by Devesh Agarwal
The 24% stake sale by India’s Jet Airways to Abu Dhabi’s Etihad Airways has been finally cleared by India’s Foreign Investment Promotion Board (FIPB), albeit with conditions, after the share holder agreement (SHA) was changed to incorporate the apprehensions of the government of India.
One of the conditions imposed by the FIBP requires prior Government approval before making any changes in SHA. The revised SHA also calls for arbitration under Indian law and not English law as earlier proposed.
The Jet Airways board of directors will have 12 members. Promoter Naresh Goyal with 51% shareholding, post the sale, will have four representatives. Etihad which has less than half of Goyal’s holding, 24%, will have two with the right to nominate the Vice Chairman, and there will be six independent directors, all Indians. As Chairman Goyal will also have veto power, though one has to see how he will use it.
A revised Commercial Cooperation Agreement (CCA) has also been submitted and approved, as it says the principal place of business would be Mumbai. Plans for shifting, operations, revenue, and network functions to Abu Dhabi have been scrapped.
Jet has already sold its London Heathrow slots to Etihad to realise desperately needed cash to lower ballooning debt levels. You can also read our initial analysis of the deal. You can also read a quick recap of the Jetihad deal time-line here.
The Jetihad deal still needs three more approvals. The Competition Commission of India (CCI) which is examining the deal, since the CCA calls for Jet to terminate existing code-share and partnership agreements on routes operated by Etihad.
Following the CCI, the deal will go to the Cabinet Committee on Economic Affairs (CCEA) since it involves a foreign direct investment (FDI) of more than 1,200 crore. After which the deal will come to the ministry of civil aviation for approval under the Aircraft Rules, 1937.