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Jet Etihad Deal

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Submitted By vishesh77
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JET ETIHAD Deal

Jet Airways and Etihad Airways on 24th Dec 2013 closed their partnership deal seven months after it was announced, bringing in much-needed cash for Jet and paving the way for both partners to implement large scale global network expansion plans. In a filing with the Bombay Stock Exchange, Jet said it has allotted 27.26 million preferential shares to the Mideast carrier for Rs 2,057.67 crore. The shares, equal to a 24% stake in the Indian carrier, were allotted at a premium of Rs 744.74 on a face value of Rs 10 per share. Jet's promoter Naresh Goyal holds 51% in the company while the rest is with public and financial institutions. In a separate announcement, Jet said Etihad's CEO James Hogan and its CFO James Rigney have joined the board.
Main Concerns: * The fact that various government ministries have raised questions over the deal is reason enough to believe that more has been given than received in the bi-lateral agreement. As against a mandate to increase weekly seat entitlements for airlines of both countries from 13,300 to 25,000, the civil ministry delegation returned after giving away 50,000 seats. * Reports say that Etihad agreed to the deal only after it was assured of more seats and more ports of call in India. That explains why Etihad agreed to pay a huge 32% premium for acquiring a 24% stake in Jet Airways. Etihad was willing to pay $370 million (Rs 2,050 crore on the day of the deal) for the stake after the seat sharing agreement was announced. Ironically, it is the same Etihad management which rejected an earlier offer of Rs 1,780 crore, saying the price was too high for a loss making company with a negative net worth. * There is little doubt that the seat sharing agreement announcement by the two countries was the deal clincher. However, while Etihad is a government owned national airline, Jet Airways is a private player. In signing the deal, the government has sacrificed the interest of other Indian aviation companies, especially its national carrier Air India. It is the sudden increase in the seat sharing which is the bone of contention among various ministries, including the finance ministry.

Time line jet Etihad Deal
April 24 - Jet Airways and Etihad sign strategic alliance. Etihad agrees to pick up 24 percent stake in Jet Airways for about Rs 2060 crore.
May 24 - Jet Airways share holders approve sale of stake to Etihad. The airline defers resolutions to amend company's articles of association
May 27 - The two airlines amend shareholder agreement to address shareholder and Sebi concerns on control and ownership
June 14 - Foreign Investment Promotion Board defers approval to Jet-Etihad alliance
July 29 - FIPB gives a conditional approval to Jet-Etihad deal
Sept 3 - Cabinet approves the enhanced traffic rights on India-Abu Dhabi route
Oct 3 - Cabinet Committee of Economic Affairs clears the deal
Nov 12 - Competition Commission of India gives its clearance to the deal

As part of the deal, there will be an overall cash infusion of $ 750 million in debt and equity. The infusion will help Jet cut its debt from $2.1 billion to $ 1.5 billion
$379 million Equity investment
$150 million Investment in Jet’s frequent-flyer programme
$150-million loan Assistance to be provided in securing debt
$70 million Sale and lease-back of Jet’s Heathrow slots

Strategic investment under FDI policy of the Government of India will deliver wide-ranging revenue growth and cost synegy opportunities for both airlines Alliance will bring significant benefits to the Indian economy, both in terms of growth, job creation, trade and tourism .Jet Airways passengers from 23 cities in India to gain direct access to an expanded global network .Jet Airways to enhance its services from its primary hubs of Delhi and Mumbai, and introduce new flights from Hyderabad and Bangalore.The strategic alliance between the two airlines will bring additional traffic, frequencies and revenues to metro airports, as well as other airports of AAI New India-Abu Dhabi routes and Jet Airways to establish a Gulf gateway for flights to the US, Europe, Africa and the Middle East.The strategic investment enables Etihad Airways to tap into India’s fast-growing 42 million strong travel market.Both airlines' passengers will benefit from fully integrated frequent flyer programs with reciprocal ‘earn-and-burn’.Alliance will result in both consumer benefits and/or all round efficiencies.This strategic investment with a US$600 million commitment from Etihad Airways will help further strengthening of Jet Airways financial position.

FDI investments in aviation after the government relaxed * Jet - Etihad deal - $379 million. Etihad will hold 24%. Jet chairman Naresh Goyal retains 51%. Public shareholding - 25% * Tata Singapore Airlines - Initital investment $100 million. Singapore Airlines will invest $49 million and the balance will be invested by Tata group * Tata AirAsia - AirAsia to hold 49% investment, Tata Group will hold 30% while 21% will be held by telestra Tradeplace. The initial investment is around Rs 80 crore

Thanks N Regards,
Vishesh Mehta

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