This is perhaps the first time in recent memory that a memorandum of understanding between two nations has actually come to the cabinet. This was because the Prime Minister had decided earlier on in July that the matter be bought to the cabinet because there was a controversy surrounding what is essentially a three-fold hike spread over three years.
Commenting on the approval, Kapil Kaul, CEO - India & ME, CAPA says the approval was on expected lines because it would have been difficult for government authorities to backtrack since they had signed the Memorandum of Understanding (MoU) with Eithad few months back.
The bilateral pact would primarily benefit Etihad since they would get access to one of the largest and fastest growing aviation markets in the world, he adds.
Moreover, he does not see any regulatory challenges to Jet-Etihad deal
Below is the verbatim transcript of his interview on CNBC-TV18
Q: We have just seen the cabinet approve the Indo-UAE bilateral agreement. This is going to be a good sign for the Jet-Etihad deal to close.
A: We were expecting that the cabinet would ratify the bilateral bill, because it is very difficult for the government to backtrack after government authorities signed the Memorandum of Understanding (MoU) with Etihad a few months back. So it was on expected lines.
There were some issues in correspondence back and forth with the MoU office, but there were no challenges with respect to the bilateral.
Q: What is this approval going to mean overall for Indian aviation?
A: Very significant, primarily so for Jet Airways -Etihad. As we have been saying this is a landmark deal for Etihad, because they get access to one of the largest and fastest growing aviation markets in the world. By this deal and with respect to the bilateral approval they have gotten access to a big market, 20 points of call, significant relaxation in the bilateral agreement. It is a very unique bilateral agreement, because not only have you given 20 points of call at one point of time, you have agreed to have no restriction on aircraft, change of gauge at Abu Dhabi and a few other benefits in this bilateral.
Since the MoU was signed it was very difficult for the government to backtrack, so it went on expected lines - got a little bit delayed, but there were no challenges with respect to government not approving the bilateral.
Q: What the cabinet has approved is the bilateral pact but this does not necessarily mean that all the additional seats will get to Jet and Etihad. However, in the current scheme of things Jet does garner the lion's share of the current arrangement in that bilateral pact. Do you think this now opens up the window - There has been a lot of talk of Emirates being in conversation with companies like SpiceJet. Do you believe that this will open up the window for those deals to go through?
A: First of all, I think the bilateral between India-Abu Dhabi, primarily the majority of the seats would be between Jet and Etihad. I do not see a very significant interest in the India-Abu Dhabi bilateral by any other Indian carriers. There was some interest, but post the deal that interest is tapered down. So most of the seats would be utilised between Jet and Etihad.
As far as other deals are concerned I do not see Emirates in any discussion with Indian carriers at the present moment. We rule out the possibilities of Emirates investing in India. There are couple of other discussions that are going on, some are strategic in nature, some are investment related. We see some progress in couple of other strategic-cum-financial investments in next couple of months.
Q: This was actually in a sense the only formality that was actually left to close the Jet-Etihad deal. Of course there is the Competition Commission of India's (CCI) regulatory knock that is still waiting to come in for the Jet-Etihad deal and we also understand that Jet-Etihad will now move to the Cabinet Committee on Economic Affairs (CCEA) and that is where the final decision on clearing that deal will go through. Do you believe now that the decks are really cleared and we are close to this deal being operationalised coupled with the bilateral pact being cleared by cabinet?
A: Yes, as I said there were no challenges with respect to the bilateral. I do not see Competition Commission of India any challenge. I think they may require a formal approval from Sebi but I do not think any regulatory challenges, unless and until there are any legal challenges with respect to what Subramanian Swamy says that he will go to the court. Minus that, I do not see any challenges to the deal.
Post the parliament which is going to end on the 5th, it was expected that after the parliament session is over most of these things would get issued. So you could expect week starting next things to move on a fast pace in terms of getting the final signatures on and the deal moves ahead to its operational phase.
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