ALLIANCE IN AIR:

Jet-Etihad Deal Set To Spark Price War, Boosts Indias Global Connectivity.

Naresh Goyal's Jet Airways and Abu Dhabi carrier Etihad finally enacted a well choreographed tango clinching the first foreign direct investment (FDI) deal after foreign airlines were allowed part ownership of their Indian rivals.

On April 24, 2013, Jet Airways board cleared preferential allotment of shares (at Rs 754 a piece) to Etihad giving the latter a 24% direct stake in India's second largest airline by market share. Etihad will pay $379 million for the stake valuing Jet Airways at $1.57 billion, which is 32% higher than the current market value of the domestic carrier.

The Indian globetrotter will now be spoilt for choice. The Jet-Etihad deal could lead to a massive hike in connectivity between India and the rest of the world through Abu Dhabi along with the existing hub in Dubai. The additional connectivity would come through a hike in flying rights between India and Abu Dhabi, which both the airlines have sought. With both Emirates and Etihad competing to get Indian flyers, a price war is on the cards and the price-conscious traveller can have the last laugh as the Sheikhs of Abu Dhabi and Dubai fight for them.

Apart from flyers, the Jet-Etihad deal is a win-win for both the airlines as well. Jet will have access to low cost funds of Abu Dhabi apart from cheap jet fuel to fund its ambitious expansion plans in both the international and domestic arenas. Etihad can now hope to increase it 2% share of international travellers flying to and from India closer to market leader Emirates 13%.Indian carriers and Etihad currently have 13,000 weekly seats each. Jet had sought an enhancement of 42,000 seats per week and Etihad also wants a similar hike. Since international traffic is growing at over 10% per annum, Etihad like Emirates wants as much traffic from India as possible to fill up its wide-bodies flying to and from rest of the world. The Indian market is expected to grow to 42 million international travellers over the next five years. Now Jet, along with the foreign airlines, is armed to compete together this traffic.

Etihad places huge aircraft orders and thus gets a good price from manufacturers. Now, Jet too can get planes at the same price. And, instead of 14% interest rate for loans in India, it will get loans at 3% to 4% from Abu Dhabi,.

Apart from these commercial reasons, a senior Jet official said Goyal wanted Jet to be an Indian MNC with presence across the globe. Let us be Indias ambassadors abroad in as many places as possible. The tricolor (that is all on Indian airlines aircraft) should fly as far and wide as possible, Goyal is learnt to have told his team, while finalizing the airlinesnetwork. This deal means that well-run Indian carriers can also hope to have foreign airlines on board and get funding. SpiceJet and GoAir could be first off the block after Jet. IndiGo, though being chased by many foreign airlines, has not shown any interest in them for offloading stake.

ACTION PLAN

WIDE-BODY FLIGHT PLANMore domestic fl ights to regain market leader slot from IndiGoJet will deploy widebody aircraft from Delhi, Mumbai, Bangalore and Chennai, and from Hyderabad, Trivandrumand Cochin in second phaseThese planes will fl y non-stop to US cities like San Francisco, N o Washington, New York, A Chicago, Los Angeles and Houston

SKY IS THE LIMITA twin-pronged strategy of having international fl ights direct from India and also via Abu Dhabi will give it the biggest ever network by an Indian airlineFlights from India to North America, Europe, Gulf, Saarc, Southeast Asia and AustraliaCover more cities like Paris, Zurich, Dusseldorf, Berlin, Amsterdam, Manchester, Copenhagen, Barcelona, Ho Chi Minh, Shanghai and Kuala Lumpur

NARROW-BODY FLIGHT PLANThey will fly further on to nearby destinations in Middle East and Africa like Kuwait, Saudi Arabia, Iran, Iraq, Beirut, Amman and CairoIn second phase when fl eet grows, Jet will also have flights to Europe viaAbu Dhabi

The man who flew through all storms

Anshul Dhamija TNN

Bangalore: Sixty-three-year old Naresh Goyal, founder chairman of Indias second largest airline by market share Jet Airways, has been at the forefront of the countrys open skies policy. Back in the early 90s when the Indian government opened up the skies to private air operators, Goyal along with big industrialists such as Subrata Roy, S K Modi and Thakiyudeen Wahid jumped in the fray and gave travellers a new experience in domestic air travel. Until then, the highly regulated aviation market only had the erstwhile Indian Airlines and Air India, both state-run carriers operating on domestic routes.ModiLuft founded by S K Modi, East West Airlines by Thakiyudeen Wahid, Sahara Airlines by Subrata Roy, and Naresh Goyals Jet Airways were the four private operators to launch air services on truck routes in 1993, connecting the major metros in the country. Goyal was the only unknown name at thatpoint in time to throw his hat into the aviation business.After graduating in commerce in 1967, Goyal joined the travel business as a general sales agent for Lebanese International Airlines where he spent around seven years learning all aspects of the airline industry. Goyal founded Jetair (Private) Limited in May 1974, with a focus on providing sales and marketing representation to foreign airlines in India. Through this venture, Goyal was involved in the development of traffic patterns, route structures, operational economics and flight scheduling, all of which helped him in starting Jet Airways. In hindsight, one could infer that it was this exposure to the nitty-gritty of air travel which helped him survive for two decades in Indias tumultuous aviation industry.Though Jet Airways may have lost its pole position in terms of market share, the airline is perhaps the only surviving private air operator from the 90s open skies era. Both ModiLuft and East West Airlines wilted away into thesunset after three years of operations. Of course, after many years of changing ownership, ModiLuft finally was reborn as SpiceJet in 2005, which was later bought over by south-based media magnate Kalanithi Maran.In 2006, when the Indian aviation industry was going through a phase of consolidation as new private air operators had entered the market with the low-cost model, Goyal once again made headlines to stay at the top. He acquired Subrata Roys Air Sahara (formerly Sahara Airlines) for $500 million (over Rs 2,000 crore), the biggest deal in Indian civil aviation till date. Air Sahara was remodelled into a low-cost airline Jet Lite, which was later merged with Goyals in-house low-cost brand Jet Konnect.A year later in 2007, Goyal once again had the media abuzz as he looked to redefined air travel, this timethough it was on the longhaul international routes. With tastefully done interiors and bespoke first and business class cabins on the brand new Boeing 777s and Airbus A330s, Jet Airways instantly shot to fame on international routes, taking on the likes of legacy carriers such as Singapore Airlines, Emirates, and British Airways, to name a few.But through all the highs, Jet Airways has had a turbulent flight in holding on as the market leader even after entering low-cost business. The preference for low-cost air travel and the emergence of airlines such as IndiGo and SpiceJet have greatly eroded Jets once star appeal.However, precisely two decades after launching Jet Airways, Goyal with an estimated net worth in excess of $2 billion is once again taking the next big leap in Indian aviation: Bringing on board Etihad as a strategic equity partner post the governments decision to allow foreign airline entities to invest up to 49% in an Indian airline.REACHING FOR THE SKIESNaresh Goyal graduated in commerce in 1967, and entered the travel biz as a general sales agent for Lebanese International AirlinesAfter 7 yrs of learning the ropes, he founded Jetair (Pvt) Ltd in May 1974, providing sales and marketing services for foreign airlines in IndiaAt Jetair, Goyal learned first-hand about trafficpatterns, route structures, operational economics & flight schedulingThis helped him survive two decades in the turbulent aviation sector after launching Jet Airways in 1993Others didnt last as long S K Modis ModiLuft, Thakiyudeen Wahids East West Airlines & Subrata Roys Air Sahara (which Goyal acquired in 2006 for $500m)

Jet to sell $379m stake to Etihad

Reeba Zachariah | TNN

Mumbai: Naresh Goyal's Jet Airways and Abu Dhabi carrier Etihad finally enacted a well choreographed tango clinching the first foreign direct investment (FDI) deal after foreign airlines were allowed part ownership of their Indian rivals.On Wednesday, Jet Airways board cleared preferential allotment of shares (at Rs 754 a piece) to Etihad giving the latter a 24% direct stake in India's second largest airline by market share. Etihad will pay $379 million for the stake valuing Jet Airways at $1.57 billion, which is 32% higher than the current market value of the domestic carrier.Etihad will take two board seats even as Goyal would hold 51% stake and remain non-executive chairman of Jet Airways. Abu Dhabi airline will separately take majority shares in JetPrivilege, the frequent flier unit of Jet Airways, for $150 million. It has already paid another $70 million to purchase Jet's slots in London Heathrow. The deal also has the potential to make Abu Dhabi the biggest emerging hub for Indian globe-trotters.Jet to expand global reach via Etihad

Mumbai: Jet said it would establish a Gulf gateway in Abu Dhabi and expand its global reach through Etihad. It's a gamechanging opportunity for Etihad, and a game-changing opportunity for India, Kapil Kaul, regional head of the Centre for Asia Pacific Aviation (CAPA), told Reuters.This 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, said Jet Airways chairman Naresh Goyal. Etihad president and CEO James Hogan added, It (the deal) 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 five years.Eithad becomes the first big full service global airline to buy into the India story where travelis expected to triple in the next 10 years. Earlier this year, Kuala Lumpur based low cost carrier AirAsia announced a JV with Tata Sons to float a new airline.WORLD IS NOT ENOUGH

Funds from stake sale , revenue from other streams like sale and lease back of aircraft and soft loans from Abu Dhabi to help prune Jets high cost loan of12,500CRTo place massive order for narrow-body planes along with some wide-bodiesHas decided not to be a part of any airline alliance and will grow along with EtihadWIDE-BODY FLIGHT PLANMore domestic fl ights to regain market leader slot from IndiGoJet will deploy widebody aircraft from Delhi, Mumbai, Bangalore and Chennai, and from Hyderabad, Trivandrumand Cochin in second phaseThese planes will fl y non-stop to US cities like San Francisco, N o Washington, New York, A Chicago, Los Angeles and Houston

SKY IS THE LIMITA twin-pronged strategy of having international fl ights direct from India and also via Abu Dhabi will give it the biggest ever network by an Indian airlineFlights from India to North America, Europe, Gulf, Saarc, Southeast Asia and AustraliaCover more cities like Paris, Zurich, Dusseldorf, Berlin, Amsterdam, Manchester, Copenhagen, Barcelona, Ho Chi Minh, Shanghai and Kuala Lumpur

NARROW-BODY FLIGHT PLANThey will fly further on to nearby destinations in Middle East and Africa like Kuwait, Saudi Arabia, Iran, Iraq, Beirut, Amman and CairoIn second phase when fl eet grows, Jet will also have flights to Europe viaAbu Dhabi

MORE THE MERRIER

India, Abu Dhabi hike weekly flying rights

Saurabh Sinha TNN

New Delhi: Hours after Etihad agreed to invest Rs 2,058 crore into Jet Airways, India and Abu Dhabi agreed to increase the weekly flying rights nearly four times by allowing their airlines to add 36,670 seats over next three years. Etihad and Indian carriers, including Jet, will be allowed to hike weekly capacity by 11,000 seats by the year-end, another 12,800 by the end of 2014 and another 12,870 by 2015-end. However, Jet is expected to get a major share of this.The Jet-Etihad dealhinged on the enhanced bilateral, which was granted only after Etihad confirmed its investment in Jet. A team of Indian aviation ministry officials finalized the bilateral enhancement in Abu Dhabi on Wednesday. Indian carriers and Etihad currently have 13,000 seats each per week. Jet wanted a hike of 42,000 more seats as it plans to operate flights to Abu Dhabi from 23 Indian cities. On a reciprocal basis, Etihad too had sought a similar enhancement.Etihad, currently flies to nine Indian cities. The number of flights it can add toDelhi and Mumbai has been capped at 7, 14 and 21 over the next three years. The Jet deal will help Etihad grow itspresence here. While it has 59 flights a week to nine cities, Emirates has 185 flights a week to 10 cities and Qatar has 95 flights per week to 12 cities.The Comptroller and Auditor Generals audit report on Air India had castigated aviation ministrys liberal grant of bilateral to Emirates. After that, the ministry did not grant any fresh flying rights to Gulf carriers. As a result, Etihad could not grow its foothold in India and remained behind Emirates.After allowing Abu Dhabi to increase seats, therewill be similar requests from other Gulf states and countries to enhance the flying rights of their airlines. Diplomatic and geopolitical pressures may not allow the other countries to be denied what has been agreed for Abu Dhabi, said a senior official.While the requests for enhanced bilateral is common to all, there are other demands too. Emirates, Lufthansa and Singapore Airlines have for years been asking permission to fly their Airbus A-380 to India. India has not been agreeing as it will hurt the domestic carriers.

FLIGHT PATH

Mid-2012 |IndiGo nudges past Jet in domestic market. Govt not granting fresh bilaterals to Gulf carriers. Etihad remains way behind compatriots Emirates and Qatar in flights to IndiaWith Naresh Goyal having helped Abu Dhabi in setting up Etihad in 2002-03, they begin talks for a mutually beneficial tieupSept 2012 |Govt allows foreign airlines to invest in Indian airlinesConcerns arise in Abu Dhabi over past experience in India with Etisalat, which was hit by licence cancellation after 2G spectrum scam. It wants some safety for investments made by its companies in India by signing an investmentsafety agreementFears arise over whether Jet-Etihad deal will materializeFeb 20, 2013 |Etihad buys three pairs of Jets slots at London Heathrow airport to show deal on trackJet applies for 42,000 additional seats per week to Abu Dhabi to operate flights from 23 Indian citiesAbu Dhabi seeks a similar hike for Etihads flying rightsApril 22 |Talks begin in Abu Dhabi over the enhanced flying rights. A delegation of the civil aviation ministry headed by joint secretary Prabhat Kumar is in Abu Dhabi. Outcome of the talks will be known by ThursdayApril 24 |Jet announces it will offer 24% stake to Etihad in a deal valued at Rs 2030 crore, valuing Jet at Rs 8460 crore