India’s Jet Airways has completed the sale of a 24 percent stake to Abu Dhabi’s Etihad, sealing the first deal with a foreign airline since New Delhi eased aviation ownership rules, the carriers said Wednesday.
Loss-making Jet announced the $335 million plan in April, taking advantage of a move by the Congress-led government a year ago to throw open the aviation sector to investment by foreign carriers.
“All requisite Indian regulatory approvals” have been obtained and the transaction has closed, the airlines said in a statement.
India's aviation sector, once vaunted as a symbol of the nation’s economic vibrancy, has seen its fortunes stumble in the face of a slowing economy, fierce fare rivalry, over-expansion and run-down infrastructure.
The sale of the stake by Jet, India’s biggest publicly traded carrier, was seen as a crucial test of India’s ability to attract foreign investors to its ailing airline sector.
Even though most Indian airlines are bleeding cash, international carriers still spy opportunity in the country’s skies as the 1.2-billion population grows more affluent, boosting the number of passengers.
India’s domestic aviation market has tripled in the past five years.
“India is one of the largest and fastest-growing markets in the world and a key part of the Etihad Airways’ growth strategy,” James Hogan, Etihad’s chief executive, said.
In the past two years, Etihad has bought minority holdings in Virgin Australia, Aer Lingus and Air Seychelles but the move into India is one of its boldest expansion steps.
Indian carriers need money to fund expansion and cut debt after years of losses caused by fierce fare battles and rising fuel costs.
Jet last month reported a record quarterly loss of 8.91 billion rupees ($145 million), up from a loss of 997 million rupees a year earlier.
“The infusion of foreign direct investment in the aviation sector will result in economies of scale, grow traffic at our airports, and create job opportunities,” said Naresh Goyal, a former travel agent who is Jet’s founder and chairman.
Goyal retains a 51 percent stake in Jet while Hogan and Etihad’s chief financial officer, James Rigney, have been appointed to Jet’s board.
Analysts say for airlines such as Etihad, part of India’s allure is the chance to swell passenger traffic on routes to North America, Europe, the Middle East and other parts of the world.
“By linking our two networks and adding new flights, new routes and more code-share options, travel to, from and within India will become much easier,” Hogan said.
The expansion moves of Etihad, along with those of its larger rivals, Emirates and Qatar Airways, show how the regional carriers are spreading their wings as the Middle East becomes a new global travel hub, analysts say.
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