Changing Dynamics of the Indian Civil Aviation Industry: Jet-Etihad Strategic Alliance

Changing Dynamics of the Indian Civil Aviation Industry: Jet-Etihad Strategic Alliance
Case Code: BSTR436
Case Length: 14 Pages
Period: 2012-2013
Pub Date: 2013
Teaching Note: Not Available
Price: Rs.400
Organization: Jet Airways, Etihad Airways
Industry: Aviation
Countries: India; Middle East; Global
Themes: Strategic Alliances, Joint Ventures, Macro-Environmental Analysis, Industry Analysis
Changing Dynamics of the Indian Civil Aviation Industry: Jet-Etihad Strategic Alliance
Abstract Case Intro 1 Case Intro 2 Excerpts

On July 2, 2013, the share price of Jet Airways (Jet), India's second largest airline both in terms of market share and passengers carried, fell by 6 percent in early trades on reports that the strategic alliance between Jet and Etihad Airways (Etihad), the national carrier of the United Arab Emirates (UAE), had been delayed because of regulatory issues. Analysts expected the deal to get further delayed as the two companies still had to negotiate more regulatory hurdles. The deal was announced on April 24, 2013, after several rounds of negotiations held over the previous six months.

According to the deal, Etihad would take a 24 percent stake in Jet for US$379 million. As part of the deal, both airlines would gradually expand their operations as well as introduce new routes between India and Abu Dhabi. The deal was expected to benefit both the airlines in terms of wider network, better distribution, revenue growth, and cost savings. Etihad's strategic investment was expected to strengthen Jet's financial position. Moreover, Jet would benefit from Etihad's global network and be able to establish a Gulf gateway in Abu Dhabi for its flights to the US, Europe, Africa, and the Middle East. For its part, Etihad would also be able to tap India's rapidly growing aviation market through Jet's connectivity across the country. "We are pleased to have reached this significant stage in India with Jet Airways and are certain the partnership will bring significant benefits and opportunities for global growth to both airlines. We look forward to collaborating with Jet Airways and constructively working together with them and their stakeholders to build a sustainable, competitive, and profitable airline," said James Hogan (Hogan), CEO, Etihad Airways.

Subject to regulatory approval, the deal would be the first investment of an overseas airline in an existing Indian airline since India relaxed its FDI (Foreign Direct Investment) norms in September 2012. According to Kapil Kaul, Head of the Center for Asia Pacific Aviation (CAPA) in India, "It's a game-changing opportunity for Etihad, and a game-changing opportunity for India. Over the last couple of years we have got into what I call self-inflicted challenges that Indian aviation brings to itself. This gives an opportunity, a window for the world to look at India differently." ...

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