Etihad Airways has looked at expansion for a long time and reported this week, it has identified two Indian airlines as potential targets for investment.
Etihad boss James Hogan wouldn’t be drawn on the names of the two airlines he’s been looking at, however all indications are going to be troubled Kingfisher Airlines who issued a statement saying it was in talks with the Gulf carrier. The other airlines could be its codeshare partner, India’s Jet Airways.
Etihad is keen to exploit India’s fast-growing aviation market after India opened the aviation sector to overseas investment for the first time in September of this year. “We’re looking at a couple of opportunities in India,” Mr Hogan said in an interview in Abu Dhabi on Tuesday. “We’re going through the due diligence at the moment. If we believe we can meet the criteria, we’ll then discuss that with our board.”
If any deal is done, it would be a minority stake, “we don’t want to take over someone’s airline,” he added. Owned by Abu Dhabi’s oil-rich government, Etihad last year bought a 29.2 per cent stake in Air Berlin and has also expanded its global network through three other equity stakes including a 10 per cent holding in Virgin Australia, a 40 per cent stake in Air Seychelles and 2.987 per cent in Aer Lingus.
India’s long-awaited liberalisation of its aviation investment policy was championed by Indian liquor baron Vijay Mallya, who longed to find a foreign partner to help save his popular but money-losing Kingfisher Airlines, which was founded in 2005, but never turned a profit.
A potential deal with Kingfisher Airlines, grounded since early October because of its severe financial problems, could help save the airline. The mere suggestion that Etihad could be interested in the currently non-operating airline sent the carrier’s shares on Tuesday up close to 5 per cent, the maximum daily limit.
“The company is in discussion with various investors, including Etihad Airways, for equity investments in the company,” Kingfisher said in a statement to the stock exchange. “However, no agreement has been reached either with Etihad or any other airline, and the matters are merely at negotiation stages.”
However, the Etihad chief said the carrier may opt not to buy a stake in any Indian airline at present. Most Indian airlines are under serious financial pressure, because of high local operating costs, including hefty taxes on jet fuel.
“We haven’t sat down and done a deal,” said Mr Hogan. “FDI is new to India, we need to understand what we can or can’t do.”