New Delhi: India's cabinet cleared the
Rs.2,058 crore deal by Abu Dhabi's
Etihad Airways P.J.S.C. to buy a stake in
Jet Airways (India) Ltd, the first such investment since the government eased ownership rules for foreign airlines.
The proposal has been approved by the cabinet, aviation minister
Ajit Singh told reporters in New Delhi.
In April, Etihad had agreed to buy a 24% stake in
Jet Airways after the government relaxed rules in September 2012 to allow foreign airlines to own as much as 49% of local carriers. The Foreign Investment Promotion Board, or FIPB, on 29 July approved the transaction with certain riders.
The investment will allow Jet to expand its fleet and pare debt after posting a combined loss of Rs.2,806 crore in the past seven fiscal years because of high fuel costs and competition from low-fare airlines.
The investment will usher in a new era for the
Naresh Goyal-controlled Jet Airways, said
Kapil Kaul, South Asia chief executive of consulting firm Centre for Aviation, or CAPA.
"The JV (joint venture) is already operational with a new CEO in charge and supported by a large team across all departments from
Etihad. The next target for the CEO is to finalize the new business plan," he said. "A new order is expected at the top. Jet is now moving to a more professional and organized structure and a new era begins. Sorting out their domestic business is key to me."
The cabinet clearance was the last major hurdle for Jet Airways. It still has to win approval from antitrust regulator Competition Commission of India.
Also,
Subramanian Swamy, a leader of the main opposition Bharatiya Janata Party, has filed a petition in Delhi high court seeking scrapping of the Jet-Etihad deal. The petition is expected to be heard this fortnight.
According to the revised shareholders and investor agreement with Etihad,
Anita Goyal, executive vice-president (network planning and revenue management) at Jet, will be replaced by
Abdulrahman Albusaidy, group executive officer of the airline. Anita Goyal, wife of Jet's founder and chairman Naresh Goyal, will be an adviser to new CEO
Gary Kenneth Toomey.
According to the new agreement, Jet Airways will have 12 board members—four nominees of Jet Airways, two nominees of Etihad and six independent directors.
The original plan was to have seven independent directors, four Jet nominees and three Etihad nominees, taking the total board members to 14.
Jet Airways and Etihad Airways will have a joint team to manage the global operations and revenue management for flights going via Abu Dhabi, said a person close to the development, requesting anonymity.
"The domestic operations of Jet Airways and international operations that (are) not connected through Abu Dhabi would be managed independently by Jet Airways. Etihad Airways would be handling its own international operations independently. The ultimate management will rest with respective airline management," he said.
Reuters contributed to this story.
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