Etihad Airways’ purchase of a stake in Jet Airways could be delayed until at least August as the Abu Dhabi carrier seeks assurances following setbacks for several Gulf investors in India, two sources familiar with the talks said.
Etihad, which is expanding globally, has been in talks over an equity stake in Jet since September after India relaxed ownership rules and allowed foreign airlines to buy up to 49 per cent in local carriers.
The Gulf airline is eyeing a 24 per cent stake, valued at about $330 million, according to sources aware of the matter.
The deal, which would inject much-needed funds into Jet and help Etihad expand its reach into the vast Indian aviation market, has slowed over concerns of past failed forays by Gulf investors into India and the Abu Dhabi firm’s demands to protect its potential investment, the sources said, speaking on condition of anonymity as the matter is not public.
“It’s going to take some time; at least until August,” said one source, who is aware of the discussions.
“There are issues relating to what happened to some other UAE entities like Etisalat and Emaar in India. So nothing is going to happen soon.”
Etisalat, the UAE’s biggest telecom operator ETEL.AD, shut down its Indian mobile operations after a court ordered the revocation of cellular permits – including those granted to Etisalat’s local affiliate – following a scandal-tainted 2008 sale.
Sources have said that apart from disagreements on commercial terms, an investment protection assurance sought by Abu Dhabi has caused a pause in talks.
“The deal has been delayed due to various considerations – pricing, management control and a Bilateral Investment Protection Agreement (BIPA) between both countries,” said another source close to Jet Airways.
Top executives from Etihad and Jet met Indian ministers in February, but the deal faced a setback later when the Gulf carrier’s chairman told Reuters it needed to be revised.
Etihad said later it remained in talks with Jet and has been strengthening its business relations with the Indian airline. The Gulf carrier paid Jet $70 million for its slots at London’s Heathrow airport earlier this month and the two already have a codeshare agreement.
Jet shares have risen nearly 45 per cent in the last six months on speculation of an investment by Etihad. But the surge has slowed on concerns about the deal going through.
Etihad chief executive James Hogan declined to give a clear timeline for the talks at an event in Abu Dhabi on Wednesday.
“They (Jet) made an announcement to the market weeks ago. Nothing has changed since that announcement,” Hogan told reporters at the tourism event.
“This isn’t about a collection of brands. It’s about whether there is a strong business reason to strengthen relationships. We have a strong relation ship with Jet Airways and we continue to develop that.”
Etihad has negotiated stake purchases in four foreign airlines including Air Berlin, Virgin Australia, Aer Lingus and Air Seychelles.
The airline is expanding quickly as it looks to compete with regional rivals Emirates EMIRA.UL and Qatar Airways.