Air links between the Gulf and India are set to improve following today’s news that Abu Dhabi’s Etihad has closed a deal to take a 24 per cent share in India’s Jet Airways.
The £248 million deal, which is subject to shareholder approval, comes seven months after the Indian government relaxed restrictions on foreign investment in its airlines.
Foreign carriers are now permitted to buy stakes of up to 49 per cent in India’s airlines and Etihad, which is based in the United Arab Emirates, is the first overseas investor to take advantage of the less stringent legislation.
Today's announcement follows mounting speculation that Etihad would invest in the loss-making Jet Airways and comes two months after the Gulf carrier purchased the latter’s slots at Heathrow Airport for £45 million.
The three pairs of slots will be leased back to the Indian carrier, which will continue to operate its London services.
In a statement at the time, an Etihad spokesperson said: “The deal further strengthens the existing commercial relationship, which came into effect in July 2008, making provision for code-sharing between the two airlines."
The acquisition adds to recent Etihad investments in airlines including Air Berlin, Air Seychelles and Aer Lingus.
Earlier this month, James Hogan, CEO of Etihad, a non-alligned carrier, claimed that legacy airline alliances have outlived their welcome.
During a speech at the International Aviation Club in Washington DC, he said: “The traditional airline alliances have evolved into slow-to-respond, bureaucratic organisations which struggle to deliver added value to their member airlines, many of which are no longer compatible with each other.
“If we look at the consolidation currently occurring throughout the airline industry, we are seeing more fragmentation within the alliances. This is going to continue as members seek ways to operate profitably in a very competitive environment with high fuel costs and generally slower global economic growth.”
Not a single Indian airline has yet to join one of the three main alliances. Until now, it was rumoured that Jet Airways might link with Star but today’s news would appear to make that less certain.
Report by Graham Smith