Delta Allegedly In Talks To Buy A 24% Stake In Jet Airways

CNBC-TV18 is reporting that Delta is exploring the possibility of buying a stake in Jet Airways, one of India’s largest airlines. Delta is interested in a 24% stake, which they’d buy for just over 300 million USD.

Keep in mind that Etihad is also a 24% shareholder in Jet Airways, so it would be quite interesting for Delta to own part of an airline alongside one of the airlines that they believe is trying to destroy global aviation.

CNBC-TV18 reports that Delta would need Etihad’s permission to make the purchase, though I suspect Etihad would be on board with it, given that they don’t want to invest more money in Jet Airways, and they also know that Delta would be investing with the intent of getting an ROI. The one challenge they might face is that Etihad may not want Jet Airways to get too cozy with Delta, since Etihad presently uses Jet Airways to drive some traffic to Abu Dhabi for their US-bound flights.

Here’s the news clip about the takeover speculation:

Delta and Jet Airways introduced an expanded partnership last March, giving travelers more access to the Indian market. It’s a smart partnership, as Delta hasn’t been able to make money flying nonstop from the US to India, so through this partnership Jet Airways has expanded their service between Amsterdam and India. This allows Delta to provide the traffic from the US to Amsterdam, and then from there Jet Airways transports passengers to India.

Delta-Jet-Airways

As of now the airlines codeshare, and also allow reciprocal earning and redeeming of miles. The next logical step would be that they introduce a joint venture in the market, which would allow for full revenue sharing.

The two airlines could easily have a joint venture without Delta buying a stake in Jet Airways, though I suspect Delta’s motivation here is that they want more control over what goes on, and they’ll have that if they own almost a quarter of the airline.

At the same time, the airline has been struggling financially, and the Indian aviation market is tough, especially for the non-low cost carriers. This is a big challenge Delta would be taking on.

Bottom line

It’s logical that Delta and Jet Airways are expanding their cooperation, given how big the Indian aviation market is, and Delta’s lack of access to it otherwise. So while I was expecting a joint venture eventually, Delta’s investment in the airline takes it to the next level. I’ll be very curious to see what comes of this.

If this happens, it would likely mean that Jet Airways will cut ties with American, though I guess that may happen anyway. That’s unfortunate, since American AAdvantage lets you redeem miles for Jet Airways first class, while Delta SkyMiles doesn’t allow international first class redemptions.

What do you make of Delta investing in Jet Airways?

(Tip of the hat to @tazeef)

Comments

  1. I would rather like Jet flies back to US via AMS to EWR / Chicago / Houston. Their Mum flight and upcoming Bangalore AMS flight can both go to either of these destinations. This will give same service on all these big market sectors. Additionally Delta can connect via AMS / LHR to other US cities.

    Also if they can connect SFO / LAX via Hong Kong.

  2. “Etihad Airways Partners.” Hmmm I wonder how well that will go down with delta. Also, I thought delta was boycotting all those involved with the gulf carriers.

  3. This is quite interesting. Out of curiosity, is there any possibility that Etihad could be selling their share to Delta? Because, I don’t remember the source, but I read an article a few months ago about how Etihad was apparently unhappy about how the Jet management was treating them and that they were defying Etihad’s wishes or something to that tune. Don’t remember it exactly. But if so, it could solve the conflict of interest. And allow Etihad to focus a bit more in their heavily loss making airlines…

  4. Hopefully the final nudge for Jet to join Skyteam… more options to india would be great

  5. @lucky,
    What do you mean Delta doesn’t allow skymiles redemption for international first class? Could you clarify this? Thank u

  6. Not that surprising. A DL SVP, Vinay Dube, was just named Jet Airways CEO at the end of May so easy to see how this came together quickly.

  7. @ Endre — Delta miles just can’t be redeemed for international first class. While other alliances allow international first class redemptions across carriers, SkyTeam doesn’t, unfortunately. So the only time SkyTeam international first class redemptions are possible is when a contract is specifically negotiated between airlines, and that’s not something Delta has chosen to do.

  8. where’s that patriotic DL sales rep who has been saddened to tell customers DL no longer flies to India? (‘We are not expanding footprints via partnerships!!’)

  9. Delta can’t be doing too badly if they can sink $300 million into an airline. But the irony, even if Jet had the cash, they sure wouldn’t be allowed to sink 24% in a US carrier. Even to buy 10%, the regulation nightmare from the US government, would make it so not worth it.

  10. As everything today it is all about money. Delta would get in bed with Etihad if that makes sense to them even if they consider them enemies. It does not surprise me at all.

  11. It would be great if Delta shed its mindless opposition to Gulf carriers (except Saudia) and partner with Etihad, which already cooperates with Air France-KLM, Alitalia, Virgin Australia, and Jet Airways. Etihad would offer connectivity not just to India but to many other countries around Southern and Central Asia, the Middle East region, East and Southern Africa, and the Indian Ocean. There are all sorts of destinations that DL-AF-KL don’t serve, or serve only on a limited basis. Etihad would expand travel options.

  12. “If this happens, it would likely mean that Jet Airways will cut ties with American, though I guess that may happen anyway. That’s unfortunate, since American AAdvantage lets you redeem miles for Jet Airways first class, while Delta SkyMiles doesn’t allow international first class redemptions.”

    And it happened:

    AA has updated their site for Jet Air that miles earn and redeem only till end of year.

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