Etihad reaches deal for rescue of Jet Airways

London, UK - Etihad Airways has agreed to lead a rescue of cashstrapped Jet Airways India Ltd in a move that will see the Abu Dhabi-based carrier double its stake to 49 per cent, according to television reports.

Etihad is in talks to lift its holding from the current 24 per cent, India’s BTVI channel reported on Monday, citing people familiar with the matter. CNBC-TV18 said that Jet Airways founder Naresh Goyal’s stake could drop to 20 per cent from 51 per cent, and that he’ll stand down as chairman.

Shares of Jet Airways closed 16 per cent higher in Mumbai, where it is based. The company ranks as India’s biggest full-service airline, but has failed to post a profit in nine of the past 11 fiscal years. Cash is running short as fare wars depress revenue and turbulent oil prices increase costs.

An increase in Etihad’s Jet Airways stake would come at a time when the Gulf carrier is cutting thousands of jobs and shrinking its fleet amid mounting losses from over-expansion and failed investments. India remains an attractive prospect because of the size of its travel market and the pace of growth.

Etihad said in an email that it does not comment on rumor or speculation.

Jet Airways didn’t immediately respond to requests for comment, though it said in a filing earlier that it had made no decision requiring a stock-market disclosure. People with knowledge of the matter said last week that the airline is seeking funds from investors including Etihad.

The deal, if it goes through, will give the third-biggest Mideast carrier more say over Jet Airways' operations and its day-to-day management, with Goyal’s voting rights capped at ten per cent, BTVI said. Indian regulations cap airline ownership by foreign operators at 49 per cent, and also prohibit them from taking control.

Etihad, which lost US$3.5bn over two years, last week scrapped orders for ten Airbus SE A320neo aircraft and revealed plans to cut 50 pilot posts this month.

Chief executive officer Tony Douglas has put the brakes on a costly bid to challenge bigger Gulf rivals Emirates and Qatar Airways, saying he’ll focused more on local needs rather than carrying passengers between continents.