JET-ETIHAD DEAL-IMPACT ON INDIAN AVIATION
JET-ETIHAD DEAL - The first deal after FDI norms have been changed in the aviation sector of India. On 24th Apr, Jet and Etihad announced the acquisition of 24 percent stake in Jet by Etihad for $379 million (around Rs.2,060 crore) . Two airlines entered on a range of terms and conditions . Along with 24% stake , Etihad said it would pay $150 million for a majority stake in Jet’s loyalty programme.
Deal in Detail:
The deal between two airlines has several angles benefitting both of them .In particular, the bilateral entitling 40,000 seats per weak between both the countries. Basically the deal covers only First and Third freedom rights.But, the deal between Jet and Etihad is based more on the Fifth and Sixth Freedom Rights and the bilateral appears to facilitate this. Lets look into what these freedoms are. Freedoms are the privileges which one has to negotiate. The First Freedom is the right to fly over a foreign country without landing. The Second Freedom allows technical stops without the embarking or disembarking of passengers or cargo. The Third and Fourth Freedoms allow basic international service between two countries.
The Fifth Freedom allows an airline to carry revenue traffic between foreign countries as a part of services connecting the airline's own country. The Sixth Freedom combines the Third Freedom and Fourth Freedoms and is the right to carry passengers or cargo from a second country to a third country by stopping in one's own country.
Though both the countries have signed an agreement for only Third and Fourth Freedom Rights, the deal between Jet and Etihad is completely based on Fifth and Sixth Freedom. An other angle is sale of Jet Airway's slots at London's Heathrow Airport to Ethihad Airways for an amount of $70 million under the sale and lease back agreement.
The main roadblock to the approval of the deal is due to the lack of clarity about...
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