MUMBAI: Etihad Airways PJSC’s bid for a minority stake in grounded Jet Airways India Ltd is non-binding and subject to fulfilment of certain conditions by Jet’s lenders, two people aware of the matter said, requesting anonymity.

Jet Airways, in which Etihad owns 24%, shut operations last month after lengthy talks with Jet’s founder Naresh Goyal, external investors and Etihad were not successful.

Among its conditions, Etihad Airways wants an exemption from an open offer that may be triggered by a change in ownership structure of Jet Airways. More importantly, it wants a commitment from banks on additional loans, once it infuses equity into the company.

In April, three more companies--India’s National Investment and Infrastructure Fund (NIIF), private equity firms TPG Capital and Indigo Partners -- had submitted their expressions of interest (EoIs) for bidding for a stake in Jet Airways. But none of them submitted a bid by the end of the deadline on 10 May.

In the past, Etihad Airways had aggressively invested in several foreign carriers to expand market share, but things haven’t turned out the way it hoped. In 2015, Etihad had to write off its investment in Italian carrier Alitalia, which filed for bankruptcy after posting a loss of more than $117 million.

It took another hit in 2017 when Germany’s Air Berlin filed for insolvency, after Etihad said that it was no longer in a position to provide financial support to the airline which had run into losses of close to $1 billion over six years.

“However, India remains a lucrative market for Etihad Airways as it is one of the biggest and fastest growing markets for Middle-Eastern carriers," said Mark Martin, chief executive of aviation consultancy firm Martin Consulting LLC.

“With Etihad itself in a financial mess, it will have to come in with a strategic partner with deep pockets," Martin added.

So far, Etihad has not been able to find a local partner and lenders may need to take about 80% haircut on their outstanding loans (to Jet Airways), two bankers said, requesting anonymity adding that India’s National Investment and Infrastructure Fund (NIIF) could partner Etihad Airways to pick up controlling stake in Jet Airways.

“Etihad Airways’ decision to bid for Jet Airways could possibly be a way to preserve the bilateral it was given, as well as to protect its India feed. This (decision to place a bid) would have only made sense if Naresh Goyal quit Jet Airways, creditors give a major haircut, and if the Abu Dhabi-based airline found a credible Indian partner. And it seems they have fulfilled all these conditions," said a senior official with a full service carrier, requesting anonymity.

“It is, however, a very risky move for them. They have not covered themselves in glory with their investments and have had zero success in turning troubled airlines around," the official added.

Another aviation sector official said that Etihad’s latest move could also be a symbolic gesture so that the Indian government does not take back the 60,000 seats (under bilateral) that the Abu Dhabi airline got when they invested in Jet Airways. “Overall, it’s a risky move for Etihad," the person added on condition of anonymity.

“Etihad re-emphasises that it cannot be expected to be the sole investor, and that, among other requirements, additional suitable investors would need to provide the majority of Jet Airways’ required recapitalisation," Etihad said in a statement on Friday.

It said India is one of the fastest-growing air transport markets in the world, and a significant economic partner of the United Arab Emirates.

“Etihad has been working consistently with key stakeholders in India over the past 15 months to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, and continues to do so," it added.

On Friday, SBI Caps said that as part of the bidding process (for Jet Airways), a sealed bid from Etihad Airways has been received and the same will be submitted to lenders for examination.

“Few unsolicited offers have also been received which the lenders may deliberate upon subsequently," SBI Caps added in the statement.

Bidders are allowed to bid for as much as 75% of the carrier. According to bid documents prepared by the lenders, strategic bidders looking to invest in Jet Airways should have a minimum net worth of 1,000 crore or at least three years of experience in the aviation sector.

For financial investors, qualifying conditions are minimum assets under management (AUM) of 2,000 crore or at least 1,000 crore in committed funds for investment in Indian firms or assets, according to the expression of interest document that was made available to prospective bidders and reviewed by Mint.


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