Deprecated: Hook custom_css_loaded is deprecated since version jetpack-13.5! Use WordPress Custom CSS instead. Jetpack no longer supports Custom CSS. Read the documentation to learn how to apply custom styles to your site: in /var/www/wp-includes/functions.php on line 6078
Opinion: Jetihad deal means India’s international market belongs to the MEB3 – Bangalore Aviation

Opinion: Jetihad deal means India’s international market belongs to the MEB3

by Vinay Bhaskara 

When Abu Dhabi based Etihad Airlines announced in late April that it had acquired a 24% stake in Mumbai

Will the MEB3 hold sway?

based full service carrier Jet Airways for $379 million, it marked a paradigm shift in the state of the Indian air travel market. The newly formed “Jetihad” partnership would hold a nearly 18% share of international passenger traffic to and from India, versus 13% for Emirates, and 12% for Air India based on statistics from 2011-2012. However, the recently re-written India-UAE bilateral more than trebles the weekly seating rights to Abu Dhabi, which means that Jetihad will likely hold close to 20% of India’s international passenger traffic by 2017.

When combined with Etihad’s gulf rivals Emirates and Qatar Airways (the so-called Middle Eastern Big 3 carriers), Middle Eastern airlines are will effectively control 40% of India’s international passenger flows, and closer to 70% of westbound international traffic.

In practical terms, this is a net positive for Indian air travelers. Middle Eastern carriers are able to offer lower fares than Western and Indian airlines, thanks to favorable labor conditions and the economies of scale offered by their massive super-hubs (larger operations have lower cost per enplanement because fixed costs like terminal rent and ground services are spread over more flights and passengers). The MEB3 carriers offer the most competitively priced westbound international tickets in the Indian market, and the expanded access thanks to the Jetihad deal will only increase the supply of such tickets.

However when one considers the strategic implications for India’s airline industry, the deal has a profound impact. Jet Airways was India’s premier full service carrier due to the demise of Kingfisher and the poor international reputation of Air India. And India’s government has at least verbally expressed its desire for India to develop both a world-class full service airline and a world class hub airport in Delhi, Mumbai, or one of the other metros.

And in pursuit of that goal, India’s dreams have suffered a major setback.  By default, Jet Airways was the one Indian airline that, had it pursued a sensible strategy and taken full advantage of the upcoming integrated terminal at its largest hub in Mumbai, could have conceivably fulfilled such aspirations (unless Air India is privatized – which the present government is unwilling to do). But with the Jetihad deal; Jet Airways’ position in the global airline market has shifted.

One need only consider the shift in strategy by Etihad’s previous equity investments to predict Jet Airways’ international network moving forwards. AirBerlin once had a worldwide long haul network with several destinations in Asia, Africa, and the Middle East. Following Etihad’s investment however, they cancelled the majority of their eastbound long haul destinations (which can be served via connections through Abu Dhabi). A few core routes (Tel Aviv, Phuket, et. al, are still served on airberlin’s mainline platform, but the long haul network has shifted to focus on services to the America and Abu Dhabi. For Jet Airways, thus the path forward is clear. As far as standalone westbound long haul destinations are concerned, only London has enough demand to survive as a nonstop destination. A core network to the Gulf will likely stay in place because of the short distances, but services to the Americas and to the rest of Europe are likely to flow over Abu Dhabi. Meanwhile, expect expansion of services to Asia and other international markets which cannot be easily served on Etihad code shares.

What this means for the strategic vision of an Indian hub is that Jet Airways’ operation in Mumbai will never turn into a massive connecting powerhouse in the vein of Singapore for Singapore Airlines or Frankfurt for Lufthansa. India will not, in the near future, have its own version of Thai Airways International, or even Vietnam Airlines for that matter. Westbound international travel will flow in volume over Dubai, Abu Dhabi, and Doha with business traffic also being captured by the various alliances as well. Absent a significant change in Air India’s status, India’s international air travel market is now firmly in the hands of the MEB3.

About Vinay Bhaskara

Check Also

In new strategy Etihad invests in Darwin Airlines, re-brands it Etihad Regional

by Devesh Agarwal Etihad Airways, the national carrier of the United Arab Emirates, today announced …