Abu Dhabi 'offered $50bn deal for India traffic rights'

Deal for three-fold increase in traffic rights came two days before Etihad-Jet acquisition - report
Aviation, plane take off, aeroplane generic, airplane generic, airport, plane, airplane, aeroplane
By Daniel Shane
Thu 04 Jul 2013 08:16 AM

Abu Dhabi promised the Indian government up to $50bn worth of infrastructure investment in the coming years as part of a deal to secure additional airline traffic rights into the country, it has been reported.

In April the UAE capital reached an agreement with Indian authorities to increase capacity bilaterally from their current 13,330 seats per week to 50,000 seats per week over the next three years.

The announcement came just two days before a deal for Abu Dhabi-based Etihad Airways to acquire a 24 percent stake in India’s Jet Airways for $379m.

An anonymous senior official in the Indian government said that during negotiations in April Abu Dhabi offered to investment $50bn in the Subcontinent’s cash-starved infrastructure as part of the deal.

"A host of issues are considered when two countries discuss any increase in bilateral agreements. In this case, a commitment to invest $50 billion in the infrastructure sector of the country by Abu Dhabi was a key reason for us to agree to the increase," they told Indian Express, following a meeting of senior government officials this week.

That meeting had been called to discuss some MPs opposition to the traffic rights deal, Indian Express said, which some in the government could harm the country’s state-run carrier Air India.

India has only recently opened its domestic aviation sector to overseas investment, with a change in regulations late last year for the first time permitting foreign carriers to buy up to 49 percent in local airlines.

Civil Aviation Minister Ajit Singh is one of those who fervently supports the Etihad-Jet deal. "It is such an important deal... the first big deal in civil aviation ministry. In terms of FDI, it is bigger than any other deal this year. There are so many dimensions to it. Those opposing the deal are long on politics and short on facts," he was quoted as saying.

India’s Foreign Investment Promotion Board last month deferred a decision on the Etihad-Jet deal as it seeks further clarity on the implications it has on control and ownership of Jet.

The Securities and Exchange Board of India and Competition Commission of India have also sought more clarity on the deal to ensure the Abu Dhabi airline’s control over Jet is in proportion to its 24 percent stake.

Since the acquisition was announced, Jet CEOP Nikos Kardassis has resigned to be replaced by ex Air New Zealand boss Gary Kenneth Toomey.

Etihad has also reportedly been seeking to oust the wife of Jet owner Naresh Goyal from the carrier’s board.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.