Etihad is currently in talks with the government of Seychelles to sell its stake in the flag carrier. The Abu Dhabi-based airline currently owns a 40% stake in Air Seychelles following a purchase deal in 2012. However, as Etihad shifts its strategy away from foreign airline investments, it is looking to exit its current position.

Divestment

Etihad Airways is currently in talks with Air Seychelles and the national government to divest its entire stake in the airline. The news came from Air Seychelles CEO Remco Althuis this week in a discussion with CAPA Live. The change would see the airline return to 100% ownership by the Seychelles government.

Air Seychelles was one of the many carriers to receive investments from Etihad in the early 2010s. The Middle Eastern giant was hoping to catch up to the likes of Emirates and Qatar by investing in a network of carriers across Europe, Asia, and Australia. However, this plan failed rather spectacularly, with several of the carriers going bankrupt in subsequent years.

After airline collapses and deep losses, Etihad is finally looking to wrap up its outstanding investments where possible. Air Seychelles has proven to be an opportunity, with CEO Remco Althuis saying,

"Etihad has been a very supportive shareholder in Air Seychelles for about nine years now. The shareholders are having conversation about basically the way forward, and it could very well mean that Air Seychelles will divest their shareholding, and then that the government of Seychelles will become 100% shareholder of the company."

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Happening now

Asked if the Etihad divestment is only being discussed or is actually in the works, Mr. Atthuis said, "It's being formalized as we speak. So it's happening right now." This signals that an agreement between the two sides is imminent and Air Seychelles will be fully nationalized in the coming months.

However, this is likely not an ideal deal for Etihad. The carrier spent $20 million for 40% in Air Seychelles and included a $25 million loan for further expansion. According to Economic Times, a regulatory filing suggests that the government is going to buy Etihad's stake "at a nominal value." This means that the airline is unlikely to make back the tens of millions it invested in the carrier.

The partnership between the two airlines allowed Air Seychelles to start flying to long-haul destinations using the A330-200. Destinations like Rome, Paris, and Hong Kong were suddenly on the route map for the island nation's flag carrier.

However, growing losses at Air Seychelles means that restructuring was desperately needed. According to Seychelles News Agency, the carrier owes over $38 million and is hoping for a government bailout to stay afloat. The airline also owes millions to Etihad itself, likely explaining the latter exiting its stake.

For now, Air Seychelles can be added to the list of Etihad investments that did not work out as well as once hoped.

What do you think about Etihad's decision to exit its stake? Let us know in the comments!