by banks which have taken control of the financially-troubled airline.
Government sources said Etihad has not given up on Jet in which it held 24% stake. After banks acquired 50.1% stake in Jet, shareholding of all existing investors fell by half with Etihad left holding 12% stake.
“Etihad will not bid alone. They are in talks with an investor for jointly bidding for Jet Airways,” said the sources. Aviation rules allow a foreign investor to pick up a maximum of 49% stake in an airline.
Protecting investment
People familiar with the development said that Etihad Airways, though now financially-constrained on account of its years of losses, is keen on increasing its holding in Jet to protect its investment as well as to ensure traffic flow into its network from India.
So far, Etihad had invested or arranged more than $1 billion in/for Jet Airways and since 2014, Jet had been sending passengers from across India to the Abu Dhabi hub of Etihad.
With its two main demands namely the removal of promoter Naresh Goyal and his spouse Anita Goyal from the board and bringing down their stake to below 10% having been met through the new bank-led provisional resolution plan, Etihad Airways is believed to be considering increasing its stake to a maximum of 49% and rope in a partner to operate the airline.
As per foreign direct investment rules, the effective control of Indian carriers has to remain with Indians.
So, even if Etihad increases its holding to 49% it cannot control Jet Airways and would need a reliable Indian partner to do so, according to analysts.
The partner is believed to be National Investment and Infrastructure Fund (NIIF) in which Abu Dhabi Investment Authority has a stake.
NIIF is majority owned by Indian government and some Indian financial institutions.
Very attractive franchise
“Jet is a very attractive franchise. It has the routes, the network and the brand. And all these make it an attractive package. Yes, there were issues among the key investors [Goyals and Etihad] which is now a thing of the past with the founders stepping down,” a person familiar with the development said.
“Since Jet will now be auctioned by the lenders, Etihad will find it convenient to gain control through some partners,” the person said.
A final decision is expected to be taken on March 31 when Etihad Airways board would meet in Abu Dhabi.
When contacted, an Etihad Airways spokesperson said, “Etihad Airways does not comment on rumours or speculation.”
With banks taking control of Jet Airways, lenders would now nominate two members on the board for the interim period (till such time the new investor comes in).
One of them would be former State Bank of India Chairman A.K. Purwar who would be the non-executive chairman of the board.
“The board of Jet had nine members, of which three resigned. Now, there will be additional two members,” said a banker having knowledge of the development.
