Jet-Etihad deal gets conditional nod from FIPB

Three months after striking a multi-billion deal, Jet Airways and Abu Dhabi-based Etihad on Monday crossed its first hurdle on entering into a partnership with Foreign Investment Promotion Board (FIPB) giving conditional clearance for the sale of stakes.

An upbeat Civil Aviation Minister Ajit Singh dubbed concerns raised over the deal as “politically motivated”.

The Rs 2,058 crore deal will now go to the Cabinet Committee on Economic Affairs (CCEA) with officials saying it could even come up before the high-level ministerial body within a week.  
Singh and experts believe the deal will help infuse more energy into the otherwise beleaguered sector but detractors like CPI MP Gurudas Dasgupta told Deccan Herald that it will undermine public carrier Air India while dismissing talks of resurgence of the industry as “all bogus”.

Singh said the decision would bring back confidence of investors on India. He said the clearance is an "important step” for the civil aviation sector as the industry need money for infrastructure projects, which will come through FDI.

The nod for the sale of 24 per cent stakes in Jet Airways to Etihad came after a 90-minute meeting of FIPB chaired by Arvind Mayaram, Secretary of Department of Economic Affairs, which laid several conditions including Jet taking prior government permission for changes in Share Holders Agreement (SHA).

Other conditions include arbitration would have to be under Indian law and not English law as proposed in the revised SHA submitted by Jet-Etihad to FIPB. The Jet also has to submit Articles of Association to FIPB, which will over ride the SHA.

Also, Jet Chairman Naresh Goyal can now move a proposal without 3/4th majority. The revised SHA has also deleted the clause related to assigning revenue management network functions to Abu Dhabi.

"We have approved (the Jet-Etihad deal) with some conditions," Mayaram said. Civil Aviation Minister Ajit Singh said the deal will now go to the CCEA but that will happen when a Cabinet note is circulated by the Finance Ministry.

"The deal is good for the passengers and the aviation sector. We require a lot of foreign investment in our infrastructure side. The deal will also reaffirm investor confidence in the India (growth) story," Singh said.

To get approval, Etihad had also agreed to give Goyal the right to deliver casting vote on any matter and also make recommendations about suitable candidates for top positions as opposed to it getting the right to source senior management in the original agreement. There will, however, be no changes in the shareholding pattern with Goyal holding 51 per cent, Etihad 24 per cent and the rest with others.