Abu Dhabi’s Etihad set to buy Kingfisher stake - report

Gulf carrier said to be interested in purchasing 48 percent stake in grounded carrier for US$550.3m
By Claire Valdini
Tue 11 Dec 2012 11:22 AM

Abu Dhabi’s Etihad Airways is interested in purchasing a 48 percent stake in struggling Indian carrier Kingfisher Airlines, Mumbai Mirror reported.

Etihad, which recently confirmed it is in talks with a “couple” of Indian airlines, will apparently pay about INR30bn (US$550.3m) for the stake and is expected to announce a deal on December 18, the newspaper said, without citing where it got the information from.

The UAE carrier will initially purchase a 30 percent stake followed by a further 18 percent next August, the newspaper said.

In response Etihad said while it welcomed India’s decision to allow foreign investment in its carriers and had identified equity investments in other airlines as an “important evolution of its successful partnership strategy”, such investments will be made where it believes “the commercial prospects are strong, where there are like-minded business philosophies, and where such commitment will be welcomed”.

“If or when we do make further investments of this sort, we will announce them in line with regulatory and commercial requirements,” a spokesperson said.

India in September decided to allow foreign carriers to buy stakes of up to 40 percent in local airlines, a move widely seen as a lifeline for carriers battling stiff competition and high operating costs.

Kingfisher, chaired by the Indian entrepreneur Vijay Mallya, was once the country’s second-largest airline but it has not flown since October due to staff protests, safety concerns and deep financial problems. It is currently prohibited from flying and three quarters of its fleet has been repossessed by creditors.

Kingfisher's total debt is estimated to be around US$550m and in September analyst firm Centre for Asia-Pacific Aviation (CAPA) said the airline needed an immediate cash injection of US$600m, followed by an additional US$300m to US$400m over the next 18 months to stimulate future growth.

Aviation analysts said Etihad was unlikely to be interested in Kingfisher. “Given the current grounding of Kingfisher and no sign at all of any resumption of flights, this would be an epic case of throwing good money after bad,” said Saj Ahmad, chief analyst at London-based Strategic Aero Research.

“It is very unlikely for any airline to buy a stake in Kingfisher in its current state,” added Sharan Lillaney, aviation analyst at Indian-based Angel Broking.

Sources within the Indian government told local media in November that Etihad was in talks with Jet Airways, another Indian carrier, about acquiring a stake, although no deal has yet been confirmed.

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