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Jet-Etihad Deal: Good news for aviation and for economy

The infusion of $379 million by Abu Dhabi-based Etihad Airways in Jet Airways, India’s largest private airline , is good news on multiple counts. The proposed deal is a tangible benefit of the government’s policy reform announced last September easing ownership rules to allow foreign carriers to own up to 49% in local airlines.
It signals an overall improvement in the country’s investment climate.
The present tie-up comes in the wake of a joint venture between Air Asia and the Tatas for a new lowcost airline that was proposed and has received the government’s permission. Greater investment in Indian civil aviation will mean good news for passengers. Foreign carriers can offer expertise, connectivity and convenience, besides funds.
At the same time, these developments mean more intense competition among Indian carriers, at a time when they show some signs of emerging from the red. The worst affected would be Air India, whose ridiculously high debt-equity ratio virtually cripples its financial performance .
A way has to be found to convert debt into equity and put the airline under professional management, insulated from the owner, the government. Another issue is accessing new capital. Banks, bitten by Kingfisher, would be twice shy. Indigo might be able to go public successfully . Others would need to engineer new sources. A little help from the government will not be amiss.
Source: Economic Times

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