November 20, 2013 was a historic day in the Indian aviation industry after
Jet Airways (India) Limited and Etihad Airways PJSC concluded the much
talked about USD 379 million investment by Etihad to acquire a 24%
stake in Jet.
In addition to the equity investment, Etihad has also agreed to infuse USD
150 million into Jet Privilege, the frequent flyer program of Jet, to be
managed by its subsidiary, Jet Privilege Private Limited and also provide or
arrange for a loan of USD 150 million to Jet. Earlier this year, Etihad had
purchased 3 slots owned by Jet at the Heathrow airport in London for USD
The saga of the Jet-Etihad deal has been in rumors since August 2012, a month prior
to the liberalization of the aviation industry to foreign investment by foreign airlines.
According to sources, the first step towards what culminated into the first investment
by a foreign airline into an Indian airline was taken in July 2012, when Naresh Goyal,
the chairman of Jet Airways Limited brought up the idea with James Hogan, the Chief
Executive Officer of Etihad Airways PJSC.
Considering it beneficial to the economy, Mr. Goyal said “the infusion of foreign direct
investment in the Indian aviation sector will result in economies of scale, grow traffic
at Indian airports, and create job opportunities. It will greatly benefit all our
stakeholders whilst significantly benefitting our guests who will now have access to a
more expanded global network, enhancing connectivity for tourists, business
travellers, Indian families and the wider travelling public
Incorporated: April 1, 1992.
Total number of aircrafts 98.
March 2004: Began international
operations with inaugural flight from
Chennai to Colombo.
Currently Operations: 50 Domestic
destinations and 20 International
On April 24, 2013, announced a 24% stake
sale to Etihad at $379 million.
Chairman: Mr. Naresh Goyal
Incorporation: July 2003
Location: Abu Dhabi, UAE.
CEO: James Hogan
Etihad has a fleet of 66 aircraft serving 87
destinations in 55 countries.
Chairman - Sheikh Hamed bin Zayed Al
29.21% stakes Etihad picked up a 10% stake
To gain a foothold in Africa, they acquired
40% stake in Air Seychelles by investing
USD 20 million
Picked up a 2.98% stake in the Irish
Subscription Shares 27,263,372 equity shares of the Target with face value of INR 10 each
Etihad’s stake in Jet post
Total Consideration INR 20,576,652,711.02 (Indian Rupees Twenty Billion Five Hundred &
Seventy Six Million Six Hundred And Fifty Two Thousand Seven Hundred
And Eleven Rupees And Two Paise).
Other Aspects of the Deal Along with the subscription to the equity shares of Jet, Etihad has also
made or agreed to make the following investments in Jet:
USD 70 million was invested by Etihad to purchase 3 landing & departure
slots owned by Jet at Heathrow airport in Feb’13. This slots were acquired
by Etihad by a way of sale & lease back arrangement.
An amount of USD 150 million will be invested by Etihad into Jet’s
frequent flyer program, ‘Jet Privilege’.
In addition to the above, Etihad has also agreed to extend low interest
loans of USD 150 million, to retire the high interest debt on the books of
Heavy losses for Jet Airways
in challenged Indian aviation
• Jet Airways (India) Ltd reported a record quarterly loss of Rs. 891.01 crore in the
three months ended 30 September.
• Depreciating currency, high fuel prices and increases in airport charges in select
Indian airports have driven cost pressures, resulting into losses
• This is the third straight quarterly loss for the country’s second largest airline.
• On a standalone basis, Jet Airways posted an operating loss of Rs.432 crore. It had
reported an operating profit of Rs.318 crore in the same period last year. The
firm’s total operating expenses increased by an annual 21%.
• Jet Airways needed to achieve 98.2% seat occupancy in its planes in the September
quarter to break even, according to a company presentation, but the airline could
only fill 78.2% of the seats.
• This is the worst set of numbers Jet Airways has ever posted. These numbers are
also indicating the health of the Indian aviation industry and possible losses that
other airlines are making.
Beginning of the Deal
•According to sources, the first step towards what culminated into the first
investment by a foreign airline into an Indian airline was taken in July 2012, when
Naresh Goyal, the chairman of Jet Airways Limited brought up the idea with James
Hogan, the Chief Executive Officer of Etihad Airways PJSC. Considering it beneficial
to the economy.
• Mr. Goyal said “the infusion of foreign direct investment in the Indian aviation
sector will result in economies of scale, grow traffic at Indian airports, and create
job opportunities. It will greatly benefit all our stakeholders whilst significantly
benefitting our guests who will now have access to a more expanded global
network, enhancing connectivity for tourists, business travelers, Indian families
and the wider travelling public".
January 3, 2013
That phone call was the start
of a process that culminated
on Wednesday in Abu Dhabi-
based Etihad agreeing to
purchase a 24% stake in the
enlarged share capital of Jet
Airways, India’s second
largest airline by passengers
flown, for $379 million.
aPrIL 24, 2013
On April 24 Jet Airways and Etihad signed the strategic alliance.
The Etihad agrees to buy a 24% stake in the Jet for about Rs 2,060 crore.
It is the biggest deal in Indian aviation sector.
On May 24, Jet shareholders approved the stake sale.
The airline deferred its resolution to amend the company’s articles of
association. However the deal is facing hurdles with share holders and
even Securities and Exchange Board of India (Sebi) and Foreign
Investment Promotion Board (FIPB) of India raising concerns over
"substantial rights'' being accorded to Etihad Airways.
The FIPB has deferred granting sanction to the proposal until the issues
regarding control are addressed.
The Jet Airways-Etihad share holder agreement is likely to be revised
again following SEBI and FIPB concerns over substantial control to
the Abu Dhabi airline under the deal.
The major concern of SEBI and FIPB were-
•Under the current agreement board resolutions require consent of 3/4th of members
majority for decision and As per the agreement Etihad would get three board positions
while Jet Airways would have four members. There will be seven independents on the
•The agreement has unilateral right and can be terminated by Etihad any time.
•The jet airways headquarters will be shifted to Abu Dhabi where it is subjected to law
and control of Abu Dhabi.
•On May 27, the two airlines amended its shareholder agreement to address
shareholder and SEBI concerns on ‘control’ and ‘ownership’. The major changes were-
Etihad will not have the unilateral right to terminate the commercial cooperation
agreement and this right will now be held by both sides.
•The other change pertained to constitution of the nomination committee of the board
which will make key board and management appointments. The nomination committee
will include one person nominated each by Jet Airways and Etihad and three other board
members will be chosen through consensus
May 24, 2013
• Jet Airways shareholders today approved the sale of 24 per cent
stake to Abu Dhabi-based Etihad, with the Indian carrier's
Chairman Naresh Goyal saying that the deal will improve
profitability, reduce costs and lower the debts.
• At the airline's Extra Ordinary General Meeting (EGM) convened
here today, shareholders approved the proposed issue of shares
on a preferential basis to Etihad. The shares will be allotted after
the completion of all regulatory approvals
• On June 13, the Foreign Investment Promotion Board (FIPB) deferred a decision on the
deal, saying it required more clarity on control and ownership structure of Jet Airways.
Jet chairman Naresh Goyal owns a 51 per cent stake in the airline.
• The PMO on June 12 Tuesday said the equity stake sale matter was still under
examination. It also asserted that there were no differences between Ministries over the
air services agreement between India and Abu Dhabi.
• The PMO said it had sought redrafting of a note prepared for the Cabinet on the issue.
• The Civil Aviation Minister insisted that there no discussion over the deal and that he had
gone to meet Gandhi to invite her for the inaugural function for Aviation Academy in Rae
• The Jet-Etihad deal has run into rough weather as objections have been raised by senior
BJP leader Jaswant Singh, CPI's Gurudas Dasgupta, Dinesh Trivedi (Trinamool
Congress) and Janata Party chief Subramanian Swamy. Each of them have shot off
separate letters to Prime Minister Manmohan Singh.
• Strongly defending the deal, Ajit Singh has maintained that "it is such an important
deal..., the first big deal in Civil Aviation Ministry. In terms of FDI, it is bigger than any
other deal this year."
• While the Civil Aviation Ministry is revising the Cabinet note, Ajit Singh today said,
"There is no question of revising the bilaterals."
• Under the bilateral agreement, both sides had decided to increase the number of seats
by 36,670 seats per week over three years, taking the total to 50,000.
• "Looking at the growth in air traffic out of India, in fact we might have to give more
bilaterals (to various countries)," he said.
JULY 29, 2013 - FIPB aPProvaL to
EtIhad to acqUIrE stakE IN JEt
• On July 29, the FIPB had approved the investment after the two airlines revised their
agreement to ensure that management control did not shift to Etihad.
• The approval was granted after Jet agreed to meet 11 conditions. Broadly, these
pertained to the shareholder agreement and powers of the chairman.
• The FIPB asked the airlines to rework the agreement to show that both parties could be
held responsible for a default or breach of agreement terms.
• Changes were made to address Sebi and FIPB concerns on the issue.
• On September 3, the Cabinet cleared the enhanced traffic rights to Abu Dhabi from
13,000 seats a week to 50,000, allowing increased flights between the two countries
and to destinations beyond the emirate. Last week, the Sebi clarified that the revised
agreement did not trigger an open offer and ruled that Jet and Etihad were not acting as
persons in concert.
• The Sebi wants Jet Airways Chairman Naresh Goyal to dilute another six per
cent stake before issuing additional shares to Etihad in the interest of more
diverse public shareholding. Upon the dilution and allotment of shares to
Etihad, Goyal along with his wife Anita will hold 51 per cent, Etihad will get 24
per cent and the rest will remain with the public.
• The deal still requires a nod from the Competition Commission of India (CCI).
Jet Airways and Etihad offered no comments on the CCEA approval. Singh,
however, said approval from the CCI was an ongoing process and the deal
would not be hampered by the CCI clearance being pending.
• Apart from the Rs 2,060-crore investment, the deal allows Jet to collaborate
with Etihad on commercial, marketing and sales and technical matters, and
expand its network. In all, there would be a cash infusion of $750 million in debt
and equity that will help the airline cut down its debt from $2.1 billion to $1.5
BENch to hEar swamY’s PLEa
agaINst EtIhad-JEt dEaL
Sept,The Jet-Etihad deal reached the Supreme Court with senior BJP leader Subramanian
Swamy filing a petition seeking to quash the approval given to it by the Centre.
In a voluminous petition, Mr Swamy also sought a CBI probe against the government officials who had
cleared the deal.
"Issue a direction to set aside and revoke any action or decision or grant of any further
approvals/permissions/ permits, etc. by the respondent (government) authorities, based upon, relying upon
or in furtherance of the impugned bilateral dated April 24," the petition said.
"The petitioner challenges such arbitrary, irrational and malafide act of grant of largesse in the form of
bilateral/ MoU dated April 24 and by way of the present petition seeks an investigation under the
supervision of this Court into the matters of national and public interest," he said in his petition.
He questioned the Centre's decision to execute the agreement in favour of Abu Dhabi under the existing
Air Service Agreement between the governments of India and United Arab Emirates.
"The actions of the authorities from the execution of the bilateral to the unprecedented haste in order to
assist the realisation of wrongful gains by the facilitator are writ large with acts of collusion and abuse of
position," the petition said.
sEBI grEEN sIgNaL For
• Market regulator Securities and Exchange Board of India (SEBI) has felt that the
deal in its revised form does not give controlling powers to the foreign carrier,
and is in compliance with the regulations.
• After studying the revised structure, SEBI has observed that the Rs.2,058-crore
deal should not trigger a mandatory open offer for purchase of shares from
public shareholders, and Etihad would not be considered a promoter entity in
• However, SEBI has left it to the government to take a final call on the revised
Commercial Co-operation Agreement (CCA) proposed by Jet and Etihad
Airways, sources said, while adding that these observations had been issued as
per the given facts about the proposed deal. The deal was announced in April,
and has been stuck due to objections from regulators, including SEBI and the
Competition Commission of India, as also other agencies, as it was deemed to
yield significant control of the airline to Etihad.
JEt aIrwaYs soars ahEad oF
caBINEt dEcIsIoN oN EtIhad
• The Cabinet Committee on Economic Affairs (CCEA) to take up the Jet-Etihad deal
• Shares of Jet Airways have gone up by nearly 10 percent in three sessions. The
chances of the Cabinet's approval were boosted after stock market regulator Sebi
eased worries over the deal.
• Sebi said the proposed sale of 24 per cent stake to the UAE-based Etihad does not
give controlling powers to the foreign carrier. It observed that the Rs. 2,058 crore deal
should not trigger a mandatory open offer for purchase of shares from public
shareholders and Etihad would not be considered a promoter entity in Jet.
• The Union Cabinet has also cleared a bilateral accord between India and the UAE,
allowing the countries to fly 50,000 additional seats between each other each week
over the next three years, up from 13,700 earlier.
EtIhad aIrwaYs – JEt aIrwaYs
movE ahEad wIth stratEgIc
aLLIaNcE FoLLowINg FINaL
• Etihad Airways, the national carrier of the United Arab Emirates and Jet Airways today announced
that both airlines closed the transaction for the subscription of a 24 per cent equity stake by Etihad
Airways in Jet Airways.
• All requisite Indian regulatory approvals had been obtained by November 12th, 2013. Jet Airways
has, on November 20th, 2013, issued and allotted 27,263,372 equity shares of a face value of Rs.
10 each at a price of Rs. 754.7361607 per equity share on a preferential basis to Etihad Airways.
Consequent to the above allotment, the paid up share capital of Jet Airways stands increased to
11,35,97,383 equity shares of Rs. 10 each.
• Following this issue and allotment of the said equity shares on a preferential basis to Etihad
Airways, Etihad Airways holds 24 per cent of the post issue paid up share capital of Jet Airways
(on a fully diluted basis).
• Additionally, Mr. James Hogan and Mr. James Rigney, being nominee Directors of Etihad
Airways, have been appointed as additional directors on the board of directors of Jet Airways as
from November 20th, 2013.
• Mr. Naresh Goyal, Chairman of Jet Airways said: “The infusion of foreign direct investment in the
aviation sector will result in economies of scale, grow traffic at our airports, and create job
opportunities. I am confident that this investment will greatly benefit all our stakeholders whilst
significantly benefitting our customers who will now have access to a more expanded global
• Mr. Goyal also stressed that together with Etihad Airways, Jet Airways would enhance
connectivity for tourists, business travellers, Indian families and the wider travelling public.
• Mr. James Hogan, President and Chief Executive Officer of Etihad Airways said: “India is one of
the largest and fastest-growing markets in the world and a key part of the Etihad Airways growth
strategy. Through this association, Etihad Airways and Jet Airways 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 code-share options, travel to, from and within India will become much easier.”
• Mr. Goyal and Mr. Hogan confirmed that the collaboration between the airlines would commence
immediately with a view to delivering network and service benefits to customers as soon as
possible. Specific details will be released progressively.”
We bring to you the timeline and the nuts and bolts of the deal:
January 3, 2013 Jet informed BSE about talks with Etihad
February, 2013 Etihad chief executive James Hogan and Jet Airways’ chairman Naresh
Goyal led a joint delegation of both the airlines and separately met Finance
Minister P. Chidambaram, Civil Aviation Minister Ajit Singh and Commerce
Minister Anand Sharma to apprise them about a possible stake sale deal.
February 27, 2013 Announcement of Etihad buying Jet’s landing and departure slots at
Heathrow in a sale and lease back agreement signed on February 26, 2013
April 24, 2013 Board of Jet approves the issuance of 27,263,372 equity shares by way
of preferential allotment to Etihad.
Jet & Etihad along with the promoters executive the IA, SHA & the CCA
May 24, 2013 Preferential allotment to Etihad is approved by the shareholders of Jet
June 13 PMO writes to civil aviation ministry to redraft the cabinet note on Abu
Dhabi traffic rights
June 14, 2013 FIPB defers the decision on Etihad’s investment into Jet.
July 29,2013 FIPB grants conditional approval to Etihad to acquire stake in Jet
September 16, 2013 BJP leader Subramanian Swamy challenges the Deal in Supreme Court
October 1, 2013 SEBI clears the Deal and clarifies that open offer obligations are not
triggered by the investment.
October 3, 2013 The Cabinet Committee of Economic Affairs approves the Deal
November 12, 2013 The Deal is approved by Competition Commission of India
November 20, 2013 Jet issues the Subscription Shares to Etihad.
James Hogan, CEO of Etihad & James Rigney, CFO of Etihad are
appointed as ad - additional directors of the Target.
Board of Jet approves transfer of ‘Jet Privilege’ programme to its
subsidiary Jet Privilege Private Limited as a slump sale.
Shareholding of the Target Post
Completion of the Deal
T a r g e
FII/ NRI/ Resident
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
STRATEGIC ALLIANCE - JETIHAD
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
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 East.
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
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 financial position.
The Deal presents a win-win situation for the parties, and the consumers.
For Jet, which had in recent times lost its numero uno position in the
Indian skies to the low cost Indigo Airlines, this Deal comes as a lifeline to
revive its position in the market.
Additionally it would be able to reduce its debt levels by around 30%
which would result in saving significant interest costs. It would also
benefit from the management expertise brought in by Etihad in increasing
its efficiencies of operation.
For Etihad, the Deal provides access to a large market of consumers in the
Tier II and Tier III cities in India where Jet operates. The consumers will
also benefit from the improved connectivity and better services at
affordable prices. It remains to be seen whether Etihad’s entry as a co-
pilot will ensure safe landing for Jet in future.