By Daniel Shane
First example of FDI into Indian aviation yet to get nod from regulators
The head of Jet Airways has said that he expects the Indian carrier’s sale of a 24 percent equity stake to Abu Dhabi’s Etihad Airways to be approved “within the next few months”.
Etihad announced in April that it would pay $379m for the stake in the indebted carrier, and will also be making a $150m investment into Jet’s frequent flyer programme, as well as $70m for three pairs of its London Heathrow slots.
The deal was the first example of foreign direct investment by an overseas airline into India’s struggling aviation sector following a long-awaited change in legislation earlier this year. However, India’s Foreign Promotion Board in June deferred its approval of the agreement as it sought more details on how much control Etihad would hold over Jet’s management.
Jet’s stake sale is also yet to secure green lights from India’s capital market’s regulator and the country’s cabinet.
“All these investments into your airline, however, are subject to obtaining the requisite regulatory and corporate approvals and ﬁnal commercial agreements, which is expected to be completed within the next few months,” wrote chairman Nayesh Goyal in Jet’s annual financial report.
Jet has called its annual shareholder meeting for August 8, where it will seek permission from shareholders to raise its borrowing limit to $4.2bn.
The Etihad-Jet deal has been surrounded in controversy in India since it was announced three months ago. Simultaneously, India and Abu Dhabi signed a bilateral traffic rights agreements that would increase by three-fold Etihad’s passenger capacity on Indian routes.
In a letter to the Indian Prime Minister and Central Vigilance Commission, MP Nishikant Dubey claimed that four government ministers colluded to clear “in haste” the bilateral traffic agreement in order to speed up the Jet-Etihad deal. Jet, owned by tycoon Nayesh Goyal, was about $1.5bn in debt prior to the acquisition and in desperate need of new funding.
Dubay also alleged the Director General for Civil Aviation (DGCA) discretely made a number of key changes to codes governing Indian aviation, that in turn paved the way for the sale of Jet.