Etihad wants to buy Air India?

Etihad Airways, the struggling national carrier of the UAE, may have lost its balance sheet but not its appetite for investing in failed carriers. After burning its hands with Air Berlin, Alitalia, Air Seychelles and cutting down their premium products and many routes. They have had success with Jet Airways, but 9W has moved on making friends with KLM/Air France.

Etihad Airways now seems to be interested in buying another airline which has some toxic debt around it. That would be Air India!

Etihad Airways A320

Etihad is reportedly planning to bid for the debt-laden Air India group, which is up for sale, and has sent feelers to Reliance Anil Dhirubhai Ambani Group (R-ADAG), an erstwhile part of the most significant industrial conglomerate in India.

As per the Business-Standard,

Etihad is scouting for partners to form a consortium to bid for Air India and is in discussion with companies, including the Anil Ambani group

It is essential at this point of time to note what is at stake, and why this should not even be an option for Etihad Airways at the moment. They helped themselves into a $1.86 billion last year, and have climbed down from their 5-star service to become more mediocre off late as I hear.

On offer is a 76% percent stake in Air India, which comes with tonnes of bilateral rights and a young fleet of planes, but it is not like Etihad Airways will get it cheap. The successful bidder will have to take on $5 billion worth of debt, will have to live with a 24% stake held by the Government of India, and have to commit to holding on to the staff and can’t even change the brand name. So, it is not like it could become another Etihad Airways’ Regional.

Air India Boeing 777ER VT-ALV

Another potential bidder could be the Tata group, which could put down a bid along with a foreign partner. The Tatas already run two airline joint-ventures in India, one with Singapore Airlines as Vistara, and another with Air Asia as Air Asia India.

 

All of this comes after an already troubled sale process so far. IndiGo, the largest domestic carrier, announced their withdrawal from the contention last week, followed by Jet Airways. Etihad already has a 24% stake in Jet Airways, which it is expected to sell to recoup some losses made on other airlines, but no one knows a timeline.
I see this as a crazy, crazy move at the moment, but who am I but another ordinary bloke who claims to know a thing or two about aviation. However, here is my suggestion to Etihad Airways if they were listening. Please don’t do this. Focus on bringing back the premium of your carrier, rather than buying into another toxic one and demolishing your balance sheet further.
Moreover, if this ever happens, I can imagine Air India making in-flight announcements such as “Air India is proud to be a member of the Star Alliance and Etihad Airways Partners, and is operating this flight in association with…” The flight would be landing by then 😉
To my readers? What do you think of this intention of Etihad Airways? Love it? Hate it?

Comments

  1. As a JP Platinum member who needs to travel Etihad due to their relation with Jet, I hope this deal does not go through. Etihad ground-staff in Abu Dhabi treats Indians very badly. I have faced this many times (subtle ones) and then once faced a major issue and had to then write to the CEO’s desk before I got an apology for them. In fact once when I was at their desk in Abu Dhabi dealing with being involuntarily being bumped off there was a man next to me crying to put on board as his relative had died and he too had been bumped off in-transit and Etihad did not seem to care at all.

    This deal should not go through. It would be an insult to India and Air India.

  2. About 35% of EY’s US flights are occupied by Indian originating passengers- a large part of it was due to the 9w partnership. AZ and AB never quite gave them the same volumes.

    JET’s cash flow situation is less stressed then AB and AZ and it’s long term valuation prospects are way stronger. Operationally JET was the only investment for EY that somewhat worked and EY deaparately needs their feed to sustain practically all their US routes and quite a few of their European routes too.

    With JET forming a profit-sharig joint venture with delta and klm, their priority will be to route passengers through their joint venture rendering their code share alliance non existent for all practical purposes. Jet will probably soon cutback flights to AUH and hike up interline rates on it’s flights for EY passengers.

    An Air India stake therefore is not an investment opportunity for EY- it is critical to their survival.

    From a financial perspective I see your point. They can’t afford it and this is probably a last ditch effort by them to survive.

    I would hate to see this deal go through personally as it would essentially relegate AI to a regional carrier and would in any case have an uncertain future given EY’s finances.

    For me the best investor would be a Tata SIA consortium as their business model is grow AI as a national flag carrier.

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