Etihad Wants to Invest in Jet Airways With Several Riders

Will they won’t they? There are so many questions.

Will Jet Airways revive post its shutdown on April 17, 2019?

Will Jet Airways receive any meaningful bid?

What will Etihad’s future be with regards to its 24% stake in Jet Airways?

After Jet Airways ceased operations, there were few weeks of silence from Etihad. Now some clarity has emerged. Several media reports indicate that Etihad has put in last-minute bid for minority stake in Jet Airways.

It has offered to invest INR 17,000 million ($243 million). However, there are several conditions. Some of these have always been in the public domain. Others are new and indicate a change in strategy.

Etihad will not take controlling stake in Jet Airways

At present, Etihad owns 24% stake in Jet Airways. There is a proposal to convert the massive debt owned by the Indian airline to equity. If this succeeds, Etihad would be diluted to 12%. Reportedly, Etihad wants to claw back its stake to 24% but no more.

Etihad has always maintained that it does not want to be the sole investor in the loss-making Jet Airways. However, to my knowledge, never before has it indicated its willingness to remain a minority investor. As per The Economic Times,

“As a minority shareholder, Etihad can only bring in cash required to retain its stake of 24%. The rest is up to the people managing the process,” said a person with knowledge of the matter. 

“As a minority shareholder, it is not for Etihad to take on the debt and liabilities. Etihad is only interested in the company being run well by a professional management with proper governance and the right professional board,” said the person. 

Etihad wants the Lenders to write-off the debt

Banks owe more than INR 80,000 million ($1.1 billion) to Jet Airways. It is amply clear that a defunct airline would be in no position to pay this back. Further, a revived Jet Airways would not be able to sustain itself with such a huge debt overhang.

Therefore, Etihad wants the lenders to write-off the debt at least partially. As per news reports, the proposed write-off could be as high as 80%.

It is worth remembering that the same lenders are running the bidding process. How will they respond to a bid which wants them to take a haircut? It is anyone’s guess.

Final Thoughts

Meanwhile, there have been several unsolicited bids for Jet Airways. This would have been funny if I did not have good memories flying Jet Airways. One of these bids is from Jason Unsworth of Atmosphere Air. I suggest you Google about him.

I do not think any of the other bids hold any water. To the best of my knowledge, the bid criteria requires an investor to have a minimum net worth of INR 10,000 million ($143 million) for a strategic investor. For a financial investor, the requirement is INR 20,000 million ($286 million). I would be surprised if any of the other bids fulfill the criteria.

Therefore, as of now, it appears as if it would be Etihad or nobody for Jet Airways.