Etihad Airways PJSC, which is acquiring 24 per cent stake in Jet Airways for Rs.2,058 crore ($379 million), has made a provision in the share purchase agreement to acquire additional stake in the Naresh Goyal’s airline in future.

Etihad has a clause of right of first refusal in case Mr. Goyal decides to sell additional stake in Jet going forward. An e-mail to Jet Airways to confirm this and disclose some fine prints of the share purchase agreement remained unanswered.

According to analysts, Etihad, which has paid a substantial premium of 32 per cent to acquire stake in Jet, will not remain contented with minority stake and will eventually get management control.

Though Mr. Goyal, whose stake will come down to 51 per cent from 80 per cent after the deal, will continue as non-executive Chairman of Jet Airways, Etihad will place a Vice-Chairman and two directors on Jet’s board.

Hub in Abu Dhabi

Etihad has also agreed to closely work with Jet to improve its all round performance, including finance. It is learnt that Etihad will augment additional finance of more than Rs.700 crore for Jet so as to improve its finances. Jet has agreed to establish a hub in Abu Dhabi. It will feed passengers to Etihad’s network by connecting all Indian cities with Abu Dhabi.

The UAE has allowed Jet to pick up passengers from there through the grant of fifth freedom rights.

Thus, Jet will start flights to several other Gulf countries by using the Abu Dhabi hub. Both have also got into a code share agreement and ‘earn and burn’ frequent flyer miles scheme for mutual benefit and draw synergy in operation.

However, the announcement of the Jet-Etihad deal coinciding with the grant of three-fold bilateral rights to Abu Dhabi by the Indian Civil Aviation Ministry has raised a controversy.

On Wednesday, soon after the Jet-Etihad was announced, the Civil Aviation Ministry said it had agreed to allocate an additional entitlement of 36,670 seats a week as compared to the current 13,330 seats a week to carriers from the UAE and India. A few days ago, Jet had asked for an additional 40,000 seats a week to Abu Dhabi.

“It is a game changing deal for Etihad. However, it speaks poorly about how we manage our bilateral policy. Three months ago we were told that no bilateral would be granted for Middle East carriers but now only Jet is granted 41,000 seats. We must open our bilateral but with tangible assessment of benefits to India and not just theoretical assumptions,” said Kapil Kaul, CEO, Centre for Asia Pacific Aviation (CAPA).

Change of gauge facility

The UAE agreed to grant change of gauge facility at Abu Dhabi to Indian carriers, which means Jet can change an aircraft without the change of flight number. The UAE and India have agreed to allow designated airlines of each side to have the option to change the aircraft in the territory of the other party. This means Jet and Etihad will have enough flexibility in operations.

Earlier, the UAE was asking the Indian government to sign a bilateral investment promotion and protection treaty to ring fence its investment, more specifically the Etihad deal. Now that the bilateral rights have been granted the deal went through quietly.