- 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?
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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.
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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.”
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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.
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- 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.”
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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.
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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.
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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.
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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.
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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 airlines...to pave way for this deal !!!! (but who benefits at the end of all this ?? u knw the answer !)
