Pre Deal Scenario

Indian domestic carriers had reported a combined loss of US$ 1.6 billion dollars in
the year 2012-2013, more than 40% of which (January-March) listed in the last
quarter of listed companies. High oil prices and strong competition along with
hostile foreign exchange environment during the third quarter has worsened the
financial performance of the airline industry.
The increase in the costs of the airport to explained the sharp increase in passenger
fares. Starting May 2012, the economic regulation of airport charges India Delhi
airport increased 346% to $400 million, was expected to boost the airline's
operating costs. Other components of the costs for Indian Airlines industry is the
repair, maintenance and operation of the "services" at that time there were only
two MRO facilities in India, making the most of the operating and maintenance
activities which forced Indian firms to avail maintenance facilities at higher costs
abroad.
In
addition, regulatory barriers have
tightened the
aviation sector airlines
operating in the city's lucrative routes had to follow the unviable routes intended to link
the remote areas tier 2 cities precisely under the guidelines laid bv authorities. . Further,
any airline proposing international operations had to have a track record of
domestic operations of at least 5 years.
The concerns raised were followed by following actions for Indian private airlines
addressed as measures.
1. The first proposal to allow foreign companies to make strategic
investments (upto 49% stake) in Indian Airlines.
2. Proposal of the air company directly import ATF ( jet fuel).
3. The lifting of the freeze on the expansion of private aviation.
4. Help national airline However, these steps alone may not be
appropriate to address the underlying issues that affect the industry.
Jets perspective
In 2008, Etihads agreement for share of a code with Jet for European destinations
and other different cities was signed up to connect. The code share agreement for
Jet had rights to code share flights between India and Abu Dhabi and between Abu
Dhabi and Paris which was an indicator of ignition of value appropriation. The codesharing for etihad was available from Chennai, Delhi, Hyderabad, Kochi, Kozhikode,
Mumbai and Thiruvananthapuram in India. Together to share code in a Jet and
Etihad also has signed a contract to add frequent flyer programs of Jet. Etihad
intended 150 million dollars for JetPrivilege limited with the jet after the completion
of this transaction will be invested. Etihad handled up 50.1 percent and 49.9% for
Jet.
Jet was struggling with losses and is saddled with a debt burden of more than Rs
13,000 crore. The fresh flow of funds saved airline some Rs 230 crore in interest

costs annually, Etihad also invested $220 million in a frequent flyer programme and
slots at Heathrow airport, for $150 million to help Jet pare its high-cost debt.
Etihads perspective
Etihad had an aim of globalization on the world stage in a position to acquire shares
in the local airlines in India where it is expected that the their air travel will triple in
2021, one of the fastest growing aviation markets was a way to reach. Between the
UAE and India should increase three-fold in those places. Etihad, which has a fleet of
73 aircraft, flies to nine cities in India. But it can now access 23 cities, thanks to Jet.
It can also use the Jet connection to tap the huge international traffic going through
Dubai and route it through Abu Dhabi instead with a decent foothold in
South
Asian subcontinent.

A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can
arise from the flowing sources.

 Efficiency
1. Economies of scale: from access to more customers and markets Etihad and Jet Alliance on
a collective basis, to meet a large number of cities the combined fleet of 182
aircrafts, after investing, was said that t will fly to 140 destinations. Jet and
Etihad with respect to fuel, spare parts, etc were at an agreement for joint
procurement, increasing frequent flyers to 4.4 million along with revenue
growth by more than $ 8.3 billion.

Exploit another countrys resources in terms of labor, raw materials:

india is not only very strategically located in the asian sub continent but is also a very good
source to an educated and cheap labour with respect to aviation industry the country not only
offered etihad an English enabled engineering talent where as jet airways derived cost benefits
and synergies in the respective fields of joint training of pilots, cabin crew,
and engineers and consolidation of Jets loyalty programme

Operational flexibility that is the shift in production such as costs, exchange rates, changes
over time. in fleet acquisitions, maintenance, joint purchasing opportunities
for fuel, spare parts and insurance and technology support will come
through with exchange of various organizational practice and procedures
which was to be acquired by both the parties to plug their shortcomings

Strategic
- First mover advantage and only provider of a product to a market

Etihad is the first foreign entity taking advantage of the new FDI
policy, before any other airline make an impact it acquired by
having an access over 20 destinations in india moving over from 9
and increasing the passenger base to 32 mn fom 10 mn a more
than twofold jump.

Risk
- Diversify economic risks (business cycles not perfectly correlated among countries)
- jet not only got $ 600 million, will have access to cheap loans @ 3%
which will enable it to get rid of 13000 crore debt to an extent.

The equity infusion will allow Jet to pay down the debt & will lead t its
Debt-Equity falling to 4.3 times. It will result in int. Saving of Rs.190-200
crore per year.
Diversify operational risks was mitigated through organizational solutions devised but jet
and etihad with an agenda of process redesign by making organization structural changes

which resulted in improved communication, performance measurement and reward systems,

- Along with efficient Capital allocation and pricing.
learning
The stratergic alliance of jet etihad resulted in
creating a culture focused on the customer which not only gave an insight to a customer base with
different backgrounds also helped in , developing a rigorous strategic planning processf for
Crossover customers between markets in terms of reputation and brand identification on an
international footing.
The outcome

In the past nine months, the number of passengers the carrier Jet Airways rose 18%
y-o-y to 19.81 crore passengers on all routes, which works with a full service carrier.
Airlines traffic exchange code also increased by 86% y-o-y in the same period. In the
quarter ended December 31, the net profit of the company increased by Jet Airways
in 1510% y-o-y to R467 crore compared with R29 crore in the corresponding period.
Jet Airways jointly with Etihad Airways, now has the largest market share in indian
international level. Group Jet Airways currently operates a fleet of 116 aircraft,
which includes ERS Boeing 777-300, Airbus A330-200 / 300 and Boeing 737 and ATR
72-500 / 600