Policy

Foreign airlines can’t have management control over domestic carriers: DGCA

Ashwini Phadnis Shishir Sinha New Delhi | Updated on February 19, 2014 Published on February 19, 2014

The Jet-Etihad deal signed last year has come under the competition watchdog CCI and SEBI's scanner.

Decision comes after SEBI’s relook at Jet-Etihad deal



The Directorate General of Civil Aviation (DGCA) has mandated that no domestic scheduled passenger airline will enter into an agreement with foreign airlines or foreign investors which gives these foreign entities or others the right to control the management of the domestic operator on their behalf.

SEBI relook

This comes after the Securities and Exchange Board of India (SEBI), took a relook at the Jet-Etihad deal signed by the two airlines in April 2013.

There were rumours that after Jet Airways sold a minority stake to Abu Dhabi-based Etihad Airways, it was actually calling the shots in the running of an airline in India, despite being a minority shareholder.

The DGCA revised the Civil Aviation requirement for Grant of Permit to operate Scheduled Passenger Air Transport Services after SEBI served a notice to Etihad for allegedly violating the take-over code while acquiring a stake in Jet Airways.

SEBI’s stand came after the CCI, in its order of November 12, observed that Jet and Etihad had entered into a composite combination comprising an investment agreement (IA), a shareholders agreement (SHA) and the commercial cooperative agreement (CCA), with thecommon/ultimate objective of enhancing their airline business through joint initiatives.

The effect of these agreements including the governance structure envisaged in the “CCA establishes Etihad’s joint control over Jet, more particularly over the assets and operations of Jet,” the CCI had said.

New FDI norms

The Government had changed the Foreign Direct Investment norms late in 2012 allowing foreign airlines to acquire a stake of up to 49 per cent in domestic airlines.

In April last year, Jet Airways sold 24 per cent stake to Etihad for over ₹2,000 crore.

The deal ran into trouble almost immediately with questions being raised about control of the company shifting to Abu Dhabi, a point which Jet Airways denied.

Published on February 19, 2014
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