Companies & Sectors
Jet-Etihad deal: Chronicle of coincidental collusions

The deal was finalised only after receiving appropriate ministerial push. Here is the chronology of how Jet pulled it off. Incidentally, well before the FDI limit in airlines was raised, the major shareholder in Jet was Isle of Man based Tailwinds

The deal between Naresh Goyal-led Jet Airways and Etihad Airways, the national airline of the United Arab Emirates (UAE), and the signing of the bilateral between India and Abu Dhabi comprises chain of events taking place one after another. The “smooth and automatic” flow of events makes one wonder whether these incidents were mere coincidence or part of collusion.


It all started on 14 September 2012 with the Cabinet Committee on Economic Affairs (CCEA) approving the proposal from the Department of Industrial Policy and Promotion (DIPP) to permit foreign airlines to invest up to 49% in scheduled and non-scheduled air transport services in India.


During January 2000 to April 2012, total foreign direct investment (FDI) inflows into the air transport sector were $434.75 million, constituting only 0.25% of the total FDI inflows in India.


Interestingly, the move to allow 49% FDI in airlines was looked upon more at facilitating the ailing and debt-ridden Kingfisher Airlines. In fact, the Vijay Mallya-led carrier was the first to initiate talks with Etihad. But by that time, Kingfisher was merely surviving on hopes. After scaling down the fleet, in October 2012 Kingfisher finally decided to cease operations. This gave a chance for Naresh Goyal, a non-resident Indian (NRI) to push for the deal between Jet and Etihad. It also opened up opportunity for SpiceJet, which was rumoured to be in talks with Malaysian carrier AirAsia and UAE’s Qatar Airways. However, there is not much progress on SpiceJet’s deal.


In January 2013, officials from both Jet and Etihad met Ajit Singh and Anand Sharma, minister for commerce and industries. After the meeting, Singh confirmed that both the carriers were negotiating a stake purchase deal.


On 1st February, the board of Jet Airways approved stake sale to Etihad and was expected to finalise the deal within a week. However, it did not materialise as expected. Even as both the carriers were negotiating the deal, on 27th February, Etihad paid $70 million to buy Jet's slots at London's Heathrow Airport, said a report from Reuters. Etihad was quoted in the report as saying that the deal to buy slots was a part of a “sale and lease-back” agreement, and Jet would continue to operate flights to London using those slots.


It is important to note that initially the Jet Airways deal was to be consummated and concluded on the 28 February 2013. This had been announced much earlier by Jet and Etihad themselves. At that time, the chairman of Etihad—a member of the ruling family—stated that all the requirements of Etihad and Abu Dhabi had not been fulfilled and hence Etihad’s investment in Jet was yet to be concluded.


DGCA swings into action

On the next day, i.e. on 1 March 2013, the Director General of Civil Aviation (DGCA) issued fresh guidelines as approved by the ministry of civil aviation. Clearly, the changes made in the 2008 guidelines were aimed to facilitate the deal between Jet and Etihad. Here are the modifications made in the guidelines...


2008 - Clause 1.7 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline shall not have agreements such as shareholders agreements, etc. with a foreign airline, containing provisions/arrangements empowering such foreign airlines or others on their behalf to have effective control in the management of the domestic airline”.


1 March 2013 - this was deleted.


2008 - Clause 1.8 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline shall not enter into an agreement with a foreign airline which may give such foreign airline the right to interfere in the management of the domestic operator.”


1 March 2013 - replaced by Clause 1.5 that states “A Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline other than those who have FDI by foreign airlines shall not enter into an agreement with a foreign airline, which may give such foreign airline, the right to interfere in the management of the domestic operator”.


It is evident from the above change that a foreign carrier, through its investment in a domestic operator, can now interfere with the management of the Indian carrier. These changes in guidelines are in total contradiction to the policy, which mandates the effective control in the hands of an Indian shareholder. It is therefore obvious as to why this clause has been diluted and the clause earlier referred to namely, Clause 1.7 has been delegated—the reason to dilute the definition of effective control.


In order to facilitate Jet in receiving the consideration of $300 million through a soft loan at 3% the guidelines were required to be changed. 


2008 - Clause 1.9 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline may enter into financial arrangements with a bank and/or other financial institutions for the purpose of lease-finance, hire-purchase or other loan arrangements, but such a tie-up shall not be permitted with a foreign airline”.


1 March 2013 - Clause 1.6 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline may enter into financial arrangements with a bank and/or other financial institutions including foreign airline for the purpose of lease-finance, higher purchase or other loan arrangements”.


The bilateral and sealing the deal

The 48-hours between 22nd and 24 April 2013 are most crucial in finalising the Jet-Etihad deal. On 22nd April “under the direction of the Prime Minister” the Cabinet Committee approved the signing of the grant of 40,000 additional bilateral seat rights per week to Abu Dhabi. However, the prime minister's office in a note issued on 13 June 2013 clarified that “the decisions were not taken under the direction of the Prime Minister”.


In short, 22nd April was the most crucial day at the government level. It was on the same day, Ajit Singh convinced PM Manmohan Singh to urgently clear the bilateral deal between India and Abu Dhabi. Prime Minister Singh then directed finance minister P Chidambaram to hold a meeting with Ajit Singh, Anand Sharma, and Salman Khurshid, minister of external affairs. This meeting was held on 22 April 2013 itself.


Immediately after this meeting, Chidambaram along with the other three ministers and Shivshankar Menon, National Security Advisor and Pulok Chatterji, principal secretary, met the PM. This time, the PM raised some issues about the bilateral. However, Ajit Singh and other ministers assured the PM that all these concerns were considered while arriving at the enhancement.


“The finance minister and external affairs minister were in agreement with and endorsed the views of the other ministers. On the basis of the above, it was agreed to give an ‘in principle’ go-ahead to the negotiating team as per the formulations (40,000 seats per week),” the note from the PMO says.


Although PM Singh directed the matter to be brought before the Cabinet for a decision before operationalizing any agreements, on 24th April, the bilateral was signed.


Immediately after signing the bilateral (thus granting 40,000 additional bilateral seat rights per week to Abu Dhabi), Etihad and Jet finalised their stake purchase deal. As per the proposal, Jet Airways would sell 24% stake to Etihad for about Rs2,058 crore.


It is therefore, obvious that the consideration to be received or received by Jet Airways was clearly linked and co-related to the value of the bilateral that Abu Dhabi was receiving along with its investment in carrier. The sole beneficiary of the largesse of this bilateral deal was Naresh Goyal and not India as the government wants us to believe.


This is because the Jet founder controls about 80% stake in the carrier through his 100% ownership in Tail Winds. Earlier in May, Tailwinds, an Isle of Man registered entity sold 2.51 crore shares in Jet to Goyal at Rs570 per share. This was done because Tailwinds cannot trade shares of an Indian company with another foreign company. However, Goyal can sell his personal stake to anyone.


As of 7 June 2013, Naresh Goyal holds 65.99% while Tailwinds hold 9.01% in Jet Airways. Another promoter group, Anita Naresh Goyal holds just 1,000 shares. All three promoters or promoter group entity hold 75% stake in the carrier, as per BSE.

This is interesting because among the promoter group entities, only those 1,000 shares held by Anita Naresh Goyal, wife of the Jet founder, are shown as from Indian promoter. The rest are owned by foreign promoters, Goyal and Tailwinds. This is also an example of how rules and regulations are being interpreted to facilitate “mutual interests”.

As per the law, foreign companies can hold maximum 49% stake in a domestic carrier. This was permitted in September 2012. However, even on March 2013, Tailwinds, a foreign registered entity, was holding 79.99% stake in Jet Airways. This was way above the stipulated 49% limit of FDI. However, neither the ministry of civil aviation nor any other regulator seems to be bothered by this.


According to the company’s Articles of Association, the bulk of Goyal’s shares in Tailwinds are held on behalf of several other individuals who all seem to be resident citizens of India. While Indian government officials have been satisfied that these arrangements do not compromise Jet Airways’ status as an Indian-owned airline that is effectively controlled by Indian citizens, they were viewed as ‘problematic’ by the American authorities.


Earlier, it took Jet Airways more than two years to get the necessary clearances from US authorities to fly to the US. The US State Department gave permission to proceed on 15 November 2006. The more serious allegation that delayed Jet Airways being permitted to fly to the US focused on its opaque ownership structure as well as its alleged links to organised crime in India and abroad. Jet was originally set up as a subsidiary of Tailwinds, an Isle of Man-based holding company designed as a tax shelter, whose sole shareholder was Goyal, the airline’s NRI founder and chairman.


Even today, Goyal, termed as an NRI, holds nearly 66% stake. He may not be a resident Indian but he is not foreign shareholder either. Classic Indian situation where anything goes!


Reported by: Yogesh Sapkale

Read More

Jet-Etihad deal: Handing over benefits to Abu Dhabi on a platter

Jet-Etihad deal: What are the Parliamentary Standing Committee, FIPB, SEBI and CCI worried about?

Jet-Etihad deal: What happened in those 48-hours?



Sonia Jaspal

3 years ago

Thanks for highlighting these list of coincidences between Govt actions and owners of Jet-Etihad. It seriously shows how far govt is willing to twist the law to accommodate a few. Airlines FDI restriction was purported to be for national security. Now I would assume that is also a salable and a risk worth taking.


ashwin bahl

3 years ago

A small country like Qatar flies to the following destinations in India daily, most of the time to its 100 per cent capacity and also doing a very good job of it :
Doha to Kolkotta. Mumbai, Ahmedabad, Amritsar, Goa, Hyderabad, Kozhikode, Trivandrum, Chennai, Bangalore, with 11 flights a week to Cochin and double daily to the capital Delhi.
Where the heck are our proud Indian carriers ? Where is there presence ? Why this sordid state of affairs ?Are we not capable to get the market share ? Or we do not want to because of red tape and domestic policies ? Or the aim of private carriers is that once they are established then it is time to re sell it to foreign carriers at a premium ????



In Reply to ashwin bahl 3 years ago

Thanks for your comment.
Request you to read to know the truth about Indian aviation sector.


3 years ago

The Indian Civil Aviation house of cards began to collapse when excess capacity was purchased from Boeing for Air India (together with unnecessary aircraft for the IAF)to curry favour with the US. This smothered an industry that is delicate at the best of the times.

All banks defy RBI circular on disclosing all service charges on their websites

The master circular of the Reserve Bank of India dated 2 July 2012 states that it is imperative that the customers are made aware of the service charges upfront. But according to our analysis at least 20 banks do not disclose

During an ongoing research on bank charges, we discovered that banks are merrily flouting a directive by the Reserve Bank of India to disclose all charges on their websites. Not a single bank out of a sample of 20 (foreign, national and private banks), disclosed the complete list of basic banking service charges that a consumer would be charged during his day-to-day banking activities. Some of the charges found missing were charges for issue of a duplicate pass book, account closure, ECS return, cheque book reorder, annual fee for debit card, DD charges, NEFT, SMS alerts. Even minimum balance requirement and charges for non-maintenance of average monthly balance, which are basic charges applicable to savings bank accounts, were not available on a number of bank websites, including India’s biggest, State Bank of India and among the oldest foreign bank, Citibank.


Banks such as Yes Bank and Bank of India have not even disclosed charges such as number of free transactions at other bank ATMs in India and replacement of damaged debit cards. Over the past month, almost all banks have begun to charge for SMS alerts on transactions. Yet Standard Chartered, Union Bank of India, HSBC and IDBI Bank have not disclosed these charges on their websites.


RBI’s master circular expresses; “The need  for displaying the charges in the notice board at the branch and advertising in newspapers, so as to disseminate information to the customers/public, in addition to display on the website”


Banks need to consider options of carrying out a one-time publicity of the service charges so that all customers are made aware of the charges, states the circular.


Yet, the majority of the banks failed to upload the service charges on their website leaving the customers guessing.


Moreover, when Moneylife mailed the concerned authorities at these banks requesting them to disclose the missing charges, the majority of them have yet not replied.


At a time when consumers are increasingly complaining about reasonableness of bank charges this just adds to the misery of the average customer.


Will the RBI still remain silent on such issues? In the past, Moneylife had raised various such issues such as Banks start charging money for SMS alerts, mobile banking , Cartelisation, not competition, decides banking service charges. Moneylife Foundation also conducted an Open House session with the Deputy Governor Dr KC Chakrabarty to discuss various issues including bank charges. You can watch it here



Narottam Ganpat Keer

3 years ago

Narottam Keer (Retired Bank Manager)

I have same experience with HDFC Bank Ghansoli Br. While starting bank in Ghansoli, promised to offer good service and no hidden charges, AMB charges. But now a days monthly AMB charges are like "ZIZIYA KAR" Hence I requested to reverse the AMB chgs. Partially reversed but not totally. I may close my a/c and transfer to another bank in nearby vicinity. As my own bank has no branch in Ghansoli and I have to open a/c in private bank.

Secondly, officers are arrogant to say that We are not bound to follow orders of RBI, our rules are framed by us only.

The same case with changing soiled notes across the counter. These private banks refuses straightway to exchange soiled notes despite of Clear cut circular of RBI viz. master circular dt. 28/-07/2006.


3 years ago

Hi I am a customer of HDFC BANK

HDFC has started charging AMB Average Monthly Balance Rs 10000 if not maintained, then bank will charge RS 350+ ST =400RS.

say for e.g if customer has maintain rs 10000 AMB the bank is giving interest @4-5% per year which is equal to around hardly not more than RS50 interest earn by customer.

the bank gives RS50 interest for month and charges RS 400 if not maintained.Is it justified amount?

RBI Should restrict all these bank from charging such big amount else customer will have choice.

I have spoken with HDFC Bank and they are ready to reverse charges & if not reversed i am closing the account



In Reply to JAYANT MOKAL 3 years ago

Mr Jayant, private banks do not want customers like you and I, and they force us to close the account with such high service charges. What about sms charges? I recently closed an Axis Bank account with average balance of Rs 20-22000 because net earning was coming to about 2% only. And they never even bothered to ask why I was closing the account, because for them, its a case of good riddance. Most funny part was that the girl said in their bank the account closure is centralised and it would take 3/4 days to close the account and a payorder will reach me at my residence. So all in all it would take at least 6/7 days [time for me to realise the payslip in the new CTS environment takes another 2/3 days]. One concession given was that I could take back whatever balance was there as cash and final settlement would be by PO. So much for the banks which make hefty profits.


3 years ago

Yes Bank has the charges published and it is quite clear for all the accounts..

arun adalja

3 years ago

rbi is not taking any action against banks so they are least bothered.they charge for sms but full details are not givenicici bank gives for credit of amount but total available balance is not given.talked to them reply was that we have changed the format.icici bank is not charging for sms alerts in case of senior citizens.why psu banks are not giving such examptions?


3 years ago

The writer should see Bank of India's website, please.


3 years ago

What if I were to tell you that SBI has made it mandatory for its Savings account customers to pay Rs 100/- per annum for accident insurance. There is no CHOICE! Every new customer( even the free YUVA Student accounts) must fall in line. Atleast private banks have everything written in their service & charges rules. SBI has non. Jus chk their website!!And people say that PSU banks have their heart in the right place. My foot!!

Francis Xavier

3 years ago

I am a customer of IDBI Bank. They publish all the charges in their website and they keep it updated if any change in the charges.

Siddharth Biswal

3 years ago

I have also observed PSU banks like SBI not putting up RBI mandated notices on bank premises.For e.g i couldn't find replacement of torn/soiled notes notice in SBI.I would like to particularly mention that HDFC bank audit process mandates check of RBI notices every qtr.Why then PSU banks are flouting this ?

Freebies by political parties vitiate election process, says SC

Holding that such promises by political parties under present law does not amount to corrupt practice, the apex court, said that election manifesto released by parties can be included in the Model Code of Conduct

Freebies promised by political parties in their election manifestos to lure voters shake the roots of free and fair polls, the Supreme Court observed today as it directed the Election Commission to frame guidelines for regulating contents of manifestos.


Holding that such promises by political parties under present law does not amount to corrupt practice, the apex court, however, said that election manifesto released by parties can be included in the Model Code of Conduct.


“Although, the law is obvious that the promises in the election manifesto cannot be construed as ‘corrupt practice’ under Section 123 of Representation of People's (RP) Act, the reality cannot be ruled out that distribution of freebies of any kind, undoubtedly, influences all people. It shakes the root of free and fair elections to a large degree,” a bench of justices P Sathasivam and Ranjan Gogoi said.


“Considering that there is no enactment that directly governs the contents of the election manifesto, we hereby direct the Election Commission to frame guidelines for the same in consultation with all the recognized political parties,” the bench said adding “a separate head for guidelines for election manifesto released by a political party can also be included in the Model Code of Conduct for the Guidance of Political Parties & Candidates”.


The judgement can have wide ramifications and can put a curb on political parties for promising different types of freebies like distributing laptops, TVs, grinders and mixers, electric fans, four gram gold thali and free foodgrain for wooing the voters. The election manifesto of parties will also come under the scrutiny of the Commission.


The bench said though the election manifesto is published before the code of conduct comes into force, the Commission can make an exception by bringing it within code of conduct.


“We are mindful of the fact that generally political parties release their election manifesto before the announcement of election date, in that scenario, strictly speaking, the Election Commission will not have the authority to regulate any act which is done before the announcement of the date.


“Nevertheless, an exception can be made in this regard as the purpose of election manifesto is directly associated with the election process,” the bench said.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)