India Dispatch: Shares in Jet Airways soared close to a two-year high yesterday on market speculation that Etihad Airways will soon announce plans to buy a stake in the Indian carrier.
Jet Airways soars on speculation Etihad 'will buy stake soon'
Shares in Jet Airways soared close to a two-year high yesterday on market speculation that Etihad Airways will soon announce plans to buy a stake in the Indian carrier. The stock jumped up to 4.7 per cent in trading yesterday following four previous sessions of gains, with shares closing up more than 17 per cent since the beginning of the month.
Etihad neither confirmed nor denied the speculation.
"Etihad Airways has identified equity investments in other airlines as an important evolution of its successful partnership strategy," the airline said. "The Indian aviation industry offers tremendous potential, with significant passenger movement on domestic and international sectors. If or when we do make further investments of this sort, we will announce them in line with regulatory and commercial requirements."
The latest gains were fuelled by a report yesterday stating that Etihad Airways is to decide on whether it will invest in Jet Airways or Kingfisher Airlines this week. The report, which appeared in the Indian business newspaper Mint, cited two anonymous sources familiar with the situation. Jet Airways did not respond to a request for comment.
India's government in September opened up its aviation sector to allow foreign carriers to buy stakes of up to 49 per cent in private carriers.
The move has been welcomed by India's industry, which is struggling under the burden of high taxes and debt. Kingfisher Airlines has been grounded since October following labour unrest because of unpaid salaries.
Analysts believe Jet Airways is favoured over Kingfisher for a deal.
"Jet Airways represents far more attractive value for Etihad, not least because unlike Kingfisher, it is flying and has a nice mix of short haul, regional and international connections," Saj Ahmad, the chief analyst at StrategicAero, said. "It's clear Etihad is taking their time and I do not see them throwing money around for no reason.
Etihad already has a 10 per cent stake in Virgin Australia, a 30 per cent stake in Air Berlin, as well as stakes in Aer Lingus and Air Seychelles. The airline's chief executive, James Hogan, said this month that Etihad plans to buy one or two more stakes before ending its strategy of equity investments.