Why is Jet Air stronger contender than KFA for Etihad deal?

Moneycontrol Bureau

Even as Etihad Airways is likely to decide whether to invest in Jet Airways or Kingfisher Airlines by the month-end, industry watchers and brokerages are confident about the Gulf carrier cracking a deal with the former.

Here is why the industry believes Jet Air to be a stronger contender than KFA for Etihad

Rashesh Shah, aviation analyst at ICICI Direct told CNBC-TV18 that there is higher probability of Etihad picking up stakes in Jet Air. "If any foreign carrier is interested to invest in India, it would look for a company which has domestic as well as international presence and Jet fits the bill due to its wide network. Hence, we are betting more on Jet Airways," he said.

On whether Jet can fetch a premium if the deal goes through, Shah said that valuation is derived from the operating environment and synergy benefits. "Suppose, a foreign carrier like Etihad or any other Gulf carrier comes in, then they would look to focus more on taking outbound travel from India. Hence, a foreign carrier would be willing to pay a premium to Jet," he added.

Independent analyst S. P Tulsian, also believes that the Jet Air-Etihad deal will happen by month-end. "Etihad and Jet Air are both in final stages of closing the deal due to synergy benefits. There has not been much progress seen with respect to the debt redemption or the debt payment by Kingfisher Airlines. Though the carrier is also in talks with Etihad, there are meager chances of Etihad acquiring stakes in it," he asserts.

Analysts say that stake sale talks are focused on diluting a minority stake in Jet Air so as to facilitate Etihad's entry. Jet Air, owned by Tailwinds, a company registered in Cayman Island in May 1993, has 80 per cent controlling shareholding by Naresh Goyal which needs to be brought down as per Sebi guidelines.

Meanwhile, shares of Jet Air were up 2.94% to Rs 627 at 10:14 hours
The Jet stock, according to markets statistics, increased 235 per cent since January 2012. Jet's advisers are Ernst and Young while Etihad is depending on PricewaterhouseCoopers at the negotiations table.