New Delhi: Jet Airways on Wednesday announced a strategic alliance with Etihad Airways, saying it would sell 24 percent stake to the Abu Dhabi-based carrier for about Rs 2,058 crore, marking the first investment by a foreign carrier in an Indian airline since the change in FDI policy.
Bringing curtains down on almost six months of tough negotiations, top officials including Jet promoter Naresh Goyal and Etihad President and CEO James Hogan, announced the strategic equity alliance in Abu Dhabi under which the Indian private carrier would sell 27.26 million shares in a preferential offer to Etihad at Rs 754.74 a piece.
"The value of this equity investment is USD 379 million (about Rs 2,058 crore) and will result in Etihad Airways holding 24 percent of the enlarged share capital of Jet Airways," a joint statement by the two airlines said. The deal is subject to shareholders' nod and conditions precedent including regulatory approvals.
The two airlines claimed that their alliance would lead to Indian passengers from 23 cities to gain direct access to an expanded global network. Jet would also enhance its services from its primary hubs of Delhi and Mumbai and introduce new flights from Hyderabad and Bangalore. The new India-Abu Dhabi routes and Jet Airways would "establish a Gulf gateway for flights to the US, Europe, Africa and the Middle East," the statement said, adding that their combined global network would cover over 140 destinations.
It said the strategic alliance would bring additional traffic, frequencies and revenues to metro airports, as well as other airports of Airports Authority of India and bring "significant benefits to the Indian economy."  "Substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive Chairman holding 51 percent of the company," the statement said.
Goyal, who was earlier bitterly opposed to opening up of FDI participation for foreign airlines, was the first to move immediately after the government allowed international carriers to pick up a maximum of 49 percent stake in domestic airlines last September.
Giving details of the deal, the statement said, "This strategic investment with a USD 600 million commitment from Etihad Airways will help further strengthening of Jet Airways' financial position."
Etihad would also inject USD 220 million to create and strengthen a wide-ranging partnership between the two carriers, including a strong codeshare arrangement. As part of the deal, Etihad has already paid USD 70 million in February to purchase Jet's three pairs of Heathrow slots through the sale and lease back agreement. Jet Airways continues to operate flights to London utilizing these slots.
Etihad would also invest USD 150 million "by way of a majority equity investment in Jet Airways' frequent flyer programme 'Jet Privilege', subject to regulatory and corporate approvals and final commercial agreements. These are expected to be completed within the next six months, it said.
"I have no doubt that this partnership with Etihad Airways is a win-win situation for all our stakeholders, especially our guests, who will now have access to a much expanded global network," Goyal said in the statement. "This transaction further strengthens the balance sheet of Jet Airways and, more importantly, underpins future revenue streams, which will accelerate our return to sustainable profitability and liquidity," the Jet promoter said.
Hogan said the deal was "expected to bring immediate revenue growth and cost synergy opportunities, with our initial estimates of a contribution of several hundred million dollars for both airlines over the next five years." "The Indian market is fundamental to our business model of organic growth partnerships and equity investments. This deal will allow us to compete more effectively in one of the largest and fastest-growing markets in the world," the Etihad chief said.


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