The Indian government's investment promotion board's conditional nod to the proposed 24 percent stake-sale in Jet Airways to Abu Dhabi-based Etihad Airways is a positive step for the aviation industry, experts watching the sector opined Monday.
New Delhi: The Indian government's investment promotion board's conditional nod to the proposed 24 percent stake-sale in Jet Airways to Abu Dhabi-based Etihad Airways is a positive step for the aviation industry, experts watching the sector opined Monday.
"Good to see FIPB (Foreign Investment Promotion Board) clearing the Jet-Etihad deal, albeit with riders. The deal is important to Jet, which is facing significant financial challenges. The deal will also help the Indian civil aviation industry by enhancing capacity, increasing competition and bringing down airfares," said Amber Dubey, partner and head aerospace and defence at global consultancy firm KPMG.
The deal was cleared by the FIPB Monday. Now the deal will go to the Cabinet Committee on Economic Affairs (CCEA) for final approval.
"The step will instill confidence in the airlines industry in India. It particularly benefits both the partners and in general improves the prevailing investment climate in the country," said Rajiv Chib, associate director, PricewaterhouseCoopers.
Civil Aviation Minister Ajit Singh said: "The deal is good for passengers and the civil aviation sector. We require a lot of foreign investment in our infrastructure side. The deal will also reaffirm investor confidence in the India (growth) story."
The conditional approval by FIPB came after Jet Airways submitted an amended shareholding agreement to the finance and civil aviation ministries.
According to informed sources, the revised agreement was worked out after FIPB and stock market regulator Securities and Exchange Board of India (SEBI) and fair trade watchdog Competition Commission of India (CCI) raised concerns about the control and management of the company after the stake-sale.
The new agreement submitted by Jet Airways is said to have addressed control and management issues, with Etihad agreeing to have only two board of directors from an earlier proposed four in the 10-member airline board.
On June 14, FIPB had deferred a decision on approving the proposed stake-sale till the time Jet clarified on the issues raised by it.
The deal is expected to garner around Rs.2,058 crore (USD 379 million) for Jet Airways, which will enable the company to service its debts and provide passengers better connectivity.
Sharan Lillaney, aviation analyst at broking firm Angel Broking, told IANS that the deal will bring benefit Jet Airways as it will be able to grow its international business which constitutes 60 percent of its entire operations without adding any significant capacity and that it will also be able to grow its businesses in tier-II and III cities.
"It is a very positive move. Jet will gain alot if the deal gets through the cabinet as well. Apart from this other International airlines would also be looking at the situation which is developing here, as they would also be interested in investing in Indian carriers," Lillaney said.
The deal will allow passengers from 23 Indian cities to get direct international flights, while they can also avail the frequent flyer programmes of both airlines.
Lillaney added that Jet's scrip may witness a sharp upward movement in the coming days. Shares of Jet Airways at the Bombay Stock Exchange (BSE) Monday increased by 4.22 percent or 16.70 points and closed at Rs.412.20 from its previous close of Rs.395.50 Friday.
Jet Airway's scrip value had increased by 17.43 percent Friday at Rs.395.50.