Etihad checks in as 24% owner of Jet Airways

Jet board approved the preferential issue of 27.26 mn equity shares at ~754 a share
BS REPORTER
Mumbai, 20 November

THE FINAL TAKE-OFF

April 24: Jet Airways and Etihad
sign strategic alliance. Etihad agrees to pick up 24 per cent stake in Jet for about ~2,057 crore May 24: Jet shareholders approve sale of stake to Etihad. Jet defers resolutions to amend companys Articles of Association May 27: The two airlines amend shareholder agreement to address shareholder and Sebi concerns on control and ownership May 29 & 31: Subramanian Swamy and Jaswant Singh complain to Prime Minister against the deal June 13: Prime Ministers Office (PMO) writes to Ministry of Civil Aviation to redraft the Cabinet note on Abu Dhabi traffic rights June 14: Foreign Investment Promotion Board (FIPB) defers approval to Jet-Etihad alliance

et Airways on Wednesday concluded the sale of 24 per cent equity stake in the airline to Etihad Airways for ~2,057 crore. The share allotment took place seven months after Jet Chairman Naresh Goyal and Etihad Chief Executive James Hogan signed a deal in this regard in Abu Dhabi. Hogan and Etihads Chief Financial Officer James Rigney have been appointed additional directors on the Jet Airways board. Board member Victoriano P Dungca has stepped down. Jet has also approved the spin-off of its frequent flyer programme into a separate subsidiary. Etihad will hold 50.5 per cent in the frequent flyer programme and invest $150 million. The deal had missed closure deadlines twice. It had also courted controversy, following the simultaneous increase in traffic rights to Abu Dhabi. A clearance by the Competition Commission of India last week paved the way for the closure of the deal. On Wednesday, the Jet Airways board approved the preferential issue of 27.26 million equity shares to Etihad at ~754 a share (a premium of ~744 a share). After the transaction, Goyals stake in the airline stands at 51 per cent. Public and institutional investors hold 25 per cent stake. Etihad, too, has been treated as a public shareholder. Following the investment, Jets share capital has increased from ~86 crore to ~113 crore (the premium amount is transferred to the reserve). Jet Airways net worth has been eroded due to losses in the past several quarters. Fresh equity infusion would help boost the balance sheet and aid debt repayment. In a statement, Goyal said: The infusion of foreign direct investment in the aviation sector will result in economies of scale, grow traffic at our airports,

July 2: PMO defends the

Abu Dhabi bilaterals, says there is no division in government on the issue July 29: FIPB gives conditional approval to Jet-Etihad deal Sept 3: Cabinet approves the enhanced traffic rights on IndiaAbu Dhabi route Sept 16: Swamy files a petition in Supreme Court against the deal, demands CBI probe Sept 25: Sebi writes to Swamy, says the agreement will not trigger an open offer Oct 3: Cabinet Committee on Economic Affairs clears the deal Nov 12: Competition Commission of India gives its clearance to the deal

NUTS & BOLTS OF THE DEAL

As part of the deal, there will be an overall cash infusion of $750 million in debt and equity. The infusion will help Jet cut its debt from $2.1 billion to $1.5 billion

$380 mn: Equity investment $150 mn: Investment in Jets

frequent-flyer programme

$150 mn: Loan assistance to

be provided in securing debt

$70 mn: Sale and lease-back

of Jets Heathrow slots

Foreign direct investments in aviation sector after the government relaxed rules in 2012
Jet-Etihad deal:

$380 million

Etihad will hold 24% Initial Jet Chairman Naresh Goyal investment retains 51% Public shareholding: 25% $100 million

TataSingapore Airlines:

Singapore Airlines will invest $49 million and the balance will be invested by Tata group

Tata-AirAsia: AirAsia to hold

The initial investment is around

49%

~80 crore

Tata group will hold 30% Telestra Tradeplace will hold 21%

and create job opportunities. I am confident this investment will greatly benefit all our stakeholders and significantly benefit our customers who will now have access to a more expanded global network. Hogan said, India is one of the largest and fastest-growing markets in the world and a key part of Etihad Airways growth strategy. Through this association, Etihad and Jet will both be strengthened, as will the economies of India and the UAE. By linking our two networks and adding new flights, new routes and more codeshare options, travel to, from and within India will become much easier. Through the last two months, Etihad has been driving changes in Jet Airways. The Indian airline has seen

several high-profile exits, including those of its chief executive Nikos Kardassis, its investor relations head K G Vishwanath and two key finance executives. The deal will see Jet Airways integrate its network with Etihads. The airlines would also work together in areas such as sales, marketing, ground handling and cargo. While Etihad has already announced doubling of services from Abu Dhabi to Delhi and Mumbai, Jet is yet to announce additional flights to Abu Dhabi. In April, India and Abu Dhabi had signed an air services agreement, allowing 50,000 seats a week to carriers from both countries through the next three years. The commercial coopera-

tion agreement signed between two airlines states Jet will use Abu Dhabi as a hub for services to and from exclusive territories (Africa, North and South America, excluding Canada, and the UAE). Jet has also agreed to transition all its current services to and from Dubai and Sharjah to Abu Dhabi, when this becomes economically viable. Under the agreement, Jet will also refrain from entering into code-share agreements with other airlines that would lead to bypassing Abu Dhabi. The Competition Commission of India, which cleared the deal last week, said using Abu Dhabi as an exclusive hub and withdrawal from certain code-share routes wouldnt lead to concentration of JetEtihads market share.