Foreign airline investment takes off with Etihad deal

Within just seven months of the government of India permitting foreign direct investment (FDI) by foreign airlines in the Indian aviation sector, Etihad, Abu Dhabi’s flag carrier, has struck a deal to buy a 24% stake in India’s foremost airline, Jet Airways.

Jet was among the first to enter the aviation sector when India’s skies were opened up to private operators in the early 1990s. Now it has again taken the initiative to forge the first partnership between an Indian and a foreign airline – a partnership that will certainly benefit Etihad, Jet, airport infrastructure and passengers in general.

Mutual benefits

The capital infusion from Etihad will enable Jet to achieve sustainable profitability. Jet can use the sale proceeds to repay its huge debt and may even consider adding to its expansion plans, especially in the Middle East. It will be able to widen its network through “code share” alliances, whereby a seat purchased from one airline is on a flight operated by a cooperating airline under a different flight number or “code”. Jet will also be looking to decrease operating costs by sharing engineering and airport services. It may also consider changing its hub to Abu Dhabi to enable it to buy fuel at cheaper prices.

Nimish Vakil and Sneha Rao are both partners at Tyabji Dayabhai. Tyabji Dayabhai was established in 1872 and has over 25 years’ experience in handling all types of aviation transactions and litigation.