Mumbai: The Rs 2,069 crore rpt Rs 2,069 crore Jet Airways deal with Etihad Airways finally took off on Wednesday with Naresh Goyal becoming the country's first airline promoter to receive foreign investment by selling 24 per cent stake to the Abu Dhabi-based carrier.
The two airlines jointly announced the completion of the Rs 2,069-crore (USD 380 million at the rupee rate on the day the deal was announced on April 24 this year) transaction under which Jet transferred 2.73 crore equity shares, aggregating to 24 per cent of its paid-up equity capital, to Etihad.
The announcement came after a board meeting of the Indian private airline at the Jet headquarters here this afternoon, which lasted for over an hour. The board also approved sale of the Jet Privilege Frequent Flyer Programme (JPMiles) business to its subsidiary Jet Privilege Pvt Ltd as a going concern on a slump sale basis. The JPMile deal will involve Etihad pumping in USD 150 million for a 50.1 per cent stake in the venture.
The finalisation of the deal came over a week after fair trade regulator Competition Commission of India (CCI) approved the acquisition of stake in Jet by Etihad, clearing the last hurdle for first such deal in the country's aviation sector, where most players are facing tough time. Though all the regulatory approvals are in place, the courts are hearing two petitions against the deal.
The deal also includes USD 150 million soft-loan from Etihad and sale of two Jet slots at the Heathrow airport in UK to the foreign carrier for USD 70 million, which put together values the deal at USD 739 million, or Rs 4,624 crore, at today's exchange rate.
The two airlines have also agreed to make equity investment in Jet Privilege following which the Jet arm will become 50.1 per cent owned by Etihad. However, this deal is subject to the CCI approval.
The two sides had initiated the discussions for a tie- up immediately after the Government allowed up to 49 per cent foreign direct investment by the overseas airlines in the Indian carriers in September 2012.
With the completion of the transaction, Goyal gets a new lease of life as his airline was struggling to keep it afloat amidst heavy losses. In the September quarter, the airline reported the worst quarterly loss at Rs 891 crore.
The agreement will help the debt-laden Indian carrier pare part of its USD 1.9 billion bank debt (as of September 30). Maintaining that all requisite regulatory approvals from the authorities have been obtained on November 12, the two airlines said Jet has "issued and allotted 27,263,372 equity shares of a face value of Rs 10 each at a price of Rs 754.736 per equity share on a preferential basis to Etihad."
As per legal requirements, 51 per cent stake would be held by Jet and Goyal, its Chairman and promoter. In a statement, the two carriers announced that Etihad President and CEO James Hogan and its Chief Financial Officer have been appointed as additional directors on the board of Jet from Wednesday.
Goyal and Hogan said, "the collaboration between the airlines would commence immediately with a view to delivering network and service benefits to customers as soon as possible."
The Government allowed FDI in aviation in September last year. Since then three FDI proposals have fructified - the other two being Malaysian carrier AirAsia's joint venture with Tata Group and Arun Bhatia, and the Tatas' 51:49 JV with Singapore Airlines.