FDI takes off PDF Print E-mail
Tuesday, 30 July 2013 00:00
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If the deal is right, enough investors out there

With the FIPB finally clearing the Jet-Etihad deal with some riders, the stage is all set for the deal to go through, and Jet to receive R2,058 crore, making it the first deal since the government allowed foreign airlines to pick up a 49% stake in aviation firms in September 2012—till then, the law designed to protect local airlines, allowed only non-airline companies from overseas to invest in Indian airlines. While the deal will bring value to Jet which can write off debt and also get access to a steady source of revenues flying local passengers to Etihad’s global hub, it also paves the way for more such deals in the future. Qatar, Emirates and Gulf have already made clear their interest in more bilaterals—this is what clinched the Jet-Etihad deal. And while the government was quick to grant the UAE bilateral rights when it became clear the deal hinged on this, stock market regulator did well to put its foot down since Etihad had clear control of Jet even though the deal was structured in such a way as to avoid making the mandatory open offer.


Given the size of the UAE’s sovereign wealth fund ($627 billion) and the potential investments that could flow from here, the government did well to give the deal its blessings and, presumably, should more bilateral rights be given to Qatar, this will be linked to more supplies of natural gas from that country. With the increased competition that such deals will bring to the Indian skies, it will be interesting to see what the government plans to do with the ailing Air India. So far, the government has gone slow on awarding bilateral rights and in allowing private airlines to fly overseas as it was more interested in preserving the inefficient and overly unionised Air India whose pilots have always found it easy to get their way. It’s early days yet, and doing so would be politically suicidal in an election year, but at some point the possibility of bringing in foreign investment into Air India needs to be considered.


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