ABU Dhabi’s Etihad Airways on Wednesday paid $70 million to Naresh Goyal-controlled Jet Airways for purchasing the Indian carrier’s three slots at London’s Heathrow Airport in a sale and lease-back agreement. The development was seen as positive by analysts as it comes at a time when the two airlines are in talks regarding a deal which would see Etihad buy into Jet Airways.
“Jet Airways will continue to use the three slots,” Etihad said in a statement. “The deal further strengthens the existing commercial relationship which came into effect in July 2008. As previously advised, Etihad Airways continues to progress discussions about further investment in Jet Airways.”
It was not immediately known whether the investment to buy the slots was part of the stake sale agreement with Jet Airways. The terms of the possible stake sale deal have not been announced yet by either airline.
Investors also cheered the move with the Jet Airways share closing 19.27% higher at R534.85. The shares had been battered in the past one week and, since February 18, had fallen 21.4% to R448.45 when Etihad chairman Sheikh Hamed bin Zayed al-Nahyan had said that the deal with Etihad needed to be “revised”. He had also said that it was too early to comment whether the deal would be finalised before March or April.
Sheikh Hamed, who is also managing director of sovereign wealth fund Abu Dhabi Investment Authority, did not specify why the deal needed to be revised. “We need to talk with the Indians about other issues...including this,” he had said.
The Etihad chairman’s comments came at the start of the week when the stake sale deal with Jet Airways was expected to be announced. Etihad’s investment was expected to be the first from a foreign airline in India since foreign direct investment rules were relaxed in September 2012.
However, even as the Jet-Etihad deal continues to be in negotiations, Malaysian carrier AirAsia has already submitted a proposal to the Foreign Investment Promotion Board for an investment to start a new airline with Tata Sons as partners.
Etihad, which is a relatively young airline launched in 2003, has been on a buying spree in recent years to compete with regional rivals Emirates and Qatar Airways. The Abu Dhabi carrier has taken stakes in Virgin Australia, Aer Lingus of Ireland and raised its share holding in Air Berlin and Air Seychelles.
Top executives of Jet Airways and Etihad had met Indian government officials including civil aviation minister Ajit Singh, commerce minister Anand Sharma and finance minister P Chidambaram in January. A formal deal was expected to be signed after Etihad completed due diligence on Jet Airways in the first week of February.
“We are doing our due diligence in the next week. We will present it to our board and take it from there,” James Hogan, chief executive of Etihad said on February 4 speaking at a press conference after the airline reported its annual results.