Title: "Analyzing the Jet Airways-Etihad Airways Merger: A Comprehensive Study of

Indian and International Legal Implications"

1. Introduction

In the constantly changing global aviation industry, mergers and acquisitions are common,
reshaping airline competition and strategies. One noteworthy merger that made waves in the
aviation world was the partnership between Jet Airways and Etihad Airways. This project
delves into the details of this deal, focusing on its legal aspects.

This deal between Jet Airways and Etihad Airways was a symbol of innovation and
collaboration in aviation. It involved a complex interplay of Indian and international laws,
regulations, and agreements. In 2016, Jet Airways held the position of the second-largest
airline company in terms of market capitalisation1. Jet Airways has managed to endure
insolvency proceedings and is wrestling with the looming threat of liquidation. Amidst this
remarkable downfall, its partnership with Etihad Airways was a significant milestone, during
which Etihad acquired a considerable stake in Jet Airways.

Joining two companies through a merger or acquisition represents a significant

developmental achievement and frequently brings about a rejuvenating effect. Companies
may choose to engage in such partnerships for a range of motives, including pursuing new
markets and products, enhancing operational efficiency and synergies, or as a component of
their revitalisation strategy.

The first part of this analysis explores the Indian legal framework that governs mergers and
acquisitions. India's aviation industry is highly regulated, and any merger or acquisition in
this sector requires careful examination and compliance with various legal regulations. This
project examines the Indian legal landscape, investigating the laws and regulations that
shaped the deal and its role in the approval process.

Additionally, the project delves into the international realm, unravelling the complex web of
international laws, agreements, and conventions that affected the acquisition. The global
nature of aviation necessitates adherence to international norms and standards, making it
essential to scrutinise legal aspects beyond national borders. A vital aspect of this project is
the exploration of the term "Control" as defined in various legislations. Control is a central
concept in mergers and acquisitions, and its interpretation can vary significantly across
jurisdictions. This project aims to provide a nuanced understanding of how control was
perceived and applied in the Jet Airways and Etihad Airways merger context. It will examine
1
Jet Airways 2.0: How Jet Is Set To Take The Sky Amid More Challenges, Outlook, 9 th May, 2022. Available at
https://www.outlookindia.com/business/jet-airways-airplanes-jet-airways-jet-airways-2-0-how-jet-is-set-to-
take-the-sky-amid-more-challenges-news-195730 (Last visited on 11th September, 2023)
the definitions and criteria outlined in Indian laws, shedding light on the challenges and
considerations faced by stakeholders in determining control in this deal of acquisition.

2. Background of the Merger

Jet Airways:
Jet Airways began operations in 1993 as a limited liability company and has developed into
India's premier airline.2 This airline initiated its services as an air taxi operator in 1993. It
expanded into full-scale operations in 1995 and introduced international flights in 2004.3 On
July 1, 1996, Jet Airways was officially recognised as a deemed public company. But then Jet
Airways again restructured as a private corporation on January 19, 2001. On December 28,
2004, Jet Airways became a public company.4

Jet Airways ultimately provided air services to over 65 destinations, encompassing major
hubs like Mumbai, Delhi, and Bengaluru, as well as gateways in Amsterdam, Paris, London,
and Abu Dhabi. On around 1,000 domestic and international routes, it flew 124 narrow- and
wide-body aircraft.5 It grew to become one of India's largest airlines, capturing a significant
market share of 21.2% by February 2016.6 From its former main hub at Chhatrapati Shivaji
Maharaj International Airport in Mumbai, it operated over 300 flights per day to 74
destinations around the world.7

Etihad Airways:
Etihad Airways is the flagship carrier established in the year 2003 in the United Arab
Emirates (UAE), and its headquarters is in Abu Dhabi.8 Abu Dhabi International Airport
serves as its primary hub and is in the capital city of the UAE, plays a significant role in the
airline industry. Etihad Airways has gained global recognition for its exceptional services and

2
Jet Airways, About us. Available at https://www.jetairways.com/about.html (Last visited on 10th September
2023).
3
Id.
4
Company History- Jet Airways , JET AIRWAYS LTD., Money Control- PNC Company Info. Available at
https://www.moneycontrol.com/company-facts/jetairways/history/ja01#:~:text=We%20commenced
%20operations%20as%20an,reconverted%20into%20a%20private%20company. (Last visited on 10th
September 2023).
5
Supra note 1.
6
Jet Airways, Wikipedia. Available at https://en.wikipedia.org/wiki/Jet_Airways#:~:text=Incorporated%20in
%20April%201992%20as,when%20it%20acquired%20Air%20Sahara. (Last visited on 10th September, 2023)
7
Id.
8
Etihad Airways, official website. Available at https://www.etihad.com/en-in/ (Last visited on 10th September
2023).
extensive network of routes.9 With a current fleet of aircraft and a base at Abu Dhabi
International Airport, Etihad provides travellers worldwide with first-class experiences.10

The airline holds a significant position in the worldwide aviation industry thanks to its
modern aircraft fleet and expansive network of destinations spanning six continents.11

Proposed Combination:
The proposed combination is related to the acquisition of a 24% equity
stake and certain other rights in Jet by Etihad. 12 In response to a particular request from the
Commission, the Parties have expressed their desire to obtain the Commission's consent for
Etihad's acquisition of a 24 percent equity stake in Jet, along with all the rights and benefits
they have mutually agreed upon in the revised SHA, CCA, and CGC agreements.13

Motivation and benefits of this deal:

The key motivations and context for this partnership (24% acquisition of equity share) at that
time included:
Financial support: Jet Airways was facing a financial downfall in this competitive
aviation market. The involvement of Etihad in business structure, as well as financial
backing, gave life to Jet Airways’ declining era.14
Expansion of Routes: The partnership between Jet Airways and Etihad expanded the
routes as Jet Airways now has access to Etihad’s global network of routes, which
helped provide more offers and options to its passengers regarding international
destinations. Through this, Jet Airways expanded its business in order to survive in
the Indian aviation market, where international travel was growing rapidly.15
Business Synergies: These airlines came together with the aim of achieving
operational synergies by sharing business ideas, style, maintenance facilities, cost-
saving initiatives, and their best practices.
Strategic Location: Abu Dhabi, the base office of Etihad, functions as a crucial
nexus for travellers moving between Europe, Asia, and Africa. This partnership holds
significant strategic importance for both airlines as they aim to seize the increasing
passenger demand in this region.
Benefiting the middle class: Both airlines have seen the opportunity of growing
demand for domestic and international airlines as in India. This deal was good for
both the Airlines to expand their business and passengers.

9
Competition Commission of India, Combination Registration No. C-2013/05/122, November 12, 2013.
10
Etihad Airways, Wikipedia. Available at https://en.wikipedia.org/wiki/Etihad_Airways. (Last visited on 10th
September, 2023).
11
Id.
12
Supra note 9.
13
Id.
14
P.R. Sanjai, Etihad to buy 24% stake in Jet Airways for $ 379 million, MINT, 24th April 2013. Available at
https://www.livemint.com/Companies/zY6HS6C2FeFMOncS2WeRML/Jet-AirwaysEithad-deal-may-finally-be-
cleared-by-board.html (Last visited on 11th September, 2023).
15
Id.
The Jet- Etihad Transaction Deal:
In 2013, the Indian government relaxed its foreign direct investment (FDI) policy for
the civil aviation sector, allowing foreign airlines to own up to 49% of Indian airline
companies.16 As a result of this policy change, Etihad Airways PJSC from the United Arab
Emirates entered into an investment agreement with Jet Airways (India) Limited, a publicly
listed Indian company, on April 24, 2013, to acquire 24% of Jet's equity shares for US$379
million.17 This transaction, known as the Jet-Etihad Transaction, marked the first instance of
foreign direct investment in the Indian civil aviation industry. After undergoing approvals
from various regulatory bodies such as the Foreign Investment Promotion Board (FIPB), the
Securities and Exchange Board of India (SEBI), and the Competition Commission of India
(CCI), the Jet-Etihad Transaction was successfully completed on November 20, 2013. 18 SEBI
conducted a post-close review of the transaction, and it concluded with SEBI granting its
approval to the Jet-Etihad Transaction on May 8, 2014, without requiring Etihad to make an
open offer.19
Furthermore, Etihad also committed to investing $150 million into Jet Airways, the frequent
flyer program operated by Jet through its subsidiary, Jet Privilege Private Limited. 20
Additionally, Etihad agreed to facilitate or provide Jet with a $150 million loan. Prior to this,
in the same year, Etihad had acquired three landing/take-off slots at Heathrow Airport in
London from Jet for $70 million and then leased these slots back to Jet later on.21

Deal Operations:

According to publicly accessible information, several agreements were established in relation

to the Jet-Etihad Transaction:

1. An Investment Agreement (IA)

2. A Shareholder's Agreement (SHA)
3. A Corporate Governance Code (CGC) was an agreed-upon code to be implemented as per
the SHA.

As part of the Jet-Etihad Transaction, Jet and Etihad also signed a Commercial Cooperation
Agreement (CCA). In this, the two parties committed to developing joint policies concerning
various aspects such as sales, routes, pricing, and marketing distribution. Furthermore, Etihad
had the authority to recommend individuals for senior management positions within Jet.

16
FDI Witness major liberalization in 2013, ECONOMICS TIMES, 26th December 2013. Available at
https://economictimes.indiatimes.com/news/economy/indicators/fdi-witnesses-major-liberalisation-in-2013-
more-to-follow/articleshow/27909914.cms?from=mdr (Last Visited on 11th September 2023).
17
Supra note 9.
18
Kishalaya Pal and Najeeb Din, Jet Etihad Deal: Trigger of a Bedlam, THE ICLRAP BLOG, 11th July 2021. Available
at http://iclrap.in/jet-etihad-deal-trigger-of-a-bedlam/#_ftn4 (Last visited on 11th September 2023).
19
Id.
20
Aneesh Phadnis, All you need to know about Jet- Etihad deal, BUSINESS STANDARD, 20th November, 2013.
Available at https://www.business-standard.com/article/companies/all-you-need-to-know-about-jet-etihad-
deal-113112000302_1.html (Last visited on 11th September, 2023).
21
Id.
To comply with the requirements of various regulatory bodies, particularly the Foreign
Investment Promotion Board (FIPB), the parties had to make amendments to these
agreements on multiple occasions. These changes were implemented to reassure the
regulators that, among other things, Jet's effective control remained in India and was not
transferred to Etihad. The modifications were carried out as follows:

1. On May 27, 2013, the parties made clarificatory changes to the SHA, CGC, and CCA.
Importantly, the fundamental nature of the transaction remained unaltered.22

2. On September 19, 2013, the parties entered an amended and restated SHA, an amended
and restated CCA, and an amendment to the IA. These changes were made in response to the
conditions imposed by the FIPB.23

3. In May 2014, the parties voluntarily adjusted the CCA to provide assurance to the
Securities and Exchange Board of India (SEBI) that effective control of Jet continued to
reside with the company.24

Defining Control:

The subsequent proceedings highlighted the discrepancies among various regulatory bodies
in their interpretation of the term 'control.' The FIPB approved the transaction and
recommended it to the Committee on Economic Affairs, subject to certain conditions. These
conditions included government oversight in the event of any change in the Shareholder
Agreement (SHA) or Jet's shareholding structure.25

Following this, the CCI scrutinised the transaction, as it met the criteria for a combination
under the Competition Act. Jet applied for CCI approval, and the CCI determined that it was
unlikely to impact India's competition significantly. Most importantly, based on the CCI's
assessment, it concluded that Etihad had ‘joint control’ over Jet.26

The SEBI investigation subsequently focused on the transaction, ultimately determining that
Etihad had not assumed "control." Consequently, SEBI concluded that the Takeover Code
(SAST regulations), specifically the open offer requirement, did not apply. 27 This conclusion
primarily stemmed from an impartial evaluation indicating that the acquisition did not
constitute a 25% or greater ownership stake, thereby negating the need for an open offer.
Additionally, SEBI considered the limited influence of Etihad in board nominations, veto

22
Supra note 9. Paragraph 3 of the CCI's order dated November 12, 2013.
23
Id., Paragraph 7 of CCI’s order dated November 12, 2013.
24
Paragraph 9, SEBI order.
25
Supra note 19.
26
Id.
27
Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations, 2011, §
2 (1)(e).
power, affirmative voting rights, and similar privileges, all of which had been obtained
through various amendments to the agreements.28

To complete a merger or acquisition, SEBI and CCI must grant approval. The divergence in
their positions can be attributed to the fact that SEBI and CCI operate under different
mandates: one aims to safeguard the interests of investors and shareholders in acquisition
transactions, while the other seeks to foster competition and curb monopolistic and anti-
competitive behaviors.29 SEBI has pointed out that the definition of 'control' in Section 5 of
the Competition Act30 is broader than that in Regulation 2(1)(e) of the Takeover Code.31

The logic behind the 25% threshold outlined in the SAST regulation is grounded in the
principles of ordinary and special resolutions as outlined in company law. A shareholder
holding more than 25% of shares wields significant influence, as they can block any special
resolution that necessitates more than a 75% majority vote. Such resolutions encompass
decisions like approving balance sheets, profit and loss statements and appointing board
members. Therefore, it is reasonable to assert that buyers below this threshold would not be
considered as having control.32

Sources: (Jet Airways website, Etihad Airways website, official merger announcements)

Benefits:
The agreement between Jet and Etihad will be advantageous for both parties as the United
Arab Emirates (UAE) has approved the provision of gauge change facilities for Indian
airlines in Abu Dhabi.33
This development allows Indian airlines to change aircraft without altering the flight number.
According to the proposed operational plan, Jet is expected to utilise wide-body aircraft to
transfer passengers from Delhi, Mumbai, and Bengaluru to Abu Dhabi while employing
narrow-body aircraft for shorter routes.34 This collaboration would enable Jet and Etihad to
serve a significantly larger number of destinations collectively. Jet operates flights to 72

28
Supra note 25.
29
Rajat Sethi, Simran Dhir and Dhruv Agarwal, Defining Control: A Study of the Jet-Etihad Case, NATIONAL LAW
SCHOOL OF INDIA REVIEW, Vol 27 issue 2 Article 6. Available at https://repository.nls.ac.in/cgi/viewcontent.cgi?
article=1205&context=nlsir (Last visited on 11th September, 2023).
30
The Competition Act, 2002.
31
Supra note 28.
32
Supra note 29.
33
Etihad deal with Jet provides for stake increase in future, THE HINDU, 25th April, 2013. Available at
https://www.thehindu.com/business/Industry/etihad-deal-with-jet-provides-for-stake-increase-in-future/
article4653193.ece (Last visited on 11 September, 2023).
34
Sindhu Bhattacharya, Deal with Etihad: What it means for Jet Airways, FIRSTPOST, 20th December, 2014.
Available at https://www.firstpost.com/business/deal-with-etihad-what-it-means-for-jet-airways-724605.html
(Last visited on 11 September, 2023).
destinations, including 20 international ones, and Etihad serves 84 destinations. 35 Combined,
it is anticipated that Jet and Etihad will expand their network to encompass 140 destinations
after the investment. Jet and Etihad are also exploring opportunities for joint procurement of
fuel, spare parts, and other resources."

35
Jet-Etihad: Jet Gets a Co-Pilot, Nishith Desai. Available at
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Ma%20Lab/Jet-Etihad_Deal_Dissected.pdf.