Etihad Airways and Jet Airways announced on 24 April 2013 that the UAE carrier has agreed to subscribe for 27,263,372 new shares in Jet Airways at a price of USD 13.93 per share. The value of this equity investment is USD 379 million and will result in Etihad Airways holding 24% of the enlarged share capital of Jet Airways.
Etihad Airways' wider overall commitment to Jet Airways includes the injection of USD 220 million to create and strengthen a wide-ranging partnership between the two carriers.
As part of this Etihad Airways paid USD 70 million to purchase Jet Airways’ three pairs of Heathrow slots through the sale and lease back agreement announced on 27 February 2013. Jet Airways continues to operate flights to London utilizing these slots.
An amount of USD 150 million will be invested by Etihad Airways by way of a majority equity investment in Jet Airways’ frequent flyer program "Jet Privilege", subject to appropriate regulatory and corporate approvals and final commercial agreements which are expected to be completed within the next six months.
Under the strategic partnership, which will be subject to full regulatory and shareholder approval, the airlines will gradually expand existing operations and introduce new routes between India and Abu Dhabi, providing an ever wider choice to the travelling public. They will combine their network of 140 destinations, with Jet Airways establishing a Gulf gateway in Abu Dhabi and expanding its reach through Etihad Airways’ growing global network.
Passengers from 23 cities in India will benefit from direct connections to international destinations. New flights from Jet Airways’ home hubs and metro airports will further strengthen its current operations from these airports. Jet Airways’ vision continues to be to develop Delhi and Mumbai airports as its primary home hubs and connecting them to Asian, European and other regions.
Details of the investment were unveiled by Etihad Airways President and Chief Executive Officer, Mr. James Hogan, and the Chairman of Jet Airways, Mr. Naresh Goyal.
A key component of the wide-ranging partnership is expanded codesharing on flights with passengers benefiting from reciprocal ‘earn-and-burn’ rights on the airlines’ frequent flyer programs.
The proposed codeshare expansion will significantly enable Etihad Airways to tap into India’s rapidly growing travel market, providing additional passenger traffic to Etihad Airways’ Middle Eastern, North American and European destinations, and give Jet Airways passengers from various cities access to an expanded network.
Current estimates predict the size of the Indian market to grow to 42 million travellers over the next five years at a rate of 10% per year, while the Indian middle class, which provides the majority of air travel demand, is forecast to grow by 200 million, over the next eight years.
Etihad Airways currently flies to nine Indian destinations including Delhi, Chennai, Mumbai, Kozhikode, Thiruvananthapuram, Hyderabad, Bangalore, Ahmedabad and Kochi, with a total of 59 flights per week.
The partnership will also help drive a significant increase in traffic growth through Abu Dhabi International Airport, as well as Jet Airways’ hubs of Mumbai and Delhi international airports.
Key benefits for both airlines will flow from synergies and cost savings in areas including fleet acquisition, maintenance, product development and training.
The airlines will explore joint purchasing opportunities for fuel, spare parts, equipment and catering supplies, as well as external services such as insurance and technology support.
Other areas of co-operation will include joint training of pilots, cabin crew and engineers, as well as maintenance of common aircraft types and the consolidation of guest loyalty programs.
A joint project management office will be set up to ensure delivery of all synergy benefits to both parties.
Substantial ownership and effective control will remain with Indian nationals, with Mr. Goyal as the non-executive Chairman holding 51% of the company.
Etihad Airways’ investment in Jet Airways follows the minority equity stakes taken by the airline in airberlin, Air Seychelles, Virgin Australia, and Aer Lingus over the last 12 months.
Etihad is being advised by HSBC, DLA Piper, Amarchand & Mangaldas & Suresh A. Shroff & Co and PricewaterhouseCoopers on this transaction.
Jet Airways is being advised by Mr. Harish Salve, Gagrats, ELP, Ernst & Young, DSP Merrill Lynch Limited and Credit Suisse.
Source: Etihad Airways