India’s financial crime agency is investigating Etihad’s 2014 investment in Jet’s loyalty programme
Enforcement Directorate( ED) has commenced a probeinto EtihadAirways’s investment in Jet Airways’ loyalty programme.
- The agency is attempting to establish whether
Jet Airwaysviolated foreign exchange protocols when it sold a 50.1% stake in its frequent flyer programme to Etihad in March 2014.
- The ED wants to ascertain whether Etihad received the necessary approvals from the now-defunct Foreign Investment and Planning Board (FIPB) before making the investment.
In March 2014, the Abu Dhabi-based Etihad bought a $150 million stake in Jet Privilege as part of a larger investment in Jet.
The ED is attempting to establish whether Jet Airways violated foreign exchange protocols when it sold a 50.1% stake in its frequent flyer programme to Etihad. It has reportedly been questioning executives from Jet on the structure of the deal.
The economic intelligence agency wants to ascertain whether Etihad received the necessary approvals from the now-defunct Foreign Investment and Planning Board (FIPB) before making the investment.
India’s foreign investment laws prohibit a foreign shareholding of more than 49% in most sectors. However, Etihad was able to take a majority stake in Jet Privilege because it was reportedly classified as an “ air transport services” firm - a sector that allows
This could be something that ED officials are taking issue with since there is some ambiguity as to whether a frequent flyer programme can be considered an air transport services company.
A spokesperson from Etihad told Mint that the airline had complied with all regulatory requirements in regards to the Jet Privilege investment.
The probe comes at a particularly testy time for Jet Airways. The airline, which has debts of $1 billion, was forced to temporarily ground its operations in mid-April after its creditors refused to extend a tranche of emergency funding.
On May 7th, the pilots' union of the airline lobbied the Supreme Court to direct the consortium of lenders to release funds to restart operations.
Jet’s creditors are currently seeking bids from potential investors to sell a sizeable stake in the company. Bidding closes at the end of this week. If Jet is unable to secure the backing of an investor, it might be the end of the road for the airline.
This isn’t the first time that Jet has been the subject of a government probe. In August 2018, the Ministry of Corporate Affairs was said to be investigating the airline for the alleged diversion of funds.
Jet Airways might fly for the last time tonight and that's bad news for travellers
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