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Jet Air in Stake Sale Talks With Etihad, India Official Says

Jet Airways (India) Ltd. (JETIN) is in talks to sell a stake to Etihad Airways, and SpiceJet Ltd. (SJET) is having similar discussions with AirAsia Bhd. (AIRA), a government official said, as India’s two largest listed carriers seek funds following a change in investment rules.

Jet Air may conclude a deal to sell a minority stake to Abu Dhabi’s Etihad in 45 days, said the official, who asked not to be identified citing rules. Discount carrier SpiceJet’s talks with AirAsia, the region’s biggest budget carrier, are at an early stage, the official told reporters today.

The two Indian airlines surged in Mumbai trading on speculation new investment may help them cut debts and pay for expansion. Kingfisher Airlines Ltd. (KAIR), which grounded flights last month amid a cash crunch, is also seeking to sell a stake after losses caused by high fuel taxes and price wars.

“Jet Airways can reduce its debt with the funds coming in, and SpiceJet needs investments for the aircraft it has ordered,” said Harsh Vardhan, chairman of Starair Consulting, which advises airlines. “They will also benefit from the international operations of the buyers.”

Shares Surge

Jet Air surged 11 percent to 560.85 rupees at close of trading in Mumbai. The carrier has more than tripled this year. SpiceJet jumped 13 percent, the most since July 30, to 44.40 rupees. Kingfisher Air rose 4.7 percent.

Ragini Chopra, a Jet spokeswoman, didn’t respond to four calls to her mobile phone. SpiceJet said in a statement that some foreign carriers and investors have shown interest in the carrier and it was “premature” to comment on the possibility of a stake sale, while Etihad declined to comment on the government official’s remarks.

“AirAsia rejects the speculation surrounding our possible expansion in India,” Tony Fernandes, Sepang Selangor, Malaysia- based carrier’s group chief executive officer, said in an e-mail statement. “AirAsia has not submitted a bid for the Indian budget carrier and has no intention of doing so.”

Jet Air Chief Commercial Officer Sudheer Raghavan and other executives are in Abu Dhabi for talks with Etihad, the Economic Times reported today, citing people it didn’t identify. The Mumbai-based airline said in a statement to the stock exchange it can’t comment on speculative reports.

A deal would let Jet Air tap the Gulf carrier’s global network and give Etihad greater access to rising travel demand in India, according to Binit Somaia at CAPA Centre for Aviation.

“Potentially it can be a win-win situation,” Somaia, a Sydney-based director at the consulting company, said by phone. “India is one of the fastest-growing markets in the world, which Etihad can’t ignore.”

Examining Opportunities

Etihad, the third-biggest Gulf carrier, said in October that it’s examining opportunities for investment in India after receiving approaches. Any purchase would be limited to a minority stake, Chief Executive Officer James Hogan said Oct. 16. The carrier has bought stakes in Virgin Australia Holdings Ltd. (VAH), Air Berlin Plc (AB1), Aer Lingus Group Plc and Air Seychelles Ltd. to help build Abu Dhabi into a global aviation hub.

India in September ended a ban on local airlines selling stakes to overseas operators to help them raise funds amid industrywide losses. The investments, which can be as big as 49 percent shareholdings, require approvals from authorities including the home ministry.

Jet Air plans to repay $600 million of debt in the year ending March 31 as it seeks to pare borrowing costs. Chairman Naresh Goyal also needs to reduce his holding in the company to 75 percent from about 80 percent by June to meet a rule capping founders’ holdings in companies.

‘Positive Move’

“It’s a very positive move for Jet Airways,” said A.K. Prabhakar, senior vice president at Anand Rathi Financial Services Ltd. in Mumbai. “For Etihad it makes sense to get their finger on the Indian pie through Jet.”

Kingfisher, controlled by liquor tycoon Vijay Mallya, last month halted operations and had its operating license subsequently suspended by India’s aviation regulator. The airline has been trying to raise funds for more than a year.

SpiceJet, India’s only publicly traded discount carrier, last week said it needs funds for expanding its fleet. The company is yet to decide on funding plans, S.L. Narayanan, chief financial officer of parent Sun Group, said Nov. 21.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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