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Corporate Apr 18, 2013

Disaster awaits Indian carriers if govt gives in to Etihad’s lobby via Jet

By Sindhu Bhattacharya

New Delhi: If Abu Dhabi is pushing for more flights into India, can Dubai be far behind? Now that the Ministry of Civil Aviation is preparing to revise (and indeed increase) seat entitlements with Abu Dhabi, in the backdrop of the emirate's flagship carrier Etihad's interest in picking up an equity stake in India's Jet Airways, Dubai could well begin pushing for more seats into India.

Etihad is eyeing 24 percent stake in Jet and reports suggest it is eyeing traffic from India to help its global ambitions and scale through this deal.

Reuters

Etihad is eyeing 24 percent stake in Jet and reports suggest it is eyeing domestic traffic from India to help its global ambitions and scale through this deal. Reuters

An industry source pointed out that it would be difficult for the Civil Aviation Ministry to show its keenness to talk to Abu Dhabi for more seats to Etihad when Dubai headquartered Emirates has been lobbying hard for years to increase seats into India. So in effect, a situation may develop where not just Etihad but even Emirates is allowed more seats on Indian routes. If this were to happen, it would be nothing short of a disaster for Indian airlines.

As on date, industry sources point out that the Indian airlines are together using only about 65 percent of their seat entitlements into Abu Dhabi or about two thirds while the utilisation into Dubai is even lesser at just about 55 percent or close to half the number of seats allowed. While Dubai's Emirates airline is using 100 percent of its entitlements, the utilisation by Abu Dhabi carriers is close to 80 percent, say industry sources.

So two questions arise:

1) What is the need to even talk of looking at increasing seat entitlements for the two Gulf carriers when Indian airlines still have not fully utilised the rights already available?

2) If the intention is to facilitate the equity partnership between Jet and Etihad, how will the interests of existing Indian carriers protected? Surely, the intent and purpose of opening up Indian airlines to foreign investment cannot be inimical to the very survival of Indian carriers?

According to sources - and I am compelled to use source based information here since Civil Aviation Minister Ajit Singh and senior officials in his ministry who deal with matters related to bilateral agreements are unwilling to share information - the present entitlements under the India-UAE bilateral agreement for Abu Dhabi are 13,000 weekly seats to carriers of either country. And a report in The Economic Times yesterday quotes ministry officials saying Jet Airways has sought to treble seats under the Abu Dhabi bilateral to 40,000 per week.

There is an urgent need to question the very basis of negotiations on seat entitlements by India with Dubai and with Abu Dhabi separately. Both are part of the same country which is UAE. Why do the two emirates get to enjoy this immense privilege? By the same logic, why doesn't India conduct separate talks for seats with, say, Munich and Berlin instead of talking to the Government of Germany for both?

This is not to say Emirates has not benefited from this policy of separate negotiations with Dubai and Abu Dhabi and therefore the past mistakes need to be corrected by throwing open Indian traffic to Etihad now.

In 2008, under the then civil Aviation Minister Praful Patel, Dubai's carriers were allowed to increase seats by a whopping 23,000 in one go! According to an official ministry press release of April 2008, Calicut was allowed as additional port of call for Dubai airlines and seat entitlements were increased by 23,000 to 54200 seats per week in each direction. When Emirates was allowed such a huge increase in seats, Etihad or other major Gulf carriers like Qatar Airways did not get the same benefits. But must this ridiculous way of undermining one's own airlines to get foreign carriers more rights into India be repeated?

There is little doubt that what Jet is doing by asking trebling seat entitlements to Abu Dhabi, is actually acting as a front for Etihad. Unless it changes its fleet plan drastically in the coming months, there is no way Jet can itself use all these rights. Which clearly means the rights will be used by Etihad to take Indian traffic to its hub at Abu Dhabi and give them onward connections. This is the reason why Indian airlines like Air India, IndiGo and SpiceJet are worried stiff.

Emirates is already the largest airline from India, carrying more passengers than even Air India. If Etihad is also allowed more seats, Indian airlines with overseas ambitions will be left virtually empty handed.

An executive at a large Indian airline reasoned thus : If Jet wants 40,000 seats a week to Abu Dhabi, it means about 33 long haul flights a day or 25 wide body aircraft. "Where is the fleet plan to show this? Obviously, Etihad will use these rights to feed its own hub, carrying a large amount of Indian traffic which would otherwise have travelled on Indian carriers".

So not only will the Ministry have a lot to explain about its tearing hurry in increasing seat entitlements to Abu Dhabi at present, it may also soon have Dubai snapping at its heels for similar largess to Emirates.

Jet Airways reacts:

Late this evening, Jet Airways finally acknowledged that it has indeed asked for unspecified increase in capacity entitlements to increase services to Abu Dhabi.

The airline, which had maintained silence over this issue till now, also said it has a "network strategy and fleet induction plan to support this growth."

But it is not clear if it wants new flights into 23 cities which carry passengers to Abu Dhabi, since the statement said "the expansion is intended to provide a wider consumer choice to the Indian traveller by connecting 23 cities across the country to the international market with a proven Indian product."

by Sindhu Bhattacharya

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