Jet Air up 14% after Etihad deal

Moneycontrol Bureau

Jet Airways shares climbed as much as 14 percent to Rs 654 after Abu Dhabi's Etihad Airways picked up 24 percent stake in the airline at Rs 754.74/share, a 31.7 percent premium to Jet Air's closing share price on Tuesday.

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.

Post the 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 added.

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Industry experts say the deal will help Jet Air to route incremental capacity from Abu Dhabi Airport to Europe, US and other regions. Currently, the airline deploys around 4 percent of its global capacity via Abu Dhabi and this is likely to go up by around 30 percent.

As part of the agreement, Jet will establish a hub in Abu Dhabi and expand its reach through Etihad's global network while the airlines will also expand existing operations and introduce new routes between India and the Gulf.

The transaction will help Jet Air to reduce debt by a fourth after Etihad infuses funds in the carrier.