Monday, April 15, 2019

Etihad Group Faces Another Failure As India's Jet Airways Collapses

India’s Jet Airways is undergoing a spectacular collapse and even last-minute financing might not be enough to get the airline back in the air. It's looking like another failure for Etihad Group, which has tried to buy its way into closed markets by taking stakes in a number of struggling airlines.
The growth of low-cost competition in India, a rise in fuel prices and an unfavorable exchange rate contributed to the $1.2 billion debt that the airline faces today.

The crisis at Jet Airways has been allowed to go on too long, says aviation industry analyst Thomas Jaeger, CEO of ch-aviation GmbH.

“It is quite unusual that airlines are allowed to carry on operating for such a long time despite not paying salaries, loans, and dues with public bodies,” he says. “The Indian market has been very competitive for many years with a much higher than worldwide average market share of low-cost carriers, and the Gulf carriers’ capacity and more competitive hubs in Dubai and Doha, for example, making the competitive landscape a tough one to operate in for a full service carrier like Jet Airways.”
Through his flight distribution business, Jetair, Naresh Goyal, founder of Jet Airways, is reportedly working with Future Trend Capital, Delaware and London-based Adi Partners to save the airline.
Etihad Aviation Group, which currently holds 24% of Jet Airways, has hesitated to increase its stake and failed to reach terms for additional financial support. Etihad had wanted Goyal to cede control of the airline, which Goyal agreed to in March of this year. However, the situation has only worsened and Jet Airways is still waiting for a rescue package.
“There have been board conflicts between Etihad and Naresh Goyal, with arguments over who runs Jet Airways and makes which decision, which is also similar to what happened at other carriers,” Jaeger says.
Etihad's influence on these partners, Jaeger says, has not always been positive in part because the objective of the investment has been to strengthen Etihad and its base in Abu Dhabi. “[Etihad] did invest in Jet Airways with the intent of buying feed for its global air hub ambitions in Abu Dhabi, and feeding that hub was not necessarily in Jet’s best interest,” Jaeger says.
15/04/19 Marisa Garcia/Forbes
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