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Wednesday, 20 March, 2019, 09 : 20 AM [IST]

Etihad seeks to disembark out of Jet Airways: Source

As per an Economic Times report by Mihir Mishra, Jet Airways’ financial problems took a turn for the worse on Tuesday with partner Etihad formally asking State Bank of India (SBI) to purchase its stake in the airline and the pilots’ union threatening to strike work from April 1 if salary arrears are not cleared.

The Abu Dhabi-based airline, which owns about 24% in Jet, has been a reluctant participant in discussions to resolve Jet’s financial woes. Etihad conveyed to SBI its decision to exit Jet in a meeting on Monday.

“Etihad wants to exit Jet completely. Any decision now has to come from SBI,” a source said. Etihad CEO Tony Douglas is believed to have discussed this with SBI chairman Rajnish Kumar on Monday.

When contacted, Etihad repeated its earlier statement that it was working with Jet. “As a minority shareholder, Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways.

The consortium of banks headed by SBI was to meet in Mumbai to discuss the latest development and decide on a future plan for Jet.

Meanwhile, the National Aviator’s Guild — the body representing Jet’s domestic pilots — on Tuesday threatened to stop flying from April 1 if the resolution plan is delayed and salary dues are not cleared by the end of March. The body represents around 1,000 pilots of the airline.

Etihad’s decision to pull out and the collapse of the resolution plan put forward by Jet Chairman Naresh Goyal, bankers and the Middle-Eastern airline last month means the situation has become critical for the Indian carrier.

According to the draft memorandum of understanding, Etihad was to infuse INR 1,600-1,900 crore for a stake of 24.9%, just below the 25% threshold that triggers an open offer.

Lenders were to infuse another INR 1,000 crore and take a 29.5% stake. About INR 450 crore that the carrier owes to entities related to founder Naresh Goyal were to be converted into equity. Goyal, who has already infused INR 250 crore, was to end up with a holding of 17.1% and not more than 22%.

On an immediate basis, lenders were to give INR 750 crore to Jet, which would come by pledging Jet Airways’ stake in Jet Privilege with banks.

Goyal is talking to Qatar Airways, which is interested in the Indian market, for a possible investment. But the effort may be futile, people close to the discussions said. “Qatar Airways would be interested in Jet only with Goyal as a minority investor, a pre-condition put forward by Etihad too,” said a source in the know, who did not want to be identified.

Qatar Airways, was trying to woo IndiGo and has previously expressed interest in buying a stake in Air India without its ground handling and engineering subsidiaries.

At INR 150 per share, Etihad’s 24% stake in Jet Airways will be valued at INR 400 crore.

The Abu Dhabi carrier’s 50.1% stake in Jet Privilege is estimated to be worth INR 1,000 crore. Jet Airways owns the remaining 49.9% in Jet Privilege that is to be pledged with banks to raise money. Etihad is the guarantor for Jet’s INR 1,000-crore loan from HSBC Dubai. Jet has defaulted on the first repayment of the loan. (Source: Economic Times)
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