India’s new dynamic

The perils and fortunes of India’s leading airlines

It didn’t take long for India’s Jet Airways to dip into new shareholder Etihad Airways honey pot after the two finally inked their partnership in April following months of delicate negotiations. The outlay by Abu Dhabi-based Gulf carrier of close to $600 million – $379 million for a 24% stake in Jet, a $150 million investment in Jet’s frequent flyer program and another $70 million to buy the Indian airline’s three pairs of Heathrow slots through a sale and leaseback agreement -turned out to be merely a start. Within days Etihad, through its bankers, had also agreed to extend a low-interest loan of some $300 million to its new bedmate. It came at a juicy rate of 3 per cent, which compares to the annual rate of 14 per cent Jet is paying on its other loans. With total debts at the end of 2012 sitting at $2.1 billion a Jet executive said the new loan will be used to partially replace high-cost debt, saving the airline an estimated $30 million annually on interest alone.

But while there were smiles on the faces of Jet management in Mumbai, up in New Delhi at government-owned Air India headquarters, there was a great deal of gloom.