Etihad to acquire 40% stake in Air Seychelles

Etihad Airways A330. By Rob Finlayson

Etihad Airways (EY) will acquire a 40% stake in Air Seychelles (HM) for $20 million as part of a strategic partnership alliance initiative between the two airlines. The alliance includes a codeshare agreement, the integration of the carriers’ frequent flyer programs and a five-year management contract for EY.

Under the terms, the Seychelles government will inject $20 million into HM. EY will also provide a shareholders’ loan of $25 million to meet working capital requirements and support network development. EY will increase frequencies between Abu Dhabi and Mahe from 4X-weekly to daily. 

“This is a game-changing strategic partnership for us, establishing Air Seychelles on a sustainable growth trajectory and offering a realistic way forward for long-term commercial growth,” said Seychelles minister of home affairs, environment, transport and energy Joel Morgan. “The aviation industry is under enormous pressure right now, with small airlines especially vulnerable to global economic instability and ongoing oil price volatility. In this context, consolidation offers the best possible solution for Air Seychelles.”

EY president and CEO James Hogan said the deal is “consistent with our approach to expansion, which relies on the strength of strategic partnerships across the globe. The investment in the national carrier of Seychelles is a natural next step towards growing our operations in the increasingly important leisure markets of the Indian Ocean and Africa.”

The agreement is EY’s second equity investment, following its December 2011 announcement that it would increase its stake in Air Berlin (AB) to 29.21% (ATW Daily News, Dec. 20, 2011). Competition authorities in Austria and Germany approved EY’s investment in AB earlier this month.

HM last year appointed former Kenya Airways COO Bram Steller as its new CEO (ATW Daily News, Sept. 28, 2011). The carrier suspended Singapore services at the end of November and ended European operations to Paris, London, Rome and Milan Jan. 10 (ATW Daily News, Dec. 8, 2011).