Post Etihad deal, Jet may shift global base to Abu Dhabi

BUS
The deal between Jet Airways and Etihad, likely to be wrapped up by end-December, could result in the Naresh Goyal-promoted airline shifting its international base from Brussels to Abu Dhabi.

The deal, under which Etihad is to pick 24 per cent stake in the Indian carrier for Rs 1,600 crore, could also give Jet access to aviation turbine fuel at much cheaper rates, according to the broad contours of the deal that has now entered the final stages of negotiations.

"As part of the deal, both the airlines will operate flights on code share and Jet will shift its international base to Abu Dhabi from Brussels. At Abu Dhabi, Jet will also get fuel at a cheaper cost. Apart from Rs 1,600 crore for the 24 per cent stake in Jet, both the airlines will also get into code share to operate flights," said a source in the know. Jet, the source said, is also likely to put on hold its plan to join the Star Alliance. "With the code share with Etihad, they will expand their network and may not join the Star Alliance," the source added. An SMS sent to the Jet Airways spokesperson did not elicit any response.

If this deal goes through, Jet Airways will be the first airline to get investments from a foreign airline after the Indian government relaxed norms allowing foreign carriers to buy up to 49 per cent stake in Indian carriers.

Analysts also say that both the airlines will benefit from the deal, even as Etihad is seen as the bigger gainer. "Etihad will get to partner with India's strongest airline and get access to a market that is the world's fastest growing aviation market. For Jet too, Etihad's entry will only add to its strength," said an aviation analyst, who did not want to be identified. Experts also say that the deal will be first for a comprehensive alliance that benefits both and equity will only come after it.

"First, all this is speculation because there is no official word on this but I do see a deep and comprehensive alliance as a first step. In the near term, I see the possibility of jet delisting once Etihad stake goes above 26 per cent," said Kapil Kaul, CEO-South Asia for Centre for Asia Pacific Aviation, an aviation think tank.

The deal between the two, however, will only be complete when Jet Airways takes necessary permissions from the home ministry and the Foreign Investment Promotion Board (FIPB).

This deal would require Naresh Goyal to first transfer shareholding in Tail Winds, which is registered in Isle of Mann, to himself. Goyal, who is an NRI, holds shares of Jet through Tail Winds that is registered outside the country.

According to the guidelines for foreign carriers wanting to invest in Indian airlines, the new entity will initially have to seek approval from the FIPB. It will also need to ensure that the CEO is Indian, board is majority Indian and the joint venture company is registered in India.

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