Stake in Jet a better option for Etihad

Our Correspondent

New Delhi, Dec. 20: The prospect of Etihad picking up a stake in Jet Airways looks bright as the revival proposal of Kingfisher Airlines has failed to enthuse the Gulf-based carrier.

Both Kingfisher and Jet are in talks with Etihad for a stake sale and a decision is likely by next week, a civil aviation ministry official said.

Since last year, Etihad has been on a buying spree, picking up minority stakes in Virgin Australia and Ireland's Aer Lingus and raising its shareholdings in Air Berlin and Air Seychelles.

Sources said the airline was interested in an Indian carrier to increase its presence in the country.

Kingfisher Airlines chairman Vijay Mallya and chief executive officer Sanjay Aggarwal had been in talks with Etihad. Mallya made personal presentations on restructuring his airline's debt in case of a possible deal. However, sources said the talks had remained inconclusive. Etihad will only consider buying a majority stake if it is convinced about the revival plan.

According to sources, Etihad officials have asked Kingfisher to pay salaries to its employees to begin operations. Mallya has decided to infuse Rs 425 crore into the carrier to partially restart operations.

Airline sources said the carrier was likely to resume operations with 21 aircraft but had not set a date to submit its revival plan to the Directorate General of Civil Aviation. The airline's licence, which was suspended on October 20, is set to expire on December 31.

Mallya has been seeking funds for Kingfisher for more than two years. The airline, which had the second highest market share in India a year ago, has not made any profit and has an accumulated debt of Rs 8,500 crore.

According to the Centre for Asia Pacific Aviation (Capa), Jet Airways will be the most viable option for foreign direct investment, and Etihad is likely to finalise a deal with the Naresh Goyal-led carrier.

"Jet is a powerful franchise and it would be very valuable for any alliance or airline," Capa's India unit official said. "It looks that Jet might be the first carrier to receive foreign airline investment after the recent policy change."

According to industry insiders, buying into Jet is more lucrative for Etihad as it can target the market share of Air India and Dubai-based Emirates Airline, which dominate routes between India and West Asia. Jet Airways has a code-share agreement with Etihad for the Abu Dhabi-Paris route. This is in addition to the existing code-sharing between the two for flights connecting Mumbai and Delhi to Abu Dhabi.

Jet Airways had 116 aircraft, including Boeing and Airbus planes, and flies to 125 destinations, including Bahrain, Doha, Dubai, Jeddah, Kuwait and Muscat.