Etihad Airways, the national airline of theUnited Arab Emirates, and the Government of Seychelles have signed a Memorandum of Understanding wherein Etihad will invest to acquire a 40% stake in Air Seychelles Ltd as part of a strategic partnership alliance initiative between Air Seychelles and Etihad Airways.

The deal was announced today by Joel Morgan, Seychelles Minister of Home Affairs, Environment, Transport and Energy and James Hogan, President and Chief Executive Officer of Etihad Airways.

Etihad Airways’ investment of USD 20 million will be matched by an equal capital injection from the Government of Seychelles. In addition, Etihad Airways will also provide a shareholder’s loan of USD 25 million to meet working capital requirements and support network development.

Mr Morgan said: “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. The partnership simultaneously provides international presence, strategic penetration and a bright future for our national carrier.”

Mr Hogan said: “This 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 Seychelles is a renowned leisure destination and its tourism industry is surging, as indicated by record-setting visitor numbers for the island nation in 2011. The integration of the networks will give Air Seychelles greater opportunity to tap into key tourism feeder markets across Europe – such as Germany, France, Italy and the UK – where Etihad Airways’ presence is strong and growing.”

The agreement, which is the first of its kind in Africa, makes for provision for a five-year management contract for Etihad Airways which will see the implementation of strategic measures to encourage Air Seychelles’ long-term commercial growth.

Under the partnership:

• Etihad Airways will seek to increase frequency of flights between Abu Dhabi and Mahé from four per week to daily, as well as providing new services to the islands;
• Etihad Airways will work in conjunction with Air Seychelles to develop a renewed fleet and network growth plan for the island-based carrier;
• The airlines will sign a comprehensive codeshare agreement to include Etihad Airways-marketed flights across Air Seychelles’ network and Air Seychelles-marketed flights to Abu Dhabi and Etihad Airways destinations across Europe, the Middle East, the GCC, Asia and Australia.
• Etihad Guest and Seychelles Bonus, the airlines’ frequent flyer programs, will be integrated to include mileage earning and redemption on each other’s flights.

This agreement is Etihad Airways’ second equity investment, following its December 2011 announcement that it would increase its stake in AirBerlin to 29.21 per cent, making it the single biggest shareholder inEurope’s sixth largest airline.