Caught in a trap of its own making Etihad, has been left holding 49% of financially stressed JetAirways of India – indeed has had to increase its holdings to the legal maximum for a foreign airline. Etihad itself is restructuring and savagely cutting costs.
JetAirways hasn’t made a profit in 9 of the last 11 years, and Etihad started involving itself a few years ago as part of its Strategic Partnership Programme. In an effort to make it profitable, which has failed, Etihad has basically had to stump up yet more to bail it out, or lose the investment entirely. JetAirways was hovering close to bankruptcy.
India is a vital market for potential growth for Etihad – Abu Dhabi imports tens of thousands of Indian guest workers every year. Indeed without them the country couldn’t function properly.
The current “owner” of the airline Naresh Goyal, has been forced to reduce his holdings in JetAirways- allegedly to under 20%, with his voting rights limited to 10%.
JetAirways was established before the current rash of fast growing low cost airlines emerged, and existed in a far more protected environment that has changed drastically. It’s full service offering fares well against Air India, but it’s struggling in the new aviation market, and the speed of change has been difficult to keep up with.
Yet the saga isn’t over – it’s still up to Indian investors to find the rest of the cash to bail the airline out. It’s hoped Etihad’s investment will make it more likely.