Obliging Etihad seat demand may be death knell for Indian carriers

New Delhi: This week, India and Abu Dhabi are slated to hold talks on a four-fold increase in seat entitlements and flying rights between the airlines of the two countries. For Abu Dhabi, the airline to benefit from any such agreement would be its national airline Etihad Airways, but from India it will be Jet Airways and not the state-owned Air India. That is because Jet is in talks for selling an estimated 24% stake to Etihad and a massive increase in flying rights to Abu Dhabi will help seal the deal faster.

The push to grant so many more seats to Abu Dhabi has seen wide ranging concerns from a cross section of stakeholders over the last few days. Now, aviation consultancy CAPA has made some startling estimates of the additional number of seats that four airlines from just the Gulf - Etihad, Emirates, Qatar and Air Arabia - are requesting.

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[caption id=“attachment_717746” align=“alignleft” width=“380”] CAPA has made some startling estimates of the additional number of seats that four airlines from just the Gulf - Etihad, Emirates, Qatar and Air Arabia - are requesting.[/caption]

“CAPA research has estimated that bilateral requests from these four carriers, from two Gulf countries, could be in excess of 150,000 seats a week. Etihad is looking at about 50,000 seats per week and another 50,000 could be the request from Emirates. Then, Qatar and Air Arabia may have together asked for 50,000 seats per week,” CAPA’s Kapil Kaul told Firstpost.

If the Government is being benevolent in granting the wish of Abu Dhabi, what stops it from acceding to the requests for massive increase in flying rights to these other Gulf carriers?

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Not just the Gulf airlines, Kaul says CAPA has estimated that Turkey may be asking for a double daily service from Delhi and Mumbai besides a daily service from seven other Indian cities. And other airlines like Singapore may also want an increase in rights (it was just allowed a paltry 10% increase last month).

So are we opening up Indian aviation to an onslaught of well-funded, large network carriers whose arrival could well spell the death knell of not just Air India but also expensive Indian airport infrastructure?

Kaul said CAPA believes expansion of bilaterals is very key part of the Jet-Etihad deal and final valuation may in fact depend to some extent on expansion potential of Etihad in India. Jet has requested for over 40,000 seat entitlements to Abu Dhabi, saying it has plans for massive fleet induction and would like to mount flights to tier II and smaller towns which carry international traffic to Abu Dhabi and then beyond, to other international destinations. At present, the sum total of Abu Dhabi seat entitlements is a little over 13,000 a week.

Why is there such widespread concern over the Ministry of Civil Aviation’s hurry to grant this four-fold increase in weekly seat entitlements to Abu Dhabi?

Kaul says that CAPA has always been advocating that bilaterals need to be expanded but must be linked to India’s short-term and long-term needs and must be evaluated on parameters such as trade and tourism potential with the country in question.

“But India has no mechanism, no policy on bilateral traffic rights. We do this in a very ad hoc manner, with no consultations. There must be a rationale for such game changing increase in bilaterals as the Abu Dhabi one could become. There should be a process of consultations, evaluation of benefits any new flying rights would provide to India in terms of trade, tourism etc. Also, interests of Indian carriers need to be kept in mind”.

What Kaul is saying is this: consider requests from other countries for increasing traffic rights by all means but have the interests of India in mind before signing on the dotted line.

Kaul termed bilateral rights India’s national assets and therefore their allocation should be done judiciously.

Two years back, CAPA had submitted a detailed report to the Ministry of Civil Aviation, citing the need for increasing bilaterals but how there also needs to be a comprehensive and exhaustive process to build a rationale before bilateral rights are allocated to any other country. It seems that report is gathering dust somewhere in the ministry as bureaucrats get ready to fly to Abu Dhabi.

A story in the Hindustan Times this morning speaks of how Jet plans to use Abu Dhabi as a hub for launching flights to North America, West Asia and North Africa. Jet plans to replicate its “Brussels-model” in Abu Dhabi and aggressively use the fifth freedom rights that Indian carriers are entitled to. Fifth freedom rights means picking up traffic from an outside point and discharging it at another outside point.

Brussels is used as a hub by Jet for flights from Delhi, Mumbai and Chennai to Toronto, Newark and New York. “The Brussels-model worked well for Jet as the three flights would arrive at around the same time giving passengers the chance to change flights to their desired destinations. So, if a passenger wanted to travel from Delhi to New York he could change the flight at Brussels for which bookings would be done from Delhi itself.”

Abu Dhabi would be used as a cross-connecting gateway from where Jet would operate flights to Iraq, Iran, Amman, Beirut, Cairo, Addis Ababa, Nairobi and Istanbul. These places are all within 4-hour range from Abu Dhabi and the airline plans to deploy narrow body planes on these routes.