Etihad buys Jet's Heathrow slots, signals deal still on track

Feb. 27--MUMBAI -- Etihad Airways PJSC purchased the Heathrow slots of Jet Airways (India) Ltd for $70 million, the strongest indication yet that the deal in which the United Arab Emirates' national airline is to buy a stake in the Indian carrier is back on track.

The money was for Jet Airways' three pairs of slots at Heathrow, Etihad said in a statement on Wednesday.

"The purchase is part of a sale and leaseback agreement signed on Tuesday, 26 February 2013," it said. Jet Airways will continue to operate flights to London utilizing these slots, it said.

The discussions on Etihad's investment in Jet Airways are progressing, the statement added.

News of the payment fuelled a surge in the Jet Airways stock, which ended trading on BSE at Rs.534.85, up 19.27%. The benchmark Sensex was up 0.72% at 19,152.41 points.

Uncertainty over the deal had led to a 27.48% slump in the stock between 18 February and 26 February.

The Heathrow slots transaction is a strong indication that the Jet-Etihad deal is intact and nearing the final stages, said Praveen Sahay, senior analyst at domestic brokerage Batlivala and Karani Securities India Pvt. Ltd. He said the deal would benefit both sides, with Jet Airways getting the money that it needs and Etihad getting more rights.

Talks between Jet Airways and Etihad started after the Indian government allowed foreign carriers to invest up to 49% in domestic airlines in September.

The Mumbai-based airline's board was originally scheduled to approve the proposal to sell a 24% stake in the carrier to Etihad for more than $300 million in the second week of February. The deal was then to have been announced on 18 February by Etihad.

The deal got bogged down because of concerns over possible policy changes that could force Etihad to exit the investment, people familiar with the talks said.

Indian government ministers have declared their support for the deal.

The Heathrow deal strengthens the existing commercial relationship between the two that began in July 2008 with a code-sharing agreement, Etihad said.

The ET Now television channel reported the payment earlier on Wednesday.

The first clear sign of hurdles to the deal came on 17 February, when Etihad Airways chairman Sheikh Hamed bin Zayed al-Nahyan said the Abu Dhabi-based airline needed to revise its deal to buy a stake in the Indian carrier.

The acquisition was to have been announced during commerce minister Anand Sharma's visit to the UAE at the time.

Copyright 2013 - Mint, New Delhi