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How Jet Airways plans to become profitable

May 18, 2014 16:47 IST

Private carrier Jet Airways is re-working a comprehensive profitability plan sought by its foreign partner Etihad Airways, which completed a 24 per cent stake purchase in the Naresh Goyal-led carrier recently.

The development comes on the heels of the market regulator Sebi exempting the UAE carrier from making an open offer to the public shareholders of Jet.

Had Sebi insisted on making an open offer, Etihad would have automatically become the controlling partner of Jet with 50 per cent stake, which would have been 1 per cent more than what the sectoral FDI norms permit.

Reportedly, Etihad skirted open offer scare following which both partners reworked some of their JV terms.

"Etihad had sought a comprehensive plan from Jet on how it plans to achieve profitability during a recent meeting held in Abu Dhabi. The plan was almost ready. However, after the Sebi's ruling this plan is being reworked now," Jet Airways sources told PTI.

In a major relief for the carrier, the Sebi on May 8 had said the Abu Dhabi carrier need not make an open offer to Jet shareholders pursuant to the Rs 2,060-crore stake deal between them inked in April 2013.

Clearing the regulatory hurdles for the first FDI deal in the sector, Sebi had also ruled that Etihad "has not acquired control over Jet". The Sebi was forced to revisit the deal following reports that Etihad got more than what it paid for in Jet and that it was controlling the domestic carrier from behind.

The airline's recent cost-cutting measures are a part of the plan, sources said, adding "Etihad wants to ensure a good return on its investment in due time."

Attempts to reach Jet spokesperson did not yield any response.

Etihad had bought 24 per cent stake in Jet for Rs 2,060 crore, besides acquiring 50.1 per cent holding in its loyalty programme for $150 million, which a fortnight ago was hived off into a subsidiary as well as extended another $300 million soft loan to Jet.

The deal also involved Jet selling three of its premium flying slots at the London's HeathrowAirport for $70 million to Etihad.

For the December quarter of last fiscal, Jet had widened its losses to Rs 214.18 crore, up from Rs 91.12 crore in the year-ago period, while its income rose 24.60 per cent to Rs 3,022.83 crore. The airline is yet to announce its Q4 FY'14 numbers.

As part of the profitability drive "some flights from the non-metro routes are being taken off to add more aircraft in the international operations," sources said.

The airline has also pruned the budget across departments, besides the airline has already handed over pink slips to some of its employees in Delhi including loaders and security personnel recently, they said.

"Travel plans of most of the executives have also been cut and they have been told to undertake only when it is unavoidable," they added. 

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