Jet-Etihad deal positive for industry: Experts

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SME Times News Bureau | 25 Apr, 2013
The sale of 24 percent stake in Jet Airways to the Abu Dhabi-based Etihad Airways for around Rs.2,000 crore ($379 million) is a positive step for the aviation industry, experts watching the sector opined Wednesday.

Experts say that the deal will bring revenue growth and cost savings for both the companies.

"Both companies are going to gain from this strategic deal. Jet will get more financial options and a reliable international partner, while Etihad will get a foothold in India," said Rajiv Chib, associate director, PricewaterhouseCoopers.

According to Chib, the deal also demonstrated the interest international passenger carriers are taking in Indian domestic airlines, as they see future growth in the sector.

"This (deal) shows that foreign airlines are interested, as they see future growth in this sector. I do expect another major deal in this area happening by the year-end," Chib said.

However, the deal, which also entails a $600 million commitment from Etihad Airways, still needs to be ratified at an extraordinary meeting of Jet's shareholders.

Sharan Lillaney, aviation analyst at broking firm Angel Broking, told IANS that the deal will bring in fresh funding opportunities for Jet Airways, which has an estimated debt of around Rs.12,000 crore.

Passengers too are bound to benefit from the better connectivity options offered by the Jet-Etihad network.

"It is a very positive move. There were negotiations going on for a long time. It will provide Jet with much needed financing options and a major international partner. Passengers can look forward to using the networks of both airlines for international and domestic travel," Lillaney said.

Some industry players, however, were cautious in their response to the development.

Not wishing to be named, some players expressed apprehension that the move may drive away transit passengers from Indian airports, impacting their own plans of operating in global hubs located in India.

Jet, on its part, said in a statement that both the airlines will expand existing operations and introduce new routes between India and Abu Dhabi, establishing it as a gulf gateway.

Jet said the move would not adversely impact domestic airports, as it would continue to develop Delhi and Mumbai airports as its primary home hubs, connecting them to Asian, European and other regions.

Interestingly, the announcement of the sale of stakes by Jet comes just a day after India and the UAE began negotiations to enhance bilateral air traffic rights on the India-Abu Dhabi sector.

Indian passenger carriers, especially Jet Airways, have sought an exponential increase in seat capacity on the sector.

The existing Bilateral Air Service Agreement (BASA) entitles India-based airlines to offer 13,300 seats per week on the India-Abu Dhabi route.

"There is demand in this sector and it is growing. Indian passenger carriers should use this opportunity. Jet can have several international hubs, these will not drive passengers away from Indian airports. Some passengers will benefit by getting direct flights from smaller airports, rather than travelling to major ones," Lillaney added.

The deal will allow passengers from 23 Indian cities to get direct international flights, while they can also avail the frequent flyer programmes of both airlines.