BackEtihad, Jet get deal approval from India’s competition regulator
This was the last hurdle for Jet Airways as the Indian cabinet had cleared the deal on 4 October
Premium
Mumbai: The Competition Commission of India (CCI) on Tuesday cleared the ₹ 2,058 crore Jet-Etihad deal that involves Abu Dhabi-based Etihad Airways PJSC buying a stake in Jet Airways (India) Ltd, the first such investment since the government allowed foreign airlines to invest in their Indian counterparts.
The cabinet had cleared the deal on 4 October and the competition body’s approval, which was expected, will mean the deal will now be fully operational.
Indeed, Etihad has already started making some changes in the management of Jet.
“CCI approval was a formality and deal was operational on ground even without this approval. Expect no further challenges and deal will be formally operational," said Kapil Kaul of the Capa Centre for Aviation, a consulting firm.
The anti-trust regulator in its order said that it is granting the present approval “pursuant to the underlying competition assessment, based upon the information/details provided" by the companies.
“This approval should not be construed as immunity in any manner from subsequent proceedings before the Commission for violations of other provisions of the Act. It is incumbent upon the parties to ensure that this ex-ante approval does not lead to ex-post violation of the provision of the Act," CCI said in its order.
In April, Etihad Airways agreed to buy a 24% stake in Jet Airways after the government relaxed rules in September 2012 and allowed foreign airlines to own as much as 49% of local airlines. The Foreign Investment Promotion Board (FIPB) on 29 July approved the transaction with certain riders.
The investment will allow Jet to expand its fleet and pare debt after posting a combined loss of ₹ 2,806 crore in the past seven fiscal years because of high fuel costs and competition from low-fare airlines.
In an attempt to sweeten the deal, India also signed, just ahead of the deal between the two airlines, a new bilateral agreement with Abu Dhabi, increasing the number of seats between India and the UAE almost fourfold to 50,000 seats over a period of three years, from 13,330 currently. The deal was opposed by other Indian airlines and Indian airports on the grounds that it would make Abu Dhabi a hub for flying in and out of India.
Etihad Airways had also committed the injection of $220 million in Jet Airways referring to money paid to Jet for slots at Heathrow Airport, London, and payment for a majority stake in its frequent flier programme.
“The approval will help Jet Airways to get funds from Etihad Airways by the way of equity infusion. This will help the airline repay high cost debt (and replace them with) cheaper loans. The benefits of synergies in terms of network and costs will start impacting the numbers positively in the next few quarters," said a senior Jet Airways executive, who spoke on the condition of anonymity.
Jet Airways had long-term debt of ₹ 9,134 crore on its books as on 30 September.
The Naresh Goyal-promoted airline reported a record quarterly loss of ₹ 891.01 crore in the three months ended 30 September after it was buffeted by a steep fall in the value of the local currency, poor demand and intense competition that led to sharp fare cuts.
Jet’s consolidated loss for the quarter was higher at ₹ 998.51 crore with its low-fare airline JetLite (India) Ltd losing ₹ 107.5 crore. This was the third straight quarterly loss for the country’s second-largest airline by passengers carried.
Earlier last month, the Supreme Court refused to stay the Jet-Etihad deal on a petition filed by Bharatiya Janata Party leader Subramanian Swamy. The court issued notices seeking clarification to the aviation ministry, FIPB, the commerce ministry and the two airlines on the deal.
Through his public interest litigation, Swamy sought the quashing of the Jet-Etihad Airways deal and an investigation into the bilateral seat-sharing agreement signed between India and the UAE.
The aviation ministry is yet to file its responses.
Aman Malik in New Delhi contributed to this story.
.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
