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Jan 27, 2013, 03.38 PM IST | Source: CNBC-TV18

Expect Etihad to increase stake, delist Jet Airways: CAPA

Kapil Kaul, CEO-South Asia, Centre for Asia Pacific Aviation (CAPA) estimates, on CNBC-TV18, that Etihad may increase its stake to 49 percent in Jet Airways and delist the airline to avoid following the mandated procedures involved in a company listed on the stock exchange.

The contours of the deal and the structure that’s been agreed make it a very important deal not only for Jet Airways, but for the entire sector.

Kapil Kaul

CEO- South Asia

CAPA

Kapil Kaul, CEO-South Asia, Centre for Asia Pacific Aviation (CAPA) estimates, on CNBC-TV18, that Etihad may increase its stake to 49 percent in Jet Airways and delist the airline to avoid following the mandated procedures involved in a company listed on the stock exchange.

Also Read: Etihad may value Jet Airways stake at $1.25bn; stock up 3%

SpiceJet is not desperate to sell stakes immediately: CEO

Below is the edited transcript of  Kapil Kaul's analysis  on CNBC-TV18

Q: Do you believe the Etihad deal will strategically benefit Jet Airways and could be the first deal in India where we see a foreign carrier boards an Indian carrier?

A: The deal looks certain. We expect a formal announcement to be made in the next week or 10 days. Most of the issues have been sorted out. There are some formalities which need to be concluded. So, this could be the first deal of this kind.

Incidentally, Jet Airways was the beneficiary of the foreign direct investment (FDI) in '90s is again the first beneficiary of FDI. It is quite a strategic deal and one must not see it only from the perspective of Jet-Etihad. It will structurally bring in a lot of changes across the entire sector.

One has to wait and watch what will be the final contours of the deal will be. I would really want to see that within the near-term Etihad increases its stake to 49 percent. I see Jet Airways being delisted when Etihad reaches 49 percent. But the contours of the deal and the structure that’s been agreed make it a very important deal not only for Jet Airways, but for the entire sector.

Q: What makes you say that this will ultimately culminate to the point where Jet Airways will actually be de-listed from the Indian stock markets?

A: I don't expect Etihad to continue holding a 49-percent stake in a company that is listed. But one has to wait and watch. Etihad would not like to go through the kind of disclosures and other processes mandated for a listed company. So, I would think that the chances of de-listing exist.

Q: Strategically, how will Jet benefit from shifting its international hub from Brussels currently to Abu Dhabi to avail of  the lower ATF prices and a joint go-to market strategy as far as the internationalisation of routes is concerned?

A: I would be surprised if they shift their Brussels hub. I don’t expect that to happen in the first phase. That will actually mean that the entire network strategy would have to completely change and I don't see that happening at all in the first phase, may be in the second phase.

You could expect them to move out of Brussels and look at some other European point which might add value to their US and onward European network, but we don’t see them shifting to Abu Dhabi.

Jet Airways stock price

On December 19, 2014, Jet Airways closed at Rs 399.50, down Rs 4.65, or 1.15 percent. The 52-week high of the share was Rs 458.00 and the 52-week low was Rs 203.50.


The latest book value of the company is Rs -196.11 per share. At current value, the price-to-book value of the company was -2.04.

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