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http://blogs.wsj.com/dealjournalindia/2012/06/28/emirates-may-invest-in-indian-carrier/

Emirates May Invest in Indian Carrier

June 28, 2012

Emirates Airline may consider investing in an Indian carrier — even a loss-making one — but only if it gets management control, a senior executive said, showing some positive sentiment for the troubled sector and an economy that’s losing favor with foreign investors.

The comments from the Dubai-based carrier come at a time when global economic uncertainty as well as growth concerns in India are making foreign investors cautious. In the aviation sector, investors are worried also because of a multitude of regulations and high taxes on jet fuel.

Manny · Member Joined: 10 Feb 2007 Posts: 292

Perfect example of having your cake and eating it too.

Jaysit · Member Joined: 19 Dec 2006 Posts: 4346

Well, at least they KNOW how to run an airline.

iah87 · Member Joined: 17 Apr 2007 Posts: 2566

Even for Emirates, Kinfisher is a tall order, especially with its mountain of debt, they probably can look at Spicejet or GoAir.

Aseem · Member Joined: 15 Dec 2006 Posts: 2841 Location: YYZ

ameya · Posted: Fri Jun 29, 2012 10:33 am Post subject:

They would certainly look at a Spicejet or Go Air and make it like fly dubai. May be even SG and have synergies in terms of purchase orders because of fleet commonality.

jasepl · Member Joined: 26 Jul 2008 Posts: 4257 Location: bund-bay

banerjee1000 · Member Joined: 07 Jul 2012 Posts: 65 Location: Delhi,India

Probably the only one who can buy around 60% stakes in Kingfisher.
And LH is the next in the race.

yrkn · Member Joined: 22 May 2012 Posts: 12 Location: NY

All those jokes about EK being the national carrier of India wont be jokes anymore.

Need some decision makes that work towards the benefit of Indians and India

bob · Member Joined: 22 Jul 2007 Posts: 173 Location: bom

Middle East airlines, India is one of the biggest market for transit passenger . There are three major carrier with hub ..

- Emirates (EK)….. Dubai …. . Full Service ….. 2011 Indian transit passenger > 26 Lacs
- Etihad …(EY)…Abu Dhabi … Full Service …. 2011 Indian Transit passenger 4-5 laces
- Qatar (QR) Doha Full Service ….. 2011 Indian transit passenger 4-5 laces ..

Emirates … is well established and has maximum number of bi lateral flights ( well managed ) more than 180 flights weeks / > 14 destination . This is much higher than other two potential middle east competitor . This is also reflects in huge difference in no of transit passenger from Dubai hub . With new assertive bi lateral policy EY and QA are not likely to have free run to increase their operation to meet EK challenge .

EK and QR will try to challenge EK to make their HUB viable for potential fleet expansion . The only option with both of them to take stake in Indian carrier who can feed pan India market to their hub .through Indian carrier bi lateral quota .. EK will also try to move and acquire Indian carrier to maintain their dominant position ( by their bi lateral and Indian carrier bilateral ) and reduce any potential challenge from EK and QR .

All of them are full service airline and branded premium full service airlines and they will tie up with Indian carrier who can support their premium brand .They are well capitalized ,access to cheap capital , large expansion plan and major buyers of equipment . Their investment will be not only restricted to financial investment but fit into their global business plan .

Out of three EY is most aggressive in market who is building of web of acquisition in different geographical reason to increase its reach . Recently it has taken stake 30 % in Airberlin, 40 % Air Seychelles , 3 % Air lingus and 10 % Virgin Australia .. This holding also give strong bargaining power with airframe / engine and other equipment manufacturer .With Mubadala ( EY parent company ) holding in ADAT , SRT give very aggressive cost advantage in .. Heavy maintenance , Engine maintenance , component maintenance , operation and maintenance training cost ) .

Out of the three full service airlines in India- 9W , AI and IT ,With 9W more than 60 % revenue from international traffic does not fit into EY plan. This leave IT which meets to very close to EY premium brand full service and available for sale with very low valuation

There is lot of talk about mounting debt of IT and why someone invest in IT . IT has very strong customer service brand , Quality on in flight service ( in good old days ) was best among international carrier . It had largest spread in India .Its EBITDA is still one of the highest in Indian List airlines . They key problem ( apart from management issue etc ) under capitalization and large debt which require large interest service close to Rs 1300 cror a year .Other big issue was A320 V2500 engine support which really started down fall of airline from 2009 , when large no of failure resulted in quick reduction on A320 fleet and cascading affecting of loss in market share mounting bill which pushed it into spiral downfall ..

With EY access to funds it will be very easy to EY to re negotiate loans with lender who will be more than happy to take hair cut once they see cash on table . there is large outstanding with vendors ( please note airframe / engine equipment vendors outstanding is much higher that airport / oil company etc which keeps popping up in news paper ) which more than happy to re negotiate their outstanding ( with large hair cut ) as they can not afford to lose EY and its holding clout on their current order book and future programme. Along with ADAT , V2500 Engine shop , SRT they can drastically reduce aircraft operating cost. With access to cash airline can be quickly refurbished and bring to old premium standard with pan India network . This combination will give good competition to other domestic carrier . There is also structure available with 49 % holding investor can have management control directly and in directly which will be key requirement of any potential investor

No wonder there is strong lobby to delay change in FDI rule .. from domestic as well as International players …….
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Mig

Nimish · Posted: Sun Jul 22, 2012 12:51 am Post subject:

^^ Thanks for that writeup - very useful. Looked at from that perspective, it does seem logical to assume that EY would be interested in picking up cheap stake in IT - the huge list of debts notwithstanding!
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We miss you Nalini!