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Abu Dhabi's Etihad says working towards Jet deal deadline

Jet Airways aircraft stand on tarmac at the domestic airport terminal in Mumbai September 9, 2009. REUTERS/Punit Paranjpe
Jet Airways aircraft stand on tarmac at the domestic airport terminal in Mumbai September 9, 2009. REUTERS/Punit Paranjpe

By Stanley Carvalho and Praveen Menon

ABU DHABI (Reuters) - Etihad Airways is working towards meeting a July 31 deadline to win regulatory approvals on its planned $379 million purchase of a stake in India's Jet Airways , the Abu Dhabi-based carrier said on Wednesday.

Etihad, which is on an acquisition drive, agreed in April to buy a 24 percent stake in Jet in a deal that would provide India's largest carrier with a deep-pocketed global partner as well as cash to help pay off debts.

But political concerns and scrutiny by Indian market regulators have delayed the deal and it risks missing a so-called "long-stop" date of July 31, before which regulatory approvals had to be secured.

"Both parties are working towards achieving the regulatory approvals before the long-stop date ... stipulated in the agreement. We are not in a position to comment further at this time," Etihad said in an emailed statement on Wednesday.

A Jet spokeswoman declined comment.

The deadline could be extended by the airlines but Etihad may also look to renegotiate terms of the deal, an industry expert said.

"It is certain that they (Etihad) will seek for compensation for the projected financial implications of any renegotiation on the control clauses and on the timing to fruition of the deal," said Stefano Sala, a partner at Avinomics, a Frankfurt-based specialist aviation investment advisory company.

Jet expects investments by Etihad to be completed within the next few months, chairman Naresh Goyal wrote in the company's annual report on Monday.

Etihad in April agreed to buy the Jet stake in a deal priced at a 32 percent premium to the market price of the target's stock. It also agreed to make a $150 million investment in Jet's frequent flyer program and to spend $70 million to buy Jet's three pairs of Heathrow takeoff and landing slots through a sale and leaseback agreement.

But regulatory approvals are still be secured. India's Foreign Investment Promotion Board deferred a decision last month as it sought more details on "effective control" of Jet.

The deal also needs to be cleared by the capital markets regulator and will need final approval from a cabinet panel.

Opposition parties in India have also called for the deal to be investigated.

Two sources familiar with the matter said all options were open if the deadline is missed. "The Abu Dhabi government is keen to take the deal forward ... The ball is now in India's court," one source told Reuters.

Asked if Etihad would renegotiate the deal if the July 31 deadline is missed, the source said: "All options are open."

(Additional reporting by Devidutta Tripathy in New Delhi; Editing by David Holmes)

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