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Executives divided on impact of Jet’s entry into West Asia routes

Executives divided on impact of Jet’s entry into West Asia routes
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First Published: Tue, Dec 11 2007. 11 44 PM IST
Updated: Tue, Dec 11 2007. 11 44 PM IST
Mumbai: Jet Airways will operate flights to destinations in West Asia starting 5 January and while some executives in the airline industry expect the company’s entry to trigger a price war, others do not.
The only Indian carriers flying to West Asia currently are Air India, Indian Airlines, and low-fare airline Air India Express, all owned by the state-owned National Aviation Company of India Ltd, or Nacil, and even these carriers use less than 60% of their entitlement on such routes. Flights between countries are usually decided on the basis of bilaterals (or bilateral agreements) and although Indian carriers are entitled to 85,481 seats a week in terms of flights to the region, they actually use only 49,348.
West Asia has a large number of Indian migrants, and flights to the region account for one third of the revenues of Nacil. “Nacil is currently competing with international carriers, including low fare ones. But we can face the competition posed by Jet by making use of the synergy between Air India and Indian Airlines. I don’t think that Jet will go for an aggressive fare war. Instead it would possibly compete with service levels,” said a Nacil executive who did not wish to be identified.
Wolfgang Prock-Schauer, CEO of Jet Airways India Ltd, said that the company would operate flights to Bahrain, Kuwait, Doha and Muscat and that it was in the process of finalizing its schedules. The pricing, he added, would be “decided on a case-by-case basis” and “service” would be the company’s “main strength”.
Jet will operate Mumbai-Bahrain, Kochi-Bahrain, Delhi-Kuwait, Kochi-Kuwait while Doha and Muscat will be connected by both Kozhikode and Mumbai. However, Ajay Prakash, general secretary with the Travel Agents Federation of India or Tafi, said there could be a shake-up in fares in the sector as Jet could come up with introductory prices. “This will have an impact on Air India and Indian Airlines but low fare carrier Air India Express would not be hit as already it is offering lowest possible prices,” Prakash added.
“Jet’s immediate target could be grabbing market share from Nacil. Since there is underutilization of entitlement of rights by Indian carriers, one cannot assume there is huge demand (for flights in the sector). Therefore, Jet will have to lower the fares initially to take away the passengers,” said a Mumbai-based aviation analyst with a foreign brokerage, who did not wish to be named. And Arup Sen, executive director with tour operator Cox & Kings India Ltd, too, said introductory fares could be cheaper than existing fares.
Experience on other international sectors where Jet has launched flights in the past few years suggest that fares are unlikely to drop. The company launched flights to London in May 2005 and New York in August 2007, but, across airlines, there has been no significant industrywide change in fares. Nor has there been a price war between airlines.
The ministry of civil aviation recently lifted restrictions on private airlines operating flights to West Asia and allowed them to do this from 1 January. Jet Airways applied for permission to operate flights to several destinations including Kuwait, Oman, Qatar, Bahrain, Dubai and Abu Dhabi and received permission to do so to the first four locations (the other two are under consideration and Jet did not apply for permission to fly to Sharjah and Saudi Arabia). This is because these routes “will take less time to become profitable than other international routes,” according to the aviation analyst.
“With Jet’s entry, Gulf (West Asia) travellers will have more choices. The demand to this sector is likely to go up with the increase in capacity. Jet’s presence is not going to affect us in (the) near future,” said Naveen Chawla, regional manager (India) of Qatar Airways, one of the leading carriers operating flights to West Asia from India. “The traffic movement between Gulf and India is half a million (passengers) a year. Though I am not aware about the schedule and pricing strategy of Jet, I would presume the carrier would be focusing more on services rather than lowering the fares,” Chawla added.
Apart from the Indian carriers, others including Emirates Airline, Qatar Airways, Gulf Air, Jazeera Airways and Air Arabia operate flights in the sector.
pr.sanjai@livemint.com
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First Published: Tue, Dec 11 2007. 11 44 PM IST