India’s Jet Airways has sold a 24% stake to Abu Dhabi-based Etihad Airways, the first such deal with a foreign carrier since last year’s change to India’s ownership laws.
Under the strategic equity alliance signed April 24, the Middle East carrier will subscribe to 27.3 million new shares of Jet Airways at 754.74 rupees ($13.92) per share. The two airlines have been negotiating the stake sale since September 2012.
“The value of this equity investment is $379 million and will result in Etihad Airways holding 24% of the enlarged share capital of Jet Airways,” an spokesman for Indian airline tells Aviation Week.
Majority ownership of Jet Airways will remain with Indian nationals and Naresh Goyal, Jet’s founder and non-executive chairman, will hold 51% of the airline after the deal, which is subject to shareholder approval.
Jet’s board of directors has approved the deal.
“This partnership with Etihad Airways is a win-win situation for all our stakeholders, especially our guests, who will now have access to a much-expanded global network,” says Goyal. The move will also enable the company to service its debts and provide passengers with better connectivity.
Etihad President and CEO James Hogan says the partnership will bring significant benefits and opportunities for global growth to both airlines.
“It is expected to bring immediate revenue growth and cost-synergy opportunities, with our initial estimates of a contribution of several hundred million dollars for both airlines over the next five years. The Indian market is fundamental to our business model of organic growth partnerships and equity investments. This deal will allow us to compete more effectively in one of the largest and fastest-growing markets in the world,” Hogan says.
Current estimates predict the Indian market to grow to 42 million travelers over the next five years, a rate of 10% per year.