Etihad Airways remains confident that its US$600 million investment deal with India’s Jet Airways is “on a good track” despite facing New Delhi’s regulatory hurdles.
Indian regulatory approval for Etihad’s US$600m investment in Jet Airways “on a good track”
Etihad Airways remains confident that its US$600 million investment deal with Jet Airways is “on a good track” despite facing India’s regulatory hurdles that have repeatedly delayed the ratification of the agreement.
Reports on Tuesday said the Securities and Exchange Board of India had given its nod for the deal after both airlines made revisions to comply with its conditions.
However, regulatory approval is still needed from the competition commission of India and the cabinet committee on economic Affairs.
“We are not there yet, but [we are] on a good track,” said Peter Baumgartner, Etihad’s chief commercial officer. “There are a couple of final regulatory hurdles but we are confident about the future to complete the deal.”
Etihad in April announced the agreement to acquire a 24 per cent stake in Jet Airways for $379m. It is investing a further $150m in Jet’s frequent flyer programme and $70m to buy Jet’s six landing slots at Heathrow Airport through a sale-and-leaseback agreement.
India’s foreign investment promotion board gave its approval of the deal in July.
At the start of last month, Etihad extended the deadline for the second time for regulatory clearances for the deal to the end of the month.
Etihad said then that the Indian authorities were expected to approve the deal “imminently”. That deadline lapsed on Monday.
Analysts say it is unclear how long it will actually take for the final approvals to come through.
Saj Ahmad, the chief analyst at StrategicAero Research,says the protracted deal approval process is a consequence of India’s complicated bureaucracy.
“It seems that the powers that be in India are happy to make Jet and Etihad wait until the deal is ratified,” Mr Ahmad said. “Etihad’s patience is to be applauded. It’s a surprise they haven’t taken their millions and walked away from this perennial mess that India seems to wallow in.”
The securities and exchange board of India had to be satisfied that Jet would not relinquish significant control to Etihad before it gave its approval, according to the Press Trust of India.
When all the approvals are given, Etihad would become the first foreign carrier to acquire a stake in an Indian airline after New Delhi in September last year permitted foreign investment of up to 49 per cent in India’s carriers.
Etihad’s investment in Jet is part of its strategy to invest in foreign airlines and expand its global network.
Mr Baumgartner said Etihad was “not closed for future partnerships”.
Etihad said last month it planned to dramatically increase its passenger capacity and flights to India over the coming months, including tripling the capacity on its routes between Abu Dhabi, Mumbai and New Delhi.
“The Indian subcontinent is a major growth market … and the deal will give us a strategic partnership,” Mr Baumgartner said.
“We are in discussion with both manufacturers pretty much right across their entire portfolio of aircraft,” Mr Baumgartner said.
Tim Clark,the president of Emirates, said on Tuesday the airline was looking to replace 175 twin-engine 777 wide-bodies in its fleet.
Etihad was operating 78 passenger and cargo aircraft in July, including 22 Airbus A330 wide-bodies and 12 A340s.
It has orders for 10 A380 superjumbos and 12 A350s – a rival to Boeing’s 777 – as well as 41 smaller Boeing 787 Dreamliners.
Etihad’s fleet is scheduled to increase to 159 planes by 2020.
* With Bloomberg News