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Jet-Etihad commercial pact under FIPB lens

July 24, 2013 09:11 IST

EtihadThe FIPB is scrutinising the agreement between Jet Airways and Etihad Airways to ensure control is not passed on to the Abu Dhabi-based airline

Ahead of a crucial meeting next week, the Foreign Investment Promotion Board is scrutinising the commercial cooperation agreement between Jet Airways and Etihad Airways to ensure control is not passed on to the Abu Dhabi-based airline.

On April 24, the two airlines had struck a deal, under which Etihad had agreed to buy a 24 per cent stake in Jet for about Rs 2,060 crore. FIPB, which is to take up the proposal for approval next Monday, has sought explanation on various clauses.

The airlines have already amended their shareholder agreement to address the concerns of the Securities and Exchange Board of India over transfer of control.

Earlier this month, FIPB wrote to Jet and Etihad on the commercial agreement. Both airlines have yet to respond.

“There are certain clauses in the agreement which may amount to passing control,” a source familiar with the development said.

Apart from shifting of Jet’s revenue management office to Abu Dhabi, the agreement allows Etihad to play an active role in the Indian airline’s aircraft acquisition and source senior management executives in that airline.

The airlines were considering a possible revision in the commercial agreement, too, the source added.

Jet and Etihad did not respond to Business Standard’s query on the issue.

FIPB’s move relates to the government’s foreign direct investment policy, amend last October to allow foreign airlines to invest up to 49 per cent in domestic ones.

The new rules clearly said permission would be given if the “substantial ownership and effective control is vested in Indian nationals”.

Aneesh Phadnis in Mumbai
Source: source image