Jet-Etihad deal not a win-win situation; PMO denies any rift between ministries

New Delhi: Even as controversy rages over the Jet Airways-Etihad deal, the UAE-based airline's 2,058 crore investment is likely to encourage other international airlines planning to invest in India. If the deal goes through, then the passengers will get benefit from Etihad's global network.

As the Jet-Etihad hub will be located in Abu Dhabi, passengers will have access to a number of new routes to cities on Africa, the USA and Europe. With Jet Airways getting access to low cost fuel, flying could become cheaper.

However, the deal also has some drawbacks as the investment will not come for free. Most of the new airlines will look to take a large chunk of traffic from India and domestic airlines will lose out. Air India will be adversely impacted as their key market remains the West Asia while Indian airports in Delhi run by GMR and Mumbai by GVK will have to wait longer to realise their dream of turning it into hubs for south-east Asia. The intense competition could also damage some of the Indian operators as Aviation Turbine Fuel.

Meanwhile, after reports of a wedge between the PM and four of his senior ministers, the Prime Minister's Office on Tuesday denied reports that the government was divided over India-UAE (Abu Dhabi) Bilateral Air Services Agreement on Jet Airways-Etihad and accused the media of spreading baseless and incorrect reports. "The allegations in some media are factually incorrect and baseless. There is absolutely no disagreement within the government or between the Ministers and Prime Minister on the matter. The Prime Minister is neither washing his hands off the Bilateral Air Services Agreement nor is the Prime Minister's Office trying to do a U-turn on the issue now," the PMO clarified on the matter.

The PMO said Bilateral Air Services Agreement and a Private Equity Stake proposal were two different matters. "There are two distinctly different matters being reported by the media. The first is the enhancement of seat entitlements under a Bilateral Air Services Agreement between India- Abu Dhabi," said the PMO.

Elaborating that they were two different deals, the PMO added that inter-government agreement on bilateral air traffic seat entitlements and concerns the governments of the two countries while the Jet-Eithad deal is a private agreement between two private entities. "Such agreements, as they involve foreign direct investment, have to be as per the laws of the land and any government policies in place in this regard. Being distinct issues and between different categories of entities, the two matters need to be handled separately without mixing them up," the statement added.

"As far as the Bilateral Air Services Agreement is concerned, the facts are simple. Changes in seat entitlements under Bilateral Air Services Agreements are normally entered into by the Ministry of Civil Aviation with its counterparts in other countries. These changes are done through an MOU and do not need approval at higher levels," it said.

Sources have told CNN-IBN that the PMO is wary of being dragged into another 2G-like controversy, more so since the number of bilateral weekly seats between Abu Dhabi and Delhi were dramatically increased from 13,330 to 36,370 just before deal.

Following the fresh concerns over the deal, Jet Airways' stock dropped as much as 6 per cent on Tuesday. The deal, largest foreign investment proposal in the aviation sector, is facing regulatory hurdles with various ministries raising major objections over the ultimate control of Jet Airways after the deal. An inter-ministerial group, headed by Finance Minister P Chidambaram had earlier flagged off three concerns on the deal. Concerns have been primarily raised on the proposed ownership and control structure of the domestic airlines.

However, Civil Aviation Minister Ajit Singh tried to play down the issue. He said the deal, if approved, will see the largest FDI in India. External Affairs Minister Salman Khurshid also sought to clarify that the deal has not been stopped yet. "It is a process before the FIPB. They have to approve any deal. It is being examined, no one has said that the deal has been stopped," he said.

Ajit Singh, who is in favour of Jet's planned 24 per cent stake sale to Etihad, said the Securities and Exchange Board of India (SEBI) and the Foreign Investment Promotion Board (FIPB) will be looking into issues surrounding the deal. "FIPB still has to give clearance. It hasn't come to government yet. Let's wait for the clearance. Government is following procedure on the deal" Ajit Singh said.