Abu Dhabi?s Etihad Airways is forming a separate wholly-owned subsidiary, Etihad Investment Holding Company, which would hold the 24% stake the gulf airline proposes to buy in Jet Airways. Industry sources said that the subsidiary is also likely to ultimately hold Etihad?s investments in other global airlines such as Air Berlin, Aer Lingus and Virgin Australia.

?Etihad Airways is in the process of incorporating a company in the name of

Etihad Investment Holding Company which shall be its wholly-owned subsidiary,? the gulf airline stated in its application to the Foreign Investment Promotion Board (FIPB). ?Subject to receipt of all regulatory approvals including approval from the Securities and Exchange Board of India (Sebi), Etihad proposes to transfer its entire shareholding in Jet Airways to the investment holdings subsidiary.?

Apart from its proposed stake purchase in Jet Airways, Etihad also owns 29.21% stake in Air Berlin, 40% stake in Air Seychelles, 2.99% stake in Aer Lingus and 10% stake in Virgin Australia. The gulf airline also owns 70% stake in Air Berlin?s frequent flyer programme, similar to its deal with Jet Airways wherein Etihad will have a 51% stake in Jet Privilege, the frequent flyer programme of the Indian airline.

Industry sources said that the investment holding subsidiary being created to house the investment in Jet Airways will also ultimately house the airline?s investments in other global airlines.

?With investments in different airlines, it makes sense to have a separate arm to monitor the state of these investments,? said a consultant with a global audit and consultancy firm. ?Typically, business groups with investments in different companies manage their investments in such a manner.? Etihad Airways was not immediately available for comment.

The change in the corporate structure would not affect Etihad?s purchase of 24% stake in Jet Airways. The investment company will be a wholly-owned subsidiary of Etihad Airways PJSC, making the investment a foreign direct investment.

To avoid any delays due to the change in the corporate structure, Etihad sought approval from the FIPB for purchasing the 24% stake in Jet and then subsequently transferring the holding to Etihad Investment Holding.

?By seeking approval simultaneously, Etihad has removed the risk of any complications that may arise later,? the consultant quoted above said.

The investment proposal, however, was deferred by the FIPB on Friday as the government has sought more clarity on ?effective control?.