Etihad invests $20m for stake in Air Seychelles

Etihad Airways has agreed to invest $20 million to acquire a 40 per cent stake in Air Seychelles.

Etihad Airways has agreed to invest US$20 million (Dh73.4m) to acquire a 40 per cent stake in Air Seychelles.

Etihad and the government of the Seychelles have signed a memorandum of understanding for the deal, which is part of a strategic partnership between Air Seychelles and the Abu Dhabi carrier, it was announced yesterday.

"The aviation industry is under enormous pressure right now, with small airlines especially vulnerable to global economic instability and continuing oil price volatility," said Joel Morgan, the Seychelles minister of home affairs, environment, transport and energy. "In this context, consolidation offers the best possible solution for Air Seychelles."

Air Seychelles has been struggling and this month stopped its flights to Paris, London, Rome and Milan, citing weak demand for its European services. The airline described these cuts as "part of its restructuring and repositioning process to turn into a regional airline".

The deal comes just over a month after Etihad announced it would pay $95m to increase its stake in Air Berlin to nearly 30 per cent, becoming the largest shareholder in Europe's sixth-largest airline.

Etihad's investment of $20m in Air Seychelles is to be matched by an equal capital injection from the government of Seychelles, according to a statement issued by the Abu Dhabi carrier and Air Seychelles.

Etihad is also providing a "shareholder's loan" of $25m "to meet working capital requirements and support network development".

"This deal is consistent with our approach to expansion, which relies on the strength of strategic partnerships across the globe," said James Hogan, the president and chief executive of Etihad.

"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 also includes the provision for a five-year management for Etihad to implement strategies to help the long-term growth of Air Seychelles.

Etihad will also seek to increase its flights between Abu Dhabi and Mahé to a daily service, as well as provide new services to the islands.

Etihad also said its Seattle to Abu Dhabi delivery flight of a Boeing 777-300ER which arrived on Tuesday, was the first in the Gulf to be operated using sustainable biofuel.

Meanwhile, it revealed plans to launch a scheme for members of its Etihad Guest loyalty programme that would allow them to convert their points into cash.