New Delhi: Two key cabinet ministers on Thursday threw their weight behind a likely deal in which Etihad Airways PJSC will buy a stake in Jet Airways (India) Ltd, moving the Mumbai-based airline closer to becoming the first Indian airline to attract investment from an overseas counterpart since a policy change in September.
Aviation minister Ajit Singh and commerce minister Anand Sharma, whose approval will be critical for the transaction to go ahead, supported the proposed deal after meeting Jet Airways chairman Naresh Goyal and a high-level delegation from Etihad Airways, including chief executive officer James Hogan.
Finance minister P. Chidambaram will be the third cabinet minister to meet the visiting Etihad delegation and Goyal on Friday. That will wrap up the high-level meetings the delegation had scheduled on its visit to India ahead of a potential investment, which has been held up because of Jet Airways’ complex shareholding structure.
Jet Airways’ shares jumped 4.34% to close at Rs.622.10 each on BSE on a day when the exchange’s benchmark Sensex fell 0.55% to 19,894.98 points.
Etihad, the national airline of the United Arab Emirates (UAE), is expected to buy a 24% stake in Jet Airways, India’s second largest airline by passengers flown, for $300 million (around Rs.1,600 crore today), Mint reported on 27 January, citing two people familiar with the development. Jet Airways needs the money to fund expansion and cut debt after several years of losses.
Jet is controlled from the Isle of Man tax haven through Goyal’s Tailwinds Pvt. Ltd. Tailwinds controls 80% of Jet Airways and is an overseas corporate body. As per the rules, Jet is, therefore, already more than 49% controlled by a foreign holding company, but it has been granted special exemption by the government.
In September, the government said overseas airlines would be allowed to acquire a stake of as much 49% in local airlines. Until the change was made, overseas airlines weren’t allowed to take advantage of the 49% foreign direct investment (FDI) limit.
Singh said he didn’t expect any hurdles in the way of Etihad picking up a stake in Jet Airways.
The minister said it was the government’s duty to ensure the deal was within the regulatory framework. Etihad raised some concerns, which he said were natural for any airline investing in a new country.
“Any foreign airline investing money has many concerns—what’s the policy, what’s the cost structure (so that) you make money out of that. They have been discussing this deal for over a month. Since the government allowed FDI (by airlines), talks have been going on,” Singh said. “But I don’t see any problems.”
The aviation minister avoided a question on state-run Air India’s opposition to deals with Gulf-based airlines on the ground that it would lead to leakage of revenue for Indian airlines and airports.
“Our concern is that the aviation sector should grow. Competition should grow,” Singh said.
After meeting the delegation, commerce minister Sharma released a statement saying he would be travelling to Abu Dhabi on 17-18 February for meeting a high-level UAE task force headed by Sheikh Hamed bin Zayed Al Nahyan, chairman of Etihad Airways.
“We have put in place an enabling policy and any investment under the policy is welcome,” Sharma said.
Mint reported on Thursday that Etihad may seek additional market access from India as part of the deal with Jet Airways, citing an aviation ministry official who didn’t want to be named. It was not clear if Etihad had sought additional access to India during the conversation with Sharma.