India’s aviation ministry is concerned that Jet Airways (India) Ltd.’s deal to sell a stake to Etihad Airways PJSC may result in the nation’s biggest publicly-traded carrier losing some overseas flying rights, a government official familiar with the matter said.
Countries including the U.S. and the U.K. may not treat Jet as an Indian carrier for granting flying rights if Abu Dhabi-based Etihad gets operational control, said the official, who asked not to be named citing rules. The ministry has conveyed to the nation’s Foreign Investment Promotion Board its concern over the deal’s potential impact on the flying rights, the official said in New Delhi today.
The FIPB will consider on July 29 Jet’s agreement to sell its 24 percent stake to Etihad, the first overseas investment in an Indian carrier after the government eased aviation rules in September. The agency last month deferred a decision on the deal, as authorities sought more details about the control and ownership of the Mumbai-based carrier after the stake sale.
Jet fell as much as 5.1 percent to 337.50 rupees and changed hands at 339 rupees as of 2:48 p.m. in Mumbai trading. The stock has declined 39 percent this year, compared with a 2.3 percent gain for the benchmark S&P BSE Sensex.
Ragini Chopra, a Jet spokeswoman, didn’t immediately respond to a call and text message to her mobile phone seeking comment. Rupert Hugh-Jones, a spokesman at Etihad, also didn’t immediately respond to e-mailed questions from Bloomberg News.
Jet’s accord in April to raise 20.6 billion rupees ($349 million) from selling a stake to Etihad may win approvals from Indian authorities if the companies address the questions over the transfer of effective control, the official said.
Jet, controlled by Chairman Naresh Goyal, is due to announce first-quarter earnings Aug. 8, according to an exchange filing. The carrier hasn’t posted an annual profit in the six years through March and had a net debt of 80 billion rupees, according to data compiled by Bloomberg.
The airline is seeking to sell its stake to Etihad to raise funds for fleet expansion and to pare debt. India has eased aviation investment rules, allowing foreign carriers to own as much as a 49 percent stake in local airlines.