Abu Dhabi based Etihad Airways becomes the first major foreign investor in India’s airlines sector as it entered a strategic partnership with Jet Airways, taking 24% stake for Rs 2058 crores. The deal holds significant for both Jet as well as the country’s aviation sector. For Jet, it can solve financial woes with Etihad alliance. For the government, the deal is a successful chase for FDI.
The deal may make the Etihad- Jet a major force in the country’s aviation sector as Etihad has strong footing in the overseas segment. Jet can now better tailor its services given the scale advantage and flexibility from having a global partner. Implication is that in international operations especially in the route connecting India with Europe and America through the Middle East, Jet will get a strong position compared to its competitors.
Now the question is whether the deal will stretched to 49% equity participation by Etihad. If it happens in the near future, Etihad can play a key role in the domestic aviation industry.
Another interesting development in incubation is the potential entry of Tata- Air Aisa alliance. If that alliance becomes realized, India’s aviation sector will witness another phase of big competition and price wars. Exit of Kingfisher has left considerable space in the aviation sector. With the Etihad-Jet deal and the entry of TATA- Air Asia, aviation industry is going to be heated up; once more.