Home / Politics / Policy /  GMR, GVK protest ministry move to expand Etihad access into India

GMR, GVK protest ministry move to expand Etihad access into India

The granting of rights to Emirates, made when Praful Patel was aviation minister, have been criticized by the Comptroller and Auditor General (CAG), which said India’s interests were not protected in the bilateral talks with Dubai. Photo: Bloomberg (Bloomberg)Premium
The granting of rights to Emirates, made when Praful Patel was aviation minister, have been criticized by the Comptroller and Auditor General (CAG), which said India’s interests were not protected in the bilateral talks with Dubai. Photo: Bloomberg

(Bloomberg)

Those against the plan say sweeping access to Etihad will mean India will never have an airport hub of its own

New Delhi: India’s airlines and airports have opposed a request by Jet Airways (India) Ltd to increase the number of seats between Abu Dhabi and India by almost 400% because such a move would likely make the West Asian city a hub for flights in and out of the country, at the cost of an Indian airport.

Jet is seeking an investment from the West Asian state that owns Etihad.

Those opposed to the proposal believe that agreeing to it will only see a repeat of what happened with Dubai’s Emirates. That airline now has 54,200 seats between India and Dubai, up from 10,400 in 2003-04, and, consequently, Dubai has become a hub to serve air traffic into and out of India.

Those against the plan include GMR Infrastructure Ltd, which runs Delhi and Hyderabad airports; GVK Power and Infrastructure Ltd, which runs the Mumbai and Bangalore airports; the state-owned Airports Authority of India (AAI) that runs most of the other airports in the country, and airlines including state-owned Air India, InterGlobe Aviation Ltd-owned IndiGo, and SpiceJet Ltd.

GMR and GVK, which have together spent $7 billion (around 38,500 crore today) on the development of the four airports, told the ministry at a Thursday meeting that allowing such sweeping access to Etihad would mean India will never have an airport hub of its own, according to two people familiar with matter who were present at the meeting and who didn’t want to be identified.

“We created a hub for India in Dubai by allowing Emirates so many rights to India. Now we are making another hub in Abu Dhabi. This cannot be allowed. Prime Minister Manmohan Singh had said at the inauguration of Delhi airport that Delhi would be made the new hub for India," said one of the two people.

The granting of rights to Emirates, made when Praful Patel was aviation minister, have been criticized by the Comptroller and Auditor General (CAG), which said India’s interests were not protected in the bilateral talks with Dubai. CAG had told the government in its audit that more flying rights should not be granted till India had its own hub. A GMR spokesman said the group has reiterated its opposition to the move in a letter to the civil aviation ministry. A GVK spokesperson also said his company had expressed its reservations on the issue.

In the past few years, modern airports have opened at Mumbai, Delhi, Bangalore, Hyderabad, Chennai, Kolkata and elsewhere and many of these can handle transit traffic. Some could even become hubs.

“AAI as well as private airport operators have invested heavily in the modernization of India’s gateway airports which are by now well equipped to handle transfer traffic on a large scale," GMR’s spokesman said in an e-mail.

“The two major gateway airports Delhi and Mumbai currently account for over 50% of international capacity. The development of a hub at closer proximity would adversely impact further growth of these gateways as hubs," he said. “The recovery of investment and growth of these airports as well the benefits associated with a gateway airport will also have adverse impact. From this angle we feel, it is an area of concern as we are already lagging behind in developing a hub in the country."

Thursday’s meeting was chaired by civil aviation secretary K.N. Srivastava.

GVK also opposed a request that Etihad be allowed to start flights directly to Pune because of the proximity of this airport to Mumbai’s airport that has been redeveloped at a cost of $3 billion by the company, said the second person.

Indian airlines present at the meeting also opposed the move. The Air India executive present at the meeting said the company would have to cancel all flights to the US within a month of access being given to Etihad, the second person added.

Mint reported on 31 January that Air India chairman Rohit Nandan warned the government in a 10 December letter to aviation secretary Srivastava about the risks to domestic carriers of allowing foreign airlines to invest in Indian ones. The government allowed such investment to the tune of 49% in September last year.

Aviation secretary Srivastava did not respond to calls and text messages seeking comments.

Civil aviation minister Ajit Singh, could not be reached for comments late evening.

Jet Airways’ Naresh Goyal also held a meeting with Singh on Thursday, according to PTI.

This person cited above also said that IndiGo and SpiceJet believed there wasn’t enough traffic on the sector to sustain such a huge increase in seats.

Air India, IndiGo and SpiceJet, didn’t respond to e-mails seeking comment.

Dubai-based Emirates has 185 flights to India every week compared with about 52 for Etihad, Nandan said in his December note. He added that Emirates had been able to lure away international traffic from India using Sri Lanka’s traffic rights through its investment in that country’s national airline over a decade until 2010 by integrating schedules.

There could be a repeat of this, he warned.

The ministry didn’t respond to Nandan’s letter.

On 5 April, Jet Airways wrote to the civil aviation ministry asking it to start talks immediately with Abu Dhabi as the airline needed an additional 40,000 seats to expand over the next three years.

“As the capacity requirements are larger than those currently available under the existing bilateral arrangements, we request for the initiations of bilateral talks with Abu Dhabi to enhance the capacity available in order to meet these requirements," Jet’s Ragini Chopra wrote in the letter that has been reviewed by Mint.

Jet confirmed it has sought more seats to Abu Dhabi.

“Jet Airways has evaluated the business, tourism and travel potential of the Indian market, basis a comprehensive assessment and has accordingly applied for the grant of additional capacity entitlements to increase services to Abu Dhabi. The airline has a network strategy and a fleet induction plan to support this growth," a Jet Airways spokeswoman said in a statement late evening.

On 16 April, the ministry issued a letter to all the airlines and airports calling for an “inter-ministerial meeting to finalize the negotiating strategy for forthcoming bilateral air services talks between India and UAE (Abu-Dhabi)".

Etihad, West Asia’s third-largest airline, is in discussions to buy a 24% stake in loss-making Jet Airways for about $300 million, a ministry official had said in December.

The talks have not yet concluded.

An analyst said that besides the airports, Air India and IndiGo maybe the hardest hit by sweeping Jet-Etihad access to India even as it brings Eithad parity with Emirates.

“What would happen is that Jet and Etihad would have the biggest domestic presence and at the same time, their exposure would be greatly reduced given that they are both sharing the spoils of the market," said Saj Ahmad, a London based aviation analyst. “While it will help achieve a sort of parity with Emirates, what it will also do is put the likes of Air India and IndiGo on alert. IndiGo may respond with lower fares etc., but at the premium end of the market where IndiGo is non-existent, a Jet-Etihad tie up would spell disaster for Air India."

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