Jet shares surge on renewed hopes of stake sale to Etihad

Moneycontrol Bureau

Shares of Jet Airways rallied 10 percent to close at Rs 554.10 on renewed hopes that the stake sale to Gulf-based Etihad Airways will be inked shortly. The stock has been under pressure for the last couple of weeks after Etihad chairman’s statement that the deal may take longer to materialize.

According to the latest information, Etihad may buy 10-12 percent in Jet from the promoters for a price between Rs 700-750 per share, reports CNBC-TV18, quoting unnamed sources. It will buy the additional stake through a preferential allotment of shares, sources said.

Under the current rules, foreign airlines can buy up to 49 percent in an Indian carrier.

The share purchase agreement will not have any forward contract clause, sources said.

Industry watchers feel the impending Jet-Etihad deal and AirAsia's entry into India could trigger another round of fare wars, putting further pressure on the already weak bottomlines of Indian carriers.

SpiceJet flagged off the fare war in January, and Jet and other carriers followed suit last month.

SpiceJet CEO Neil Mills of the view that AirAsia is unlikely to be aggressive in its fare strategy.

"AirAsia is a very credible competitor but they have always been very rational and logical. So I don’t believe that they will undercut and not make any money. If you see their growth in some of the other markets they have tempered the growth when they haven't been able to make money," he told CNBC-TV18 in an interview on Thursday.