Air links between the Gulf and India are set to improve following Etihad’s deal to take a 24 per cent share in India’s Jet Airways.
The £248 million deal, which is subject to shareholder approval, comes seven months after the Indian government relaxed restrictions on foreign investment in its airlines.
Foreign carriers are now permitted to buy stakes of up to 49 per cent in India’s airlines and Etihad, which is based in the United Arab Emirates, is the first overseas investor to take advantage of the less stringent legislation.
The announcement follows mounting speculation that Etihad would invest in the loss-making Jet Airways and comes two months after the Gulf carrier purchased the latter’s slots at Heathrow Airport for £45 million.
The three pairs of slots will be leased back to the Indian carrier, which will continue to operate its London services.
The acquisition adds to recent Etihad investments in airlines including Air Berlin, Air Seychelles and Aer Lingus.
Earlier this month, Etihad CEO James Hogan claimed that legacy airline alliances have outlived their welcome. Etihad is not aligned with any alliance.
During a speech at the International Aviation Club in Washington DC, he said: “The traditional airline alliances have evolved into slow-to-respond, bureaucratic organisations which struggle to deliver added value to their member airlines, many of which are no longer compatible with each other.
“If we look at the consolidation currently occurring throughout the airline industry, we are seeing more fragmentation within the alliances. This is going to continue as members seek ways to operate profitably in a very competitive environment with high fuel costs and generally slower global economic growth.”
No Indian airline has yet joined one of the three main alliances. Until now, it was rumoured that Jet Airways might link with Star but the Etihad deal would appear to make that less certain.