Shares of India's Jet Airways surged almost 20 per cent on Wednesday after Abu Dhabi-based Etihad paid $70 million to the Indian carrier for London landing slots.
The move by Etihad fuelled investor hopes that the Gulf carrier could be close to a long-anticipated deal to purchase a stake in the Indian airline.
Jet shares jumped almost 20 per cent to a day's high of Rs537.75 after Etihad confirmed that it has paid $70 million for the landing slots at London's Heathrow Airport.
This investment would bolster Jet's balance sheet and help lower its debt of $2.6 billion, analysts said.
Shares retraced marginally to Rs525 later in the day but were still up 17 per cent.
"The deal further strengthens the existing commercial relationship, which came into effect in 2008, making provision for code sharing between the two airlines," Etihad said in an emailed statement.
"Etihad Airways continues to progress discussions about further investment in Jet Airways."
The Gulf carrier has plans to pick up at least a 24 per cent stake in Jet, media reports have said. The two airlines have been in talks for nearly two months.
Jet is India's second-largest private carrier with a 25 per cent market share after low-cost, unlisted IndiGo.
Several Indian airlines have been in talks with foreign carriers after the government last year opened up the aviation sector further to allow non-Indian airlines to invest in their counterparts in the country.
Indian carriers need money to fund expansion and cut debt after years of losses caused by intense air-fare battles and rising fuel costs.
The Jet-Etihad development comes after Asia's biggest low-cost airline, AirAsia, last week announced plans for a no-frills carrier in the country with India's Tata group.
The AirAsia-Tata venture awaits government and regulatory approval.
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