By Prarthana Mitra
Etihad Airways on Thursday announced a financial restructuring and support plan for the Mumbai-headquartered Jet Airways, 24% of whose stake is owned by Etihad. The proposal approves an agreement which allows for Jet Privilege to pre-purchase discounted mileage redemption seats from Jet Airways, providing Jet with a windfall of $35 million.
What is the Etihad’s plan with Jet Privilege?
Etihad Airways which owns the majority stake in the programme confirmed the plan on Thursday, which involves a $35 million pre-deal payment directed at the domestic airline’s frequent flyer programme JPPL (Jet Privilege Private Ltd). Sources in the aviation industry in Abu Dhabi informed ANI that Etihad Airways greenlit JPPL. Spokespersons at Jet Airways later confirmed this, calling it a prepaid ticket purchase agreement under the normal course of business.
Preparation and reaction
Jet Airways informed lenders last month, of its decision to raise about Rs 3,500 crore over the next six months by divesting its stakes through the loyalty programme and via an infusion of fresh funds into the company. According to Mint, the airline also notified its investors that it will minimise costs by as much as Rs 2,000 crore over the next two years.
“JPPL (Jet Privilege Private Ltd) regularly purchases these tickets to offer its members against redemption of Miles hence the said transaction is no different and is done under normal course of Business between Jet Airways and JPPL,” the airline said.
Why was this necessary?
At a time when the domestic aviation sector rides the maelstrom of rising jet fuel prices, weakening rupee, and swelling operation costs, the effects have not left Jet Airways unscathed. That said, the airline has been facing stiff competition from a large number of budget airlines like Go Air, Indigo and Air Asia in recent times, as it operates on a comparatively higher cost model. Only time will tell if Etihad’s plan can end this period of turbulence for the domestic airline.
Prarthana Mitra is a staff writer at Qrius.
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