Jet-Etihad deal: How AI will take on competition in foreign skies

Now that Jet Airways has struck a jackpot with the Etihad deal by pushing for a massive increase in seat entitlements to and from Abu Dhabi, Air India is planning an aggressive expansion strategy by using direct flights from India to the US and Europe, with New Delhi as its base. The global trot includes five non-stop destinations in five months along with code share or a seat (sharing) arrangements with foreign airlines.

[caption id=“attachment_741177” align=“alignleft” width=“380”] Reuters[/caption]

In an interview with Mint, Air India’s chairman and managing director Rohit Nandan said the national carrier is geared up to face the challenge from the Etihad Airways-Jet Airways combine by connecting Delhi to Rome, Milan, Moscow, Melbourne, Sydney and Birmingham via direct flights. Air India will also only deploy its new Dreamliner 787s on these routes as it competes with other airlines.

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“It is a better product and better price that will win,” said Nandan.

He was even quoted by the Economic Times as saying,"We offer a different product, which is non-stop flights and we take passengers directly to destinations as opposed to flying them via another stoppage. Market will grow and I don’t want to give a kneejerk reaction. In fact, I want to be optimistic to tackle new competition."

On the other hand, Jet-Etihad plan to offer flights from several Indian cities to Abu Dhabi and then onward connections to the US. As a Firstpost article said earlier , “Why would a passenger want to pay more to reach the Americas if a cheaper option via Abu Dhabi is available? Jet can buy much cheaper fuel at Abu Dhabi, making its cost of operations lower than Air India.”

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While Nandan does sound a tad optimistic, it should not forget that any expansion plan depends on government support through equity infusion, for a fifth of AI’s international traffic diverted to the Jet-Etihad combine would certainly mean trouble for an airline which has only recently begun to make operational profits.

So far the government has infused Rs 800 crore into the airline of the Rs 5,000 crore it promised to infuse in the next fiscal as part of its turn around plan.

And, moreover, how does AI plan on retaining its 20.2 percent market share in the domestic market?

“We will use two of our 787s this year as a premium product in the domestic market to ply on metro routes. Earlier, we were flying them on the Chennai, Kolkata, Bangalore route from Delhi, so two of these 787s will continue to cater to the domestic market from now on,” Nandan told Mint.