Too Sweet For Comfort

Too Sweet For Comfort

The Jet-Etihad deal hinged on bilateral concessions on flight rights and seats granted to Abu Dhabi. These have been increased to 36,470 seats between several points in India and Abu Dhabi. And Etihad will be controlling the seat allocations, up from 13,330 till before April 22^nd, 2013.

Etihad paid a 32% premium on the share value of Jet Airways to garner a 24% stake in it after the bilateral seat enhancement went through. These developments are subject to final Indian Government approvals of course, but the crucial requirement of seat enhancements has gone through.

 And then, there is the rumoured sweetener of $50 billion in promised infrastructure development investment from the sheikhdom. The Government of India may be in desperate barter mode now with its entire FDI programme trailing inward remittances from NRI’s and PIO’s at some 30 to 40%.

Certainly, like an eager suitor, it chose to act with great if uncharacteristic speed on its concessions on the strength of a none too specific promise. And  despite the reservations of several of its watch-dog and regulatory Government organisations.

But many wagging tongues are suggesting the bilaterals were rushed through to help Jet-Etihad consummate their over 2,000 crore FDI deal, which followed almost back to back with the Government’s announcements.

They cite the Aviation Minister’s huge enthusiasm for the matter supported by the Prime Minister himself. There have been vocal objections from several senior politicians from various Opposition parties who have all written to the Prime Minister in this regard.

And the Parliamentary Standing Committee along with the FIPB, SEBI and the Competition Commission think that Jet is now effectively a subsidiary of Abu Dhabi owned Etihad. This is via the fine print of its working memoranda and articles, the management controls, the use of Abu Dhabi as a hub, the three Etihad Directors to come on to the Jet Board etc. despite Etihad’s  minority stake at 24%.

The Aviation Minister Mr Ajit Singh tried to put a spin on the deal in the face of controversy. He said he would offer similar concessions in any bilateral that involved foreign airlines buying into Indian ones. The irony in this attempt to deflect and distract lies in the fact that till lately it was expressly banned by the GOI.

The Government has scuttled several attempts of foreign airlines setting up in India in collaboration with Indian corporates, most famously the Singapore Airlines/Tata deal in the nineties.

Jet has always been rumoured to be financed by entities from the UAE, via its management, namely Mr. Naresh Goyal, who ostensibly owns 51% of the airline. The Jet-Etihad deal at some 2,058 crores for that 24% share now is of a piece with that.

Talk of compromising India’s security via this deal however is a bit of a red herring, as is outrage at the deal affecting the fortunes of a chronic under-performer like Air India. It is only a formalisation of a covert reality of long standing, and planes flying in and out of the country, no matter whom they are owned by or belong to, are not the threat in any case.

But if Abu Dhabi chooses not put in the $50 billion into Indian infrastructure projects any time soon,  there is precious little we can do. And yes, Mr. Ajit Singh is right- we could do with more such deals to liven up our civil aviation space, especially when they pump in money into our existing players.

Air Asia along with the much thwarted Tata will soon be functional, and provide healthy competition on many of the routes it will fly. It plans not to fly in and out of Mumbai and Delhi at first. And it is not joining hands with any existing airline, at least at first. How Kingfisher must be longing for a relaunch. And who knows, perhaps the beleaguered Air India too.

(646  words)

July  4th, 2013

Gautam Mukherjee