Etihad is right to be wary, say experts

Dubai: As Etihad Airways’ potential deal for buying an equity stake in India’s Jet Airways gets pushed further, market experts are of the opinion that Etihad is justified in adopting a wait-and-watch approach.
The Abu Dhabi-based carrier has been in talks with Jet Airways for months now, reportedly eyeing a 24 per cent stake in the Indian carrier, valued at approximately $330 million (Dh1.2 billion).
However, a Reuters report on Wednesday said that the deal could be delayed until at least August as Etihad is seeking assurances following setbacks for several Gulf investors in India, quoting sources familiar with the talks.
“It’s going to take some time; at least until August. There are issues relating to what happened to some other UAE entities like [UAE’s largest telecom operator] etisalat and [developer] Emaar in India. So nothing is going to happen soon,” Reuters quoted sources as saying. [Etisalat shut down its Indian mobile operations last year after India’s Supreme Court decided to cancel its licences, following a probe.]
Time frame
When asked for Etihad’s position on the deal, the carrier told Gulf News in an emailed statement, it had “no comment”.
Etihad chief executive, James Hogan, meanwhile, reportedly said on Wednesday that nothing has changed since Jet Airways made an announcement [of the deal] to the market weeks ago, without indicating any timeframe for the deal to materialise.
Analyst Peter Morris, chief economist at aviation consultancy, Ascend, however, says that Etihad is “right to be wary”. “Cross border investments by foreign airlines in others do not have a happy record in the industry — there are many examples from South America, Africa, Europe, Asia where expectations have not been met.
“Jet Airways themselves have a good track record as an Indian airline, but they cannot guarantee the behaviour of governments or politicians with different agendas at the regional or national level. Undoubtedly, it is better for Etihad to adopt a stepwise approach until they feel they have the right assurances in place,” he told Gulf News.
Another aviation expert, Andrew Charlton of Aviation Advocacy, added that the Etihad-Jet deal will go through “in one form or another”.
Regulatory structures
“Etihad Airways cannot have no Indian strategy. If Jet Airways deal collapses, Etihad can do other things, I assume, but this is a quick and easy way to get into the market,” he explained, adding, India will need to look at reform of its regulatory structures if it hoped to retain a powerful aviation sector.
India, in September last year, opened up its aviation sector for 49 per cent FDI (foreign direct investment) ownership by foreign carriers. And Jet Airways is likely to be the first carrier to take advantage of the move by the Indian government.
Then, there are others who are of the opinion that Etihad need not necessarily buy an equity stake in Jet Airways. “Etihad would be crazy to invest in Jet or any Indian airline. It can get what it wants without financial risk. Jet needs the partnership as much , so they can codeshare,” said US-based analyst, Addison Schonland, founder and partner at AirInsight.
Amber Dubey, Partner and Head-Aviation at global consultancy KPMG, is more optimistic. “Many feel that the Jet-Etihad deal will go through despite the niggles. It would be a win-win for the airlines and passengers alike. Jet would get access to much funds, global network, latest technology and management best practices. They would get synergy benefits in network planning and procurement of jets, fuel, spares, manpower, other goods and services etc,” he recently told Gulf News.
“Etihad, in turn, would get access to the traffic originating from India’s interiors and a stronger foothold in India which is a key market for Gulf carriers,” he added.
Meanwhile, aggressively pursuing its strategy to grow through alliances, Etihad Airways has equity stakes in a number of carriers including Air Berlin, Aer Lingus, Air Seychelles and Virgin Australia.

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