Gulf Air has fired a broadside at the Indian government's insistence that the Arab carrier sell its 20 per cent stake in Jet Airways, just as New Delhi looks set to bring an end to the ownership debacle by reversing the ban on foreign airlines holding stakes in Indian carriers.
Gulf Air's chief executive, Sheikh Ahmed bin Seif al-Nehyan, has strongly criticised the ban on foreign ownership imposed by India's previous government in April, arguing that it shouldn't be applied retrospectively. 'Any change in policy ought not to have any retroactive effect which adversely and prejudicously alters the position and status of foreign investors,' argues al-Nehyan in a letter to the aviation ministry.
Ironically, the attack has come just as prime minister Inder Kumar Gujral's four-month old government looks set to overturn the ban. Following a directive from Gujral, the aviation ministry is preparing a new policy allowing overseas companies, including airlines, to hold equity in domestic airlines. 'The comprehensive aviation policy will be ready by [October],' confirms aviation minister Jayanti Natarajan. The ban was never expected to last because the previous government collapsed only weeks after passing the legislation.
Gulf Air is understandably keen to protect its investment - if forced to sell its stake the Bahrain-based carrier can hardly hold out for the best offer. But there is also speculation that Jet Airways is trying to use the ban to sever its link with Gulf Air and then try to find a bigger foreign player as a shareholder in a bid to compete more effectively against the proposed US$700 million joint venture carrier proposed by SIA and Tata Industries. The latter is almost certain to get the go-ahead if the foreign ownership ban is reversed.
Relations between Gulf Air and Jet Airways are strained following Jet's indications to the government that Gulf Air would divest its 20 per cent stake in Jet Airways before the 15 October deadline. 'It was agreed that the shareholders would work out the detailed procedures and modalities of implementing the decision,' confirms executive director Saroj K Datta. 'We have already drawn the attention of Jet Airways to this inadvertence,' retorts al-Nehyan.
Irrespective of whether the ban is rescinded, Gulf Air may yet have a strong case if it were to mount a legal challenge against its enforced divestment. The directive 'does not appear to be legally sustainable,' says leading aviation lawyer Ravinder Nath.
Reversal of the ban could also see the grounded Modiluft restart operations with a new foreign partner. The defunct private operator has reached a settlement in its legal dispute with Lufthansa. Modiluft agreed to return three Boeing 737-200s and pay US$5 million in outstanding fees to the German carrier. Modiluft executives say that the airline is close to clinching a technical and managerial tie-up with another European airline. But the Lufthansa experience may make any prospective partner tread warily.
Ravi Prasad
Source: Airline Business
