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Deal hopes Jet as Etihad buys Heathrow slots

Thursday, 28 February 2013 - 9:00am IST | Place: Mumbai | Agency: DNA
The equity deal can take its own time. In the interim, Jet Airways and Etihad Airways have started tying up smaller details to keep the momentum going.

The equity deal can take its own time. In the interim, Jet Airways and Etihad Airways have started tying up smaller details to keep the momentum going.

On Wednesday, Abu Dhabi-based Etihad announced it has acquired three slots at London’s Heathrow airport for $70 million (`377 crore) from Jet – two from Mumbai and one from Delhi.

The deal is part of a sale and lease back agreement, said Etihad.

Jet will continue to operate flights to London utilising these slots.

Talks for acquisition of a stake in Jet by Etihad hit a roadblock last week after Etihad chairman Sheikh Hamed bin Zayed al-Nahyan raised concerns over it.

However, on Wednesday, Etihad said in the statement that it continues to progress in discussions about further investment in Jet.

Experts said the acquisition of Jet’s slots holds out hope of a full-blooded equity deal, going forward.

“The Heathrow deal is a positive development and highlights the close relationship between the two airlines. An equity deal in the highly regulated airline sector is a complex transaction. After the foreign direct investment reforms in September last year, we had estimated that it will take 6-12 months for deals to fructify. We are on track,” said Amber Dubey, partner and head-aviation at global consultancy KPMG.

Amrit Pandurangi, senior director, Deloitte, concurred. “This is a way of saying – let’s start working with each other till the larger development takes place.”

Currently, Etihad does not have any direct flights from India to London, which generally enjoys high load factors. “The move will help in optimising the routes. With this, they can utilise the Middle East as a hub to London, which helps in better profitability,” said Pandurangi.  

According to reports on a business channel on Wednesday, Etihad is close to clinching a deal with Jet Airways for purchasing a 24% stake in the airline. The deal would be the first since foreign airlines were allowed to invest up to 49% directly in Indian carriers.  

“It would be a win-win for the airlines and passengers alike. Etihad in turn would get access to the traffic originating from India’s interiors and a stronger foothold in India which is a key market for Gulf carriers. The Indian passenger would gain from seamless travel through code-shares and increased competition that in turn may lead to better offers and cheaper airfares,” said Dubey.




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