The government Friday deferred a decision on approving the proposed stake-sale of 24 percent in Jet Airways to Abu Dhabi-based Etihad Airways.
The decision to defer approval for the deal by the Foreign Investment Promotion Board (FIPB) was confirmed by Economic Affairs Secretary Arvind Mayaram.
According to sources, the deferral for the Rs.2,058 crore deal came as capital market regulator Securities and Exchange Board of India (SEBI) and fair trade watchdog Competition Commission of India (CCI) sought clarity on some of the sticking issues of the deal like the number of Indian directors on board and the holding pattern of the merged entity.
Even some Parliament members have alleged that the government gave huge concession to Abu Dhabi by granting it 40,000 seat per week additional capacity as a quid-pro-quo to facilitate a private party deal.
The parliamentary panel on aviation chaired by CPI-M's Sitaram Yechury is said to be investigating the newly-assigned bilateral air agreement between India and Abu Dhabi.
Interestingly, the new bilateral air service agreement between India and Abu Dhabi was signed just hours after the announcement of the Jet-Etihad deal.
However, on May 24, 2013 Jet Airways' shareholders had approved the company's plans to offload 24 percent stake to Etihad Airways for around $379 million (Rs.2,058 crore).
The deal was ratified at an extraordinary meeting of Jet's shareholders held in Mumbai. That time the company had said that the preferential allotment of shares to Etihad was subject to the fulfilment of certain conditions, including approval of the FIPB and the CCI.
On April 24, nearly eight months after the Indian government permitted international airlines to invest in domestic passenger carriers, Jet Airways had announced a 24 percent stake sale to Etihad Airways. The two airlines were negotiating a Jet Airways' stake sale since last September. However, the deal was delayed due to investment protection and management control issues.
The deal is expected to garner around Rs.2,058 crore ($379 million) for Jet Airways, which will enable the company to service its debts and provide passengers with better connectivity.
The Indian domestic passenger carrier is under financial strain of a slowing economy and high aviation fuel taxes. The airline has reported a net loss of Rs.485.50 crore for the year ended March 31, 2013 as compared to net loss of Rs.1,236.10 crore in 2011-12.
The company's total income during the quarter under review had increased by 14.76 percent to Rs.17,403.17 crore from Rs.15,173.08 crore in 2011-12.
Jet Airways' scrip at the Bombay Stock Exchange (BSE) Friday increased by 8.47 percent or 36.65 points to Rs.469.20 per share from its previous close of Rs.432.55.
