Saturday, July 27, 2013

  • On 22nd April the Cabinet Committee approved 40,000 additional bilateral seat rights per week to Abu Dhabi. 
  • As soon as the bilateral deal was signed, both Jet and Etihad entered into an agreement on 24th April
  • Is it a coincidence or collusion?

What is shocking are the notes from the PM and the FM  contradict each other. 

The minutes of the meeting held on 22nd April 2013 and signed by P Chidambaram states that the bilateral was mandated under the directions of the PM. However, the note from the PMO says that the PM was concerned with the proposals being made for the bilateral deal with Abu Dhabi. The note also clearly states “the decisions were not taken under the direction of the Prime Minister”. The question then is who is telling the truth?

The PMO raised following issues during the meeting...(which are genuine )

1. Although ministry of external affairs and ministry of commerce support this substantial enhancement (40,000 seats per week), the Department of Economic Affairs (DEA) had reservations in the past on the enhancement.

2. It has been reported in the media that some airlines have opposed the request for enhancement.

3. It is also likely that private airport operators would not be supportive of this enhancement as they have invested substantial amounts in the airports at Delhi, Mumbai, Bangalore and Hyderabad and would like these to develop as hubs for air traffic.

4. One of the effects of this enhancement would be that long-distance traffic from India to Europe or North America would be diverted to Abu Dhabi.

5. There is a possibility that if, as reported, an Abu Dhabi airline acquires Jet Airways, this entity would control the bulk of the seats on this route.

6. There is possibility that other countries may also make similar requests.

7. Hence a calibrated approach may be necessary.

However, this decision was implemented within 48 hours and on 24th April the bilateral agreement between India and Abu Dhabi was signed. Soon after signing the bilateral, the long-pending deal between Jet and Etihad was also signed on the same day.

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 Jet Airways and not India as the government wants us to believe. 
Parliamentary Standing Committee's concerns over the deal

  • The Standing Committee has categorically said that the increase in bilaterals appears to facilitate one airline’s ability to strike a stake-sale deal with a foreign airline at a huge premium. 
  • The FIPB, SEBI and the Competition Commission are worried about ownership and control of Jet.
In fact, the Committee expressed surprise at the increase in bilateral entitlement to 36,670 seats a week. It said, “Prime facie this move appears to facilitate one airline to strike a deal with a foreign Airline for its stake sale at a huge premium. The Committee feels that the huge premium could be a backhanded way of obtaining access to the huge civil aviation market in India.

The increase in the bilateral agreement is questionable,” the Committee said, “especially, in view of the fact that the Indian carriers are not in a position to use increased seat capacity due to fleet constraints. In such a situation, the foreign airline may try to catch up passenger traffic headed to destinations in North America, Europe, Africa and Middle East resulting in huge losses to Air India and various airports of India.”


Allowing Abu Dhabi to come up as another hub, which is only a three-hour flight away from the major Indian metros would certainly have an adverse impact on India’s efforts to establish a world-class hub in the country.

  • The Committee was informed that Jet Airways sold three of its slots in London to Etihad, which was confirmed by the secretary of MCA. 
  • The Committee said, “Carriers have no right to sell the bilateral allotted to them to other airlines that too a foreign airline. 
  • The Committee recommends that the government should take away the slots from Jet Airways and the airlines should be penalized for selling the national property—bilateral.”

According to the deal between Jet and Etihad !

  • Etihad would operate and manage affairs of Jet Air both domestically and internationally. In short, Jet Air was becoming a virtual subsidiary of Etihad with effective control in the hands of UAE carrier.

  • Also a clause makes it mandatory for Jet to use Abu Dhabi as its exclusive hub to Africa, North and South America and the UAE. This means that Jet can only fly to these countries via Abu Dhabi and not directly from India and all this using Indian bilateral rights with those third countries.

What are SEBI's concern ?

  • SEBI is concerned only with matters relating to, and for protecting the public shareholder interest, and enforcing the Takeover Code with the relevant provisions of effective Control and Ownership. 
  • These are not related in any way to the laws and rules on effective control and ownership in civil aviation. 
  • Effective control in terms of the FDI and FDI policy are determined either by Department Of Industrial Policy & Promotion (DIPP) and FIPB. 

What are the concerns of Indian airports ?

  • There are 25,000 seats per week vacated by the defunct Kingfisher. The additional weekly seat entitlement of 40,000 by India would only help Etihad whose sole aim is to establish Abu Dhabi as a hub at the cost of Indian airports.
  • The Indian government has literally given Jet and Etihad the right to pick up passengers from any domestic airport to Abu Dhabi. From here, the passengers would be flown to destinations beyond United Arab Emirates (UAE) like London and New York.
The cancellation of rights of Kingfisher to fly overseas alone created 25,000 seats per week for use to eight countries, including Dubai, UAE, UK, Hong Kong, Singapore, Nepal, Sri Lanka and Thailand.

  •  Ideally, this should have benefitted domestic carriers like Air India. However, these vacated slots were adjusted to several destinations beyond Abu Dhabi to be used by Etihad, thus violating the Chicago Convention.
Additional Reading !!!

Chicago Convention ?
  •  International Civil Aviation Organization (ICAO) or Chicago Convention, a specialized agency of the United Nations, looks after coordination and regulation of international air travel. 
  • The original document of the Chicago Convention was signed on 7 December 1944 by 52 signatory states. At present, the Chicago Convention has 191 state parties, including all member states of the United Nations—except Dominica, Liechtenstein, and Tuvalu—plus the Cook Islands.

 The Freedoms of the air are a set of commercial aviation rights granting a country’s airline(s) the privilege to enter and land in another country’s airspace. 
  • The First through Fifth Freedoms are officially enumerated by international treaties, especially the Chicago Convention. 
  • Several other Freedoms have since been added and although most are not officially recognised under international treaties, they have been agreed by a number of countries. 
  • The lower-numbered Freedoms are relatively universal while the higher-numbered ones are rarer and more controversial. At present, there are nine Freedoms.

Importantly, Freedoms are not automatically granted to an airline as a right; they are privileges that have to be negotiated and can be the object of political pressures.


and hence later ....the drama of setting up the Arvind Mayaram Committee by the Government  ....nd its report  seeking to change the stipulation under the civil aviation requirements that effective control and ownership be retained with Indians in pave way for this deal !!!!  (but who benefits at the end of all this ?? u knw the answer !)

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