"(Potential deals taking shape) is impossible to comment on. Jet's deal with Etihad doesn't have any immediate relationship to what other carriers could get. Valuations will also depend on what will happen in the future; how they see the airlines growing and so on and so forth. However, foreign deals will not automatically bring in a lot of money to get over the financial problems of the Indian Aviation industry," adds Datta in an interview to CNBC-TV18.
Another issue one needs to focus on, according to Datta and aviation expert, R Krishnan is enhanced bilateral rights. Datta believes inking the deal based on bilateral rights is not a good idea as in the recent past the Indian aviation has complained about excess number of seats due to which traffic growth has slowed.
Jet Airways announced a deal with Abu Dhabi-based carrier Etihad Airways for Rs 2,060 crore (roughly USD 379 million) after months of negotiations. Jet has approved the allotment to Etihad of 27.3 million shares at Rs 754.74 each on a preferential basis.
Below is the edited transcript of Datta, Krishnan and Kanu Gohain, Ex-DGCA's interview to CNBC-TV18.
Q: What is your view on this deal, the fact that it has come in at very good valuations and going forward how it could impact the aviation sector?
Datta: It is a very good deal for Jet Airways because Jet will now be able to reduce their debt with the funds they get from Etihad and acquire new aircraft and so on. However, to ink the deal with additional bilateral right is something which should not be resorted to. The aviation industry has in the recent past complained about the excess number of seats in the Indian market and with the surplus capacity that has been operated, traffic growth has become slower.
Therefore, putting in additional seats will be even more difficult and we don't want to see a situation of shares dropping further to levels where airlines are not going to breakeven. It will have consequences not only for Jet and Etihad. It is important to know the plan that they implement and whether it is Abu Dhabi's half for Jet or India's half for Etihad. Also, it is important to know whether Etihad continues operating in the four-five points that they do. All these questions need answers and the pricing could become more difficult because if truly the capacity increases greatly, it is almost inevitable that the prices will drop and airlines will then be in difficulty. Not that they are not today but they will continue to have problems.
Q: What does the valuations tell you about the other impending deals that could get struck, do you see more players coming in on board into the Indian markets into other companies like SpiceJet etc and do you see any of that happening anytime soon within this calendar year itself?
Datta: That is an impossible question to answer because valuations that Jet has been able to get from Etihad for this 24 percent doesn't have any immediate relationship to what other carriers could get. Valuations will also depend on what is the future; what will happen in the future; how do they see the airlines growing and so on and so forth. However, foreign deals will not automatically bring in a lot of money to get over the financial problems of the Indian Aviation industry.
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