Jet-Kingfisher deal may pass regulatory muster

Experts feel the deal is bad news for passengers as fares will increase.

The Jet Airways-Kingfisher Airlines deal may pass the regulatory muster in India though such a deal would have been turned down in many other countries.

The two airlines together have 60 per cent market share, which may come down to 50 per cent as they cut routes. What stand will the regulators take?

“The deal is bad news for consumers as frequencies will reduce and prices will rise. The airlines are indulging in semi-cartel and the minister is giving them a pat on the back,’’ said an industry expert, who closely tracks both these airlines.

“Such an agreement would be turned down in many countries where anti-trust regulations are diligently applied,’’ said Steve Forte, former CEO of Jet Airways. The big question is will India be one of them? Many believe, unlikely.
 

FLYING HIGH AND LOW

* Such a deal would have been turned down in many countries

* The two airlines will have 50-60% share and could dictate prices

* Sceptics feel MRTPC may send notice, but nothing will happen

* Consumer are weak and have failed to organise themselves

* The deal is not good for market, consumers & aviation growth

* Political clout of owners may steamroll over the real issues

“This so-called-alliance is a spectre for fare-fixing, so that while overall fares may not go up, they will not fluctuate the same way as they did if the two airlines were competing in yesterday’s scenario. I am not sure if the government regulators will be able to set up checks and balances to prevent such abuse,’’ added Forte.

He feels the best thing the regulators can do is to turn down the whole deal and let both airlines take individual measures to reduce costs and survive during this downturn. Rival airlines feel the anti-trust laws are weak in India.

“The Monopolies and Restrictive Trade Practices Commission (MRTPC, India’s anti-trust body) may ask them to explain the deal or someone may go to the court, but nothing will happen,’’ said the promoter of an airline with a lot of scepticism.

Even as traffic grew in India, the passengers have failed to organise themselves, who can be a vocal group in such times. “Consumers are weak and disorganised. The two thought maybe we should go ahead when they are so,’’ said an expert.

India embraced a deregulatory system to grow its domestic commercial aviation. Experts feel it has worked well so far but this deal threatens to set the clock back.

Smaller airlines, who today are struggling to carve a niche in the market, will face a more powerful competitor and feel threatened.

“They will be scared. When you have a single guy controlling 60 per cent of the market, he will define how the market is going to be driven,’’ said Amitabh Malhotra of NM Rothshchild & Sons.

The regulators need to ask themselves three questions. Is the market going to benefit from the alliance? Is the customer going to benefit in the long run? Will this alliance help develop domestic commercial aviation?

The answer to all three questions is NO. The question is will the political clout that both owners have steamroll over the real issues?