24 Apr 2013 13:30
Strategic investment under FDI policy of the Government of India will deliver wide-ranging revenue growth and cost synergy opportunities for both airlines
- Alliance will bring significant passenger
benefits with expanded codesharing, creating a combined network of 140
- Alliance will bring significant benefits to the Indian
economy, both in terms of growth, job
creation, trade and tourism.
- Jet Airways passengers from 23 cities in
India to gain direct access to an expanded global network.
- Jet Airways to enhance its services from its primary hubs
of Delhi and Mumbai, and introduce new flights from Hyderabad and Bangalore.
- The strategic alliance between the two airlines will
bring additional traffic, frequencies and revenues to metro airports, as well
as other airports of AAI.
- New India-Abu Dhabi routes and Jet Airways to
establish a Gulf gateway for flights to the US, Europe, Africa and the Middle
- The strategic investment enables Etihad
Airways to tap into India’s fast-growing 42
million strong travel market.
- Both airlines' passengers will benefit from
fully integrated frequent flyer programs with reciprocal ‘earn-and-burn’.
- Alliance will result in both consumer
benefits and/or all round efficiencies.
- This strategic investment with a US$600 million
commitment from Etihad Airways will help further strengthening of Jet Airways
Etihad Airways of the United Arab
Emirates and Jet Airways of India today announced that the UAE national carrier
has agreed to subscribe for 27,263,372 new shares in Jet Airways at a price of
INR754.74 per share. The value of this equity investment is US$379 million and
will result in Etihad Airways holding 24 per cent of the enlarged share capital
of Jet Airways.
Etihad Airways' wider overall
commitment to Jet Airways includes the injection of US$220 million to create
and strengthen a wide-ranging partnership between the two carriers.
As part of this Etihad Airways paid
US$70 million to purchase Jet Airways’ three pairs of Heathrow slots through
the sale and lease back agreement announced on 27 February 2013. Jet
Airways continues to operate flights to London utilising these slots.
An amount of US$150 million will be
invested by Etihad Airways by way of a majority equity investment in Jet
Airways’ frequent flyer program "Jet Privilege", subject to
appropriate regulatory and corporate approvals and final commercial agreements
which are expected to be completed within the next six months.
Under the strategic partnership, which
will be subject to full regulatory and shareholder approval, the airlines will
gradually expand existing operations and introduce new routes between India and
Abu Dhabi, providing an ever wider choice to the travelling public. They will
combine their network of 140 destinations, with Jet Airways establishing a Gulf
gateway in Abu Dhabi and expanding its reach through Etihad Airways’ growing
Passengers from 23 cities in India
will benefit from direct connections to international destinations. New flights
from Jet Airways’ home hubs and metro airports will further strengthen its
current operations from these airports. Jet Airways’ vision continues to be to
develop Delhi and Mumbai airports as its primary home hubs and connecting them
to Asian, European and other regions.
Details of the investment were
unveiled by Etihad Airways President and Chief Executive Officer, James Hogan,
and the Chairman of Jet Airways, Naresh Goyal.
Mr. Hogan said: “We are pleased to have reached this significant stage in
India with Jet Airways and are certain the partnership will bring significant
benefits and opportunities for global growth to both airlines.
“It is expected to bring immediate
revenue growth and cost synergy opportunities, with our initial estimates of a
contribution of several hundred million dollars for both airlines over the next
“The Indian market is fundamental to
our business model of organic growth partnerships and equity investments. This
deal will allow us to compete more effectively in one of the largest and
fastest-growing markets in the world.”
“We look forward to collaborating with
Jet Airways and constructively working together with them and their
stakeholders to build a sustainable, competitive and profitable airline.”
Mr. Goyal said: “I would like to thank
the Government of India, especially the Ministries of Civil Aviation, Commerce
and Industry, and Finance, for having the foresight to introduce the historic
reform of allowing foreign direct investment into civil aviation in India.
Infusion of FDI in the domestic sector will result in the improvement of the
economics of aviation, grow traffic at our airports, and create job
“I am extremely happy to be in a partnership with an airline that
shares our customer-centric operational philosophy and ethos. I have no doubt
that this partnership with Etihad Airways is a win-win situation for all our
stakeholders, especially our Guests, who will now have access to a much
expanded global network.
transaction further strengthens the balance sheet of Jet Airways and, more
importantly, underpins future revenue streams, which will accelerate our return
to sustainable profitability and liquidity.”
A key component of the wide-ranging
partnership is expanded codesharing on flights with passengers benefiting from
reciprocal ‘earn-and-burn’ rights on the airlines’ frequent flyer programs.
The proposed codeshare expansion will significantly
enable Etihad Airways to tap into India’s rapidly growing travel market,
providing additional passenger traffic to Etihad Airways’ Middle Eastern, North
American and European destinations, and give Jet Airways passengers from
various cities access to an expanded network.
Current estimates predict the size of
the Indian market to grow to 42 million travellers over the next five years at
a rate of 10 per cent per year, while the Indian middle class, which provides
the majority of air travel demand, is forecast to grow by 200 million, over the
next eight years.
Etihad Airways currently flies to nine
Indian destinations including Delhi, Chennai, Mumbai, Kozhikode,
Thiruvananthapuram, Hyderabad, Bangalore, Ahmedabad and Kochi, with a total of
59 flights per week.
The partnership will also help drive a
significant increase in traffic growth through Abu Dhabi International Airport,
as well as Jet Airways’ hubs of Mumbai and Delhi international airports.
Key benefits for both airlines will
flow from synergies and cost savings in areas including fleet acquisition,
maintenance, product development and training.
The airlines will explore joint
purchasing opportunities for fuel, spare parts, equipment and catering
supplies, as well as external services such as insurance and technology
Other areas of co-operation will
include joint training of pilots, cabin crew and engineers, as well as
maintenance of common aircraft types and the consolidation of guest loyalty
A joint project management office will
be set up to ensure delivery of all synergy benefits to both parties.
Substantial ownership and effective control will
remain with Indian nationals, with Mr.
Goyal as the non-executive Chairman holding 51 per cent of the company.
Etihad Airways’ investment in Jet
Airways follows the minority equity stakes taken by the airline in airberlin,
Air Seychelles, Virgin Australia, and Aer Lingus over the last 12 months.
Etihad is being advised by HSBC, DLA
Piper, Amarchand & Mangaldas & Suresh A. Shroff & Co and
PricewaterhouseCoopers on this transaction.
Jet Airways is being advised by Mr.
Harish Salve, Gagrats, ELP, Ernst & Young, DSP
Merrill Lynch Limited and Credit Suisse.
About Jet Airways Group
Airways is one of India’s premier international airlines recognized for its
quality and customer service excellence. The Jet Airways group currently
operates a fleet of 109 state-of-the-art wide and narrow-bodied aircraft under
the Jet Airways and JetKonnect brand.
Airways a full service airline with one of the youngest fleets in the world
operates a network that includes flights to 77 destinations spanning the length
and breadth of India and destinations in Europe, North America (USA &
Canada) , the Middle East and Asia.
JetKonnect service is a dedicated product designed to meet the needs of the low
fare segment. With a mixed fleet of Boeings and ATR aircraft, JetKonnect’s
convenient schedules, reliable service and low fare offer bring greater value
and a seamless flying experience to its customers.
Airways and JetKonnect together operate over 580 flights daily.