Jet-Etihad Airways deal challenged in Supreme Court
A petition has been filed before the Supreme Court to quash the approval of multi-crore Jet-Etihad deal. The basis for filing the petition is that it has been approved by bestowing assets in favour of foreign airline resulting in undue enrichment and pecuniary advantage. Secondly, the petition seeks CBI probe into the role of Ministry of Civil Aviation and Ministry of External Affairs in amending the bilateral Air Service Agreement which grants unprecedented increase in capacity entitlement to Etihad. On September 15, 2012, the Government of India permitted foreign airlines to invest in domestic airlines. Jet-Etihad was the most important deal in the pipeline, since the relaxation of FDI norms. In this transaction, Etihad airways will own 24% stake in Jet airlines but the effective control of the deal was to remain with the Indian entity. On July 29, 2013, FIPB gave its nod to the deal, but placed three riders (a) Indian law must prevail in case of any dispute between the two airlines; (b) Jet and Etihad must amend the Articles of Association to bring it in sync with the revised shareholders' agreement; and (c) Jet will seek Government approval before making any changes to the shareholders' agreement with Etihad or any change in the shareholding of the company. Jet's stake sale is approved by FIPB and all regulatory clearance was expected to be in place by September 20, 2013. The present petition has caused the deal to miss its September 20, 2013 deadline.
PSA View
The Jet-Etihad deal has been chaotic for its Article of Association, equity structure, NRI status of Naresh Goel etc. The deal was a life saver for Jet Airways with huge debt of Rs.13,282 crore in March 2012. Further, the entry of Etihad in India will transform Jet Airways into an international carrier. The much needed cash flow to the aviation sector will depend on the outcome of the petition. If progressed, deal will be a precedent for future transactions and remove road blocks to facilitate such business ventures.
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