India deferred a decision on Jet Airways (India) Ltd. (JETIN)’s agreement to sell a stake to Etihad Airways PJSC, as authorities sought more details about the local carrier’s ownership.
“We need more details of effective control and ownership,” Economic Affairs Secretary Arvind Mayaram said in New Delhi today after the nation’s Foreign Investment Promotion Board discussed the investment. Civil Aviation Minister Ajit Singh said India’s stock market regulator raised some concerns over the deal and asked the carriers to “rectify” some parts of their agreement. He didn’t elaborate.
Jet is seeking to sell a 24 percent stake to Abu Dhabi-based Etihad to raise funds for fleet expansion and to pare debt after six years of losses caused by a price war and high fuel costs. The Mumbai-based airline also named a new chief executive officer yesterday as it prepares to face rising competition from AirAsia Bhd. (AIRA), the region’s biggest discount carrier, that plans to enter the Indian market later this year.
Jet spokeswoman Ragini Chopra declined to comment on the government’s move to defer the decision.
Shares of Jet jumped 9.2 percent, the most since April 25, to 470.40 rupees at the close in Mumbai trading before the announcement. The stock has declined 16 percent this year, while the benchmark S&P BSE Sensex has lost 1.3 percent.
The carrier, which agreed in April to sell the stake for 20.6 billion rupees ($358 million), is counting on the Etihad funds to accelerate repayment of working capital debt, K.G. Vishwanath, vice president of commercial strategy, told analysts in a conference call on May 27. The company is considering an order for Boeing Co. 737 planes, he said.
Jet hired Gary Kenneth Toomey, a former CEO of Air New Zealand Ltd., to succeed Nikos Kardassis who resigned June 5. Chief Operating Officer Hameed Ali will continue as acting chief executive till the Australian national’s appointment is approved by regulators, the company said yesterday.
Prime Minister Manmohan Singh’s government in September allowed foreign carriers to buy as much as 49 percent of local operators. That prompted AirAsia to set up its India venture through a partnership with Tata Group.
State-owned Etihad has invested in smaller operators to help feed long-haul flights and turn its home emirate into a hub for intercontinental travel. It owns stakes in Air Berlin Plc (AB1), Air Seychelles Ltd., Virgin Australia Holdings Ltd. (VAH) and Aer Lingus Group Plc.
Jet is in talks with Etihad to lease out some excess aircraft capacity including Airbus SAS A330 planes, Vishwanath said. The airline also separately plans to sell a stake in its frequent flier program to Etihad, with the move tied to the main deal going through.
The carrier also plans to focus on increasing services to Abu Dhabi by adding more direct flights to the emirate from smaller Indian cities, Raj Sivakumar, its senior vice president, said last month. Jet will also look at expanding services to Europe with new direct flights.
Jet last month posted a wider-than-estimated fourth-quarter loss of 4.96 billion rupees because of higher aircraft lease costs and a one-time expense.
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