Jet Airways shares fall as Etihad deal hits 'air pocket'

NDTV Profit Desk

02 Jul 2013, 03:37 PM IST

Jet Airways shares closed lower on Tuesday on reports that Gulf carrier Etihad Airways' proposal to buy 24 per cent stake in India's second largest carrier has hit another stumbling block.

Sources have told NDTV that in mid-June an official in the Prime Minister's Office (PMO) wrote a letter to Civil Aviation Minister Ajit Singh stating that the PMO was not in favour of giving away additional seats to Abu Dhabhi, whose national carrier is Etihad.

Earlier in June, the Foreign Investment Promotion Board (FIPB) had deferred a decision on the Rs 2,058 crore ($370 million) deal. The regulator asked for more details on "effective control" and ownership of the Indian carrier post the stake sale.

Jet Airways shares pared losses after falling as much as 6 per cent to Rs 438 in early trades. The stock closed down at Rs 455.55, down 2.1 per cent on the Bombay Stock Exchange. The stock underperformed the broader BSE Sensex, which declined 0.6 per cent lower at the same time. (Track stock)

Mayuresh Joshi of Angel Broking told NDTV that the deal has hit an air pocket right now and this is being reflected in the stock price.

However, Mr Joshi was confident that the deal will go through.

Last month, Janta Party president and MP Subramanian Swamy had written to the Prime Minister alleging that the government of India agreed to give away 36,400 additional seats to Abu Dhabhi over the next three years only to facilitate the Jet-Etihad deal.

Mr Swamy called the bilateral deal a sweetener for the Jet-Etihad deal. Incidentally, both Jet-Etihad deal and the bilateral got concluded on the same day.

Jet Airways maintains that no special favours have been extended to them. A spokesperson for Jet Airways said last month, "It is unfortunate that these kind of baseless allegations are being levelled against the first successful FDI in the Aviation Sector."

The Etihad deal was seen as a big boost for Jet, which has been struggling under huge debt and interest costs burden. Etihad is the first overseas operator to invest in an Indian airline since ownership rules were relaxed last year.