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Tuesday, July 17, 2018

With CCEA approval,runway clear for Jet-Etihad take off

Airline free to approach aviation ministry,DGCA for clearances.

Written by ENS Economic Bureau | New Delhi | Published: October 4, 2013 3:15:26 am

Clearing the decks for the biggest foreign investment in the country’s aviation sector,the Cabinet Committee on Economic Affairs (CCEA) Thursday gave its nod for Rs 2,058 crore stake sale deal between Jet Airways and Abu Dhabi-based Etihad Airways announced in April this year.

The deal should result in wider international connectivity for Indian flyers,especially those flying from tier-II cities,as Jet plans to offer international connectivity from 23 cities in the country through the Abu Dhabi hub.

The deal,entailing a 24 per cent stake sale by Jet to Etihad,was cleared by the Foreign Investment Promotion Board (FIPB) in July. “The Cabinet has cleared the deal. There are no regulatory concerns left,as all of it were addressed by the FIPB,” civil aviation minister Ajit Singh told reporters after the meeting.

The airline will now have to apply to the civil aviation ministry and the Directorate General of Civil Aviation for approvals. An approval from the Competition Commission of India,which is reviewing the deal,is also awaited.

As part of the deal,beyond the Rs 2,058 crore,Etihad is also expected to invest Rs 1,188 crore in the Indian carrier to strengthen the “wide-ranging partnership” between them.

Of this,the foreign carrier will pump in Rs 810 crore by way equity investment in Jet Airways’ frequent flyer program ‘Jet Privilege’ while the remaining Rs 378 crore has already been paid to Jet for three pairs of slots that it has at London’s Heathrow Airport under the ‘sale and lease back agreement’.

With the CCEA clearance,the Indian aviation sector will see the entry of a foreign airline in a little over 12 months after the government relaxed the sectoral foreign direct investment limits in September last year. Following the move,foreign carriers were permitted to own up to 49 per cent in Indian airlines.

After the initial announcement in April,the deal had hit an airpocket after the FIPB deferred the proposal in June citing concerns raised over the issue of ‘effective control’ in Jet Airways,especially over a proposal that aimed at the shifting of operations from Mumbai to Abu Dhabi.

A month later,the deal managed to get the FIPB approval,but only after the airline,in its revised set of pacts that restored the supremacy of the Jet board as the final authority and the chairman’s right to vote and veto powers were effectively restored.

The deal was then sent to the Cabinet for clearance,as every deal over Rs 1,200 crore requires Cabinet clearance even after the FIPB nod.

Deal Timeline

September 2012: Government relaxes FDI norms allowing foreign airlines to buy stake in Indian airlines; Jet and Etihad starts negotiations around the same time

April 2013: Jet announces to sell 24% to Etihad for R2,058 crore

June: FIPB did not clear the deal after concerns over effective ownership post the deal and change in place of business were raised

July : FIPB cleared the deal after all concerns were addressed

October: CCEA clears the deal; airline will now apply to the civil aviation ministry and DGCA for approvals

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