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Rediff.com  » Business » Minister rebuffs AI concerns on Jet-Etihad deal

Minister rebuffs AI concerns on Jet-Etihad deal

January 31, 2013 15:05 IST

Air India’s concerns over the Jet-Etihad deal have found no favour with the civil aviation minister, Ajit Singh.

In a letter to Civil Aviation Secretary K N Srivastava, Air India chairman and managing director Rohit Nandan had raised concerns over the potential threat to the airline from the Jet-Etihad deal. When contacted, Srivastava declined to comment.

Naresh Goyal-promoted Jet Airways is expected to soon announce a deal of 24 per cent stake sale at over $300 million to Abu Dhabi-based Etihad Airways. The airline’s senior management will meet Commerce Minister Anand Sharma and Singh on Thursday.

In the letter, written in December 2012, Air India had expressed concerns that allowing investments by foreign airlines would hurt the interests of domestic airlines and prevent Indian airports from developing into international hubs.

It added that Jet’s flights to Abu Dhabi could be used to carry passengers from India headed for the US and Europe, two government officials said on condition on anonymity.

Singh told Business Standard, “Jet Airways is an Indian carrier. It can fly from any place in India to Abu Dhabi. We cannot control the city pairs or restrict its number of flights.”

Curiously, the minister’s views are in variance with that of the officials in his ministry. According to sources, there has been a buzz among ministry officials that Air India’s interests should be taken into consideration, even if the Jet-Etihad deal goes through.

According to Singh, the decision to allow foreign direct investment in aviation has been taken in overall interest of the sector and not for a particular airline.

So, there is no reason for any airline to complain about it now, he said, adding that it will lead to betterment and growth in the sector and management expertise. Once the skies are open, airlines should be ready to face competition, Singh added.

Currently, Jet Airways flies from two points in India and Etihad flies out from 10 points in India to Abu Dhabi.

Etihad Airways has already utilised over 85 per cent of its bilateral rights and the civil aviation ministry is not in favour of granting further bilaterals to West Asia carriers till the Indian carriers exhaust bilaterals from their side.

Etihad has minuscule market share compared to other big Gulf carriers such as Emirates and Qatar, which rule the West Asian market. It has a fleet of 67 aircraft, which is nearly a third of Emirates and half of Qatar.

In India, too, with less than 2 per cent of the international market, it is a minor player compared to Emirates (over 13 per cent share) and Qatar (over 5 per cent).

Etihad has 52 weekly flights to and from India, which is way below Emirates (185 flights) and Qatar (95 flights).

Experts believe that the Jet-Etihad deal would help Etihad to bypass the limitation of bilaterals. Moreover, Jet needs money to fund expansion and cut debt after several years of making losses.

Etihad can feed in passengers seamlessly from Abu Dhabi across the country by using Jet Airways’ wide coverage of over 53 cities in India.

Similarly, Jet could bring in passengers from Indian cities to Abu Dhabi, from where they could travel to any destination in West Asia and Africa where Etihad has excellent connectivity.

Jet Airways can also leverage Etihad’s strong presence in Europe by bringing in Indian passengers through Abu Dhabi.

Jet currently operates only to Brussels, Milan and London in Europe on its own and connects 14 cities through code-share agreements with Brussels Airlines and Thalys. On the other hand, Etihad has a huge network in Europe.

It directly flies to over 17 destinations and through its elaborate code-share agreements with around 13 airlines, offers seamless connectivity to over 88 cities.

The India-North America market is also one of the largest and most lucrative in terms of business.

Jet Airways currently flies only to Newark and Toronto and through its code-share with United and Air Canada, offers connectivity to all key markets in North America.

But Etihad can provide an alternative to Indian flyers. It can fly seamlessly from Abu Dhabi to Chicago, New York and Washington, apart from Toronto.

Disha Kanwar and Aneesh Phadnis in New Delhi and Mumbai
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