Etihad muses on rescuing Jet Airways

Etihad Airways is contemplating lending support to the debt-laden Jet Airways. Consequently, it engaged in discussions with some of the airline’s bankers about matters concerning cash flow and future business plans.

Presently, Etihad is holding 24 per cent stake in Jet Airways and is deliberating further investments if it can work out an appropriate structure. However, no deal has been sealed yet. However, such a deal would provide much-required respite to the cash-starved company, which is being forced to cut corners by cancelling flights on non-profitable routes in order to save money.

Jet Airways is India’s largest full service carrier in terms of market share. However, the 25-year old airline owes money to lessors and vendors and is struggling to make these payments. To make matters worse, astronomical fuel prices, depreciating Indian rupee and intense price wars pervading the economy are dampening the company’s prospects. In such a scenario, Jet Airways is facing stiff competition from no-frills airlines like IndiGo, as they are better placed to withstand such headwinds.

Etihad has already incurred losses in airline ventures like Alitalia and Air Berlin; thus, it will indeed exercise caution in forking over funds to rescue Jet Airways. Furthermore, owing to the liquidity crisis and tighter lending norms permeating the Indian markets, most bankers are reluctant to lend money to struggling airlines.

Naresh Goyal, the founder and majority shareholder, declared that the company might close the deal with Etihad around mid-December. As such, Jet Airways can expect route restructuring and more flights to Abu Dhabi. He also reassured pilots that there will be no delays in salary payments from April 1.

On Wednesday, the shares of Jet Airways opened at Rs. 304.00 per share, and hit a high and low of Rs. 311.75 per share and Rs. 303.55 per share, respectively. At 11:44 am, the stock was trading at Rs. 305.80 per share, up 0.79 per cent.