India red flags Jet Airways being piloted out of Abu Dhabi by Etihad Airways

“We have raised concerns over Jet Airways’ plan to shift key operational departments like network planning and others out of India over a period. This could eventually mean a change in place of business and we are not inclined to allow this,” said a senior civil aviation ministry official.

According to the agreement between the two airlines,Jet Airways will shift key departments such as network planning to Abu Dhabi after the deal. The plan is also to form a committee,which will be based out of Abu Dhabi,and will take key decisions on the functioning of the airline.

The other issue flagged by the civil aviation ministry was on differences between the proposal and the final agreement on the deal. “The proposal submitted to the Foreign Investment Promotion Board (FIPB) had specifically mentioned that two third members on the board of Jet Airways will be Indian nationals but the same thing is not mentioned in the final agreement submitted to us,” said the official,adding that these issues can be resolved. All these issues were raised by the civil aviation ministry in the FIPB meeting held on Friday that put the clearance of the deal on hold. The issue of effective control in the airline was also raised by the corporate affairs ministry in the same meeting.

“The corporate affairs ministry feels that Etihad is getting far higher control with just a 24 per cent stake and the effective management of the airline is also likely to shift to Etihad,” said the official. The issue of effective control of the airline,post the deal,had also been raised by the Sebi,which had expressed concern over Etihad’s rights to nominate three directors on the board and also decide senior management positions,including the position of the CEO,with simply a minority stake.

Jet-Etihad deal is the biggest deal in the Indian aviation sector after the government relaxed foreign direct investment norms in September last year. Jet Airways announced that it was selling 24 per cent of its equity to Abu Dhabi-based carrier for $370 million,Etihad in April. With a minority stake in the airline,Etihad gets to nominate three directors on the board. Jet Airways is to have four directors,while there will be seven independent directors.

COCKPIT CONCERNS

* The civil aviation ministry has raised concerns over Jet’s plan to shift key operational departments such as network planning out of India

* Jet,according to the agreement with Etihad,would also form a committee based in Abu Dhabi that would take key decisions

* The corporate affairs ministry feels Etihad is getting far higher control in lieu of its 24% stake