New Delhi: India on Thursday approved Jet Airways (India) Ltd.’s plan to sell a 24 per cent stake to Etihad Airways, removing the last barrier to the $339 million deal.
The stake sale had been delayed for close to six months on concern from Indian regulators that Etihad would use its stake to gain control of the Indian airline.
India’s Cabinet Committee of Economic Affairs approved the deal late yesterday, a government official said.
A Jet spokeswoman declined to comment. Thomas Clarke, a spokesman for Etihad, didn’t respond to a phone call.
Speaking to television news channels, Civil Aviation Minister Ajit Singh said the deal is “good” for the civil aviation sector in India and for passengers. The cash injection from the Etihad deal could help bolster Jet’s balance sheet. The company has been hurt by a weakening rupee which has driven up Indian aviation fuel costs, which were already some of the highest in the world.
Jet posted a net loss of Rs3.55 billion ($58 million) in the three months ended June 30, compared with a profit of Rs247 million a year earlier.
In September last year, India allowed foreign airlines to own up to a 49% stake in Indian carriers. Foreign airlines were previously barred from investing in Indian airlines, as the government wanted to avoid foreign control of the strategic sector.
The Jet-Etihad deal ran afoul of Indian regulators who were concerned that Etihad would control management decisions even though it only held a minority stake.
The companies then changed the terms of the deal and reduced the number of board members from Etihad.
In July, India’s Foreign Investment Promotion Board approved the deal with some conditions.
Previously, a senior finance ministry official, who asked not to be named, had told The Wall Street Journal that some of the conditions were to ensure that the effective control of Jet remained with Naresh Goyal, the company’s founder and an Indian by nationality.
A clause in the agreement that would transfer portions of Jet’s management operations to Abu Dhabi from Mumbai was deleted, the official said.
Jet and Etihad also will have to seek approval from a government panel if they make any changes to their shareholder agreement in the future, the official had said. 03-10-13 1535GMT
