Home/ Opinion / Jet-Etihad deal and the national interest

That the Indian government was willing to approve an inordinate increase in bilateral flying rights to United Arab Emirates seems to indicate that not much has been learnt from the trenchant criticism by the national auditor of a previous such decision. At that time, the beneficiary of the award of flying rights was Dubai’s Emirates. This time around, Jet Airways and Etihad are the ones with the most to gain.

Once again, national interest seems to have been subordinated to what is best for one airline company or the other. The government is making far-reaching policy decisions on an ‘airline-to-airline’ basis.

Jet Airways had sought additional rights for the next three years to fly 41,600 seats a week to Abu Dhabi, ahead of the deal to sell a stake to United Arab Emirates’ national airline Etihad Airways PJSC, which operates out of Abu Dhabi airport. Following the announcements on the Jet-Etihad deal, the Indian government said late on Wednesday that seats would increase by 36,670 until 2015.

That’s more than the 26,600 seats a week available for all Indian and Abu Dhabi-based airlines put together to fly between the two countries. Bilateral negotiations between two countries for increasing airline seats take place only when the existing allotments become insufficient. That’s not the case here -- Indian airlines haven’t exhausted these allotted seats.

The ministry feels the Etihad deal is critical for India’s second-largest airline by passengers carried as its debt stands at $2.6 billion.

Mumbai and Delhi airports have protested against the proposal as Jet Airways, if it gets the additional seats, will start moving at least a third of its international passengers through Abu Dhabi, hurting the aspirations of these private airports to become global gateways like Dubai or Singapore.

State-run airline Air India Ltd and other private airlines have raised concerns about the implications of Etihad investing in Jet Airways. They warn that UAE-based airlines such as Emirates and Etihad will then opt to deploy more seats in India to move international passengers via their respective hubs.

Ironically, Jet had been against the move to allow foreign investment in Indian airlines. The policy decision came through in September largely in response to hectic lobbying by the cash-strapped Kingfisher Airlines Ltd -- again an airline-specific measure. Naresh Goyal, founder and chairman of Jet Airways, had been in the forefront of the fight against allowing international airlines a stake in local carriers and then dumping capacity in India.

Air India, which is complaining about the Jet-Etihad case, has a sweetheart deal of its own. The government last year decided to pump more than 30,000 crore into the carrier while its domestic rivals were reeling under heavy losses. This tax payer-funded bailout gave Air India a fresh lease of life to fight its rivals. This again is an airline-specific policy that will have serious repercussions on India’s civil aviation.

Former civil aviation minister Praful Patel had said in 2007 that he would consider the plea of Indian airlines to be allowed to fly abroad on a “case-to-case basis". Such a mindset seems to persist. But for how long can the Indian government make policy on a case-to-case basis?

Consider also that the India will gain greater access to one city, Abu Dhabi, in the latest instance and in return have to allow carriers from there to fly to a dozen or so cities in this country.

In 2011, the Comptroller and Auditor General held the civil aviation ministry responsible for the deteriorating financial health of Air India because it had given away bilateral rights and permitted foreign airlines to pick up passengers from India to various parts of the world through their hub airports. In its report, CAG suggested a roll-back of some of these bilateral rights granted to foreign airlines.

Those who don’t learn from their mistake are doomed to repeat them and this seems to be what the government is doing, sidelining national interest and long-term sector growth in the interest of a particular airline at a time when the big carriers of Europe, West Asia and South East Asia are aggressively vying for a pie in India, the ninth-largest aviation market in the world.

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Updated: 25 Apr 2013, 01:26 AM IST
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