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STRATEGIC PARTNERSHIP

Etihad in stake talks with top Indian carrier

New Delhi, November 26, 2012

UAE national airline Etihad Airways is in talks with loss-making Indian carrier Jet Airways for acquiring a minority stake and also a strategic partnership with the carrier, an Indian government source said.

Talks between Jet and Etihad have been the subject of media reports citing unnamed sources.

"The talks are on. This is more or less final. It may take around a month and half," the government source told reporters, referring to the Jet-Etihad negotiations.

"This deal is not just about investment but also technology and partnership in many other ways," said the source, who declined to be identified.

Jet and Etihad already have a code-sharing agreement and a deal could help them win market share from state-owned Air India, as well as from Dubai-based Emirates Airline, which dominates routes between India and the Middle East.

Etihad is interested in access to Jet's low-fare domestic network under JetKonnect, an industry source said in Dubai.

A Jet official could not immediately be reached for comment. Etihad declined comment.

Thus far, there is no clarity on valuations for a Jet-Etihad deal, and internal finance teams of both airlines are in talks, without involving bankers, said another source, who is familiar with the discussions but not directly involved.

The founder of Jet Airways is likely to convert shares owned by its holding company into his personal stake to comply with foreign investment regulations, the government source said.

Tail Winds, the Isle of Man-based investment vehicle of Jet founder Naresh Goyal, currently holds 79.99 per cent of Jet Airways.

Etihad, which expanded globally through stake purchases in firms like Air Berlin and Virgin Australia, will look to extend its geographical reach to India and other Asian markets, its chief executive told Reuters last month.

"Etihad Airways welcomes the Indian Government's decision to allow foreign investment in Indian carriers. The Indian aviation industry offers tremendous potential, with significant passenger movement on domestic and international sectors," Etihad said in a statement last week

Meanwhile, another Indian SpiceJet is also in talks with Malaysia's AirAsia, the source stated.

Any deal would be the first since India changed its rules in September to allow foreign carriers to buy stakes of up to 49 per cent in local airlines, which have been battered by fierce competition and high operating costs.

Shares in both the Indian carriers continued rallies from last week, with Jet shares up about 11.5 per cent and Spicejet up 13.5 per cent on Monday.

The fiercely competitive Indian aviation industry lost a combined $2 billion in the last fiscal year. All but unlisted IndiGo lost money, hurt by high state taxes on jet fuel, expensive airports and regulatory uncertainty.

SpiceJet declined immediate comment, while officials from AirAsia, Asia's largest budget carrier, could not be reached for comment.

Jet Airways shares had gained 50.6 per cent in November through Friday while SpiceJet was up 17 percent on speculation of potential stake sales.

"Reports of stake sale have driven stocks higher but its absurd given so much government interference in this sector," said Vivek Mahajan, head of research at brokerage Aditya Birla Money.

Heavy competition is driven in part by government-subsidised losses at state-owned Air India. However, competition has eased somewhat and airfares have risen due to the decline in cash-and-debt strapped Kingfisher Airlines, the former No. 2 operator which has not flown since the start of October.-Reuters




Tags: UAE | Airline | Etihad | India | jet airways | loss | SpiceJet |

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