Ajit Singh snubs AI's concerns over Jet Etihad deal

AI fears investment by foreign airlines will prevent Indian airports from developing into intnl hubs

Air India’s (AI) plea raising concerns over Jet-Etihad deal found no favour with the civil aviation minister Ajit Singh. However, the minister’s views are in complete variance with the bureaucracy of the aviation ministry which favours that AI’s interest should not be compromised from the deal.

In a letter to the civil aviation secretary, AI Chairman and Managing director (CMD) Rohit Nandan had raised concerns over the potential threat to the airline from Jet-Etihad deal.

Naresh Goyal promoted Jet airways is expected to soon announce a deal of 24% stake sale at over $300 million to Abu Dhabi based Etihad airways. The management of the gulf carrier is meeting Anand Sharma, commerce minister and Ajit Singh, civil aviation minister.

AI had expressed through the letter that allowing investments by foreign airlines will hurt the interests of domestic airlines and prevent Indian airports from developing into international hubs. It also added that Jet’s flights to Abu Dhabi could be used to funnel passengers from India headed for the US and Europe, according to two government officials who declined to be named.

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

Foreign direct investment by airlines has been approved by the government. The decision has been taken in overall interest of the sector and not a particular airline. There is no reason for any airline to complain about it now. 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 2 points in India and Etihad flies out from 10 points in India to Abu Dhabi. Etihad airways has already utilized over 85% of its bilateral rights and the civil aviation ministry is not in favour of granting further bilaterals to middle east carriers till the Indian carriers exhaust bilaterals from their side.

Etihad has miniscule market share compared to other big Gulf carriers 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% of the international market, it is a minor player compared to Emirates (over 13% share) and Qatar (over 5%). Etihad has 52 weekly flights to and from India, which is way below Emirates (185 flights) and Qatar (95 flights).

 Experts believe that 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 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–they can fly seamlessly from Abu Dhabi to Chicago, New York and Washington, apart from Toronto.