Post the Etihad deal announcement, Naresh Goyal, Jet Air's chairman said the deal will further strengthen the airline's balance sheet and will also open up more avenues for improving revenues. "The deal will also accelerate returns to sustain profitability," he had added.
Jet Airways is likely to pare a significant chunk of its debt by the year-end after Etihad invests around Rs 2000 crore for acquiring 24 percent stake in the carrier, suggest media reports.
The deal is first of its kind after the government relaxed foreign direct investment rules late last year.
Deal with Etihad will provide Jet Air to improve credit perception as well as cash to retire debt, say experts. This is how it will work for Jet Air:
Currently, of the Rs 13000 crore debt, Rs 5000 crore is towards working capital loans and the remaining was taken for acquiring aircraft.
Even if Etihad infuses a small portion of equity, it will certainly help the carrier bring down working capital debt level.
In addition, Jet has also entered into a sale and lease-back agreement with Etihad for its three pairs of slots at London's Heathrow airport for five years. This deal will also bring in around Rs 390 crore to the carrier
In an earnings call post FY13 numbers announcement, Jet Air's management had said that they are looking to repay around USD 500 million and once Etihad injects equity into the airline, paring debt would not be a problem.
Read This: Jet Air up 14% after Etihad deal