Three-way analysis: How does Emirates respond to Jetihad?

By Oussama Salah, Vinay Bhaskara, and Devesh Agarwal

Photo copyright Devesh Agarwal

The Indian government often makes curious decisions in setting aviation policy. For example, it encouraged Air India to lower prices to gain market share, causing mayhem in the market place and increasing Air India’s losses. It also recently  allowed Air Asia to expand in India by approving a JV with the Tata and Bhatia group, creating an LCC that will put pressure on indigenous carriers like SpiceJet and IndiGo. The latest example is the quadrupling in the number of seats between India and Abu Dhabi due to the recently concluded UAE-India bilateral air services agreement which will mostly benefit the newly formed Jetihad partnership.

A recent Bangalore Aviation analysis of International Traffic Share in and out of India, showed Jet Airways share at 16.01%, Emirates at 13.04% and Etihad at 1.95%. In one fell swoop, Etihad has not only caught up with Emirates, but has effectively almost doubled its total seat capacity because its strategic partner Jet Airways will have access to almost the same number of seats from the Indian side of the bi-lateral agreement. This is visible with the newest route being launched by Jet Airways - Kochi-Abu Dhabi-Kuwait.

The Indian market is important to the Gulf carriers as it is an important source of demand to MENA (Middle East and North Africa) , Europe, and North America. In particular, the North American market is being developed by these carriers at a rapid pace, and new routes such as Qatar Airways’ upcoming services to Philadelphia are heavily dependent on feed from the Indian subcontinent. The latest India/UAE bilateral almost doubles the weekly seat allocation for Jetihad to Abu Dhabi.

Dubai has unofficially asked for a doubling of the weekly seat allocation to Dubai and the rights to serve additional Indian metros but officially requested an increase from 54,200 to 72,400 seats per week.

The problem is that Dubai and Emirates airline in particular are in the cross-hairs of the Comptroller and Auditor General (CAG) of India which has criticised the civil aviation ministry for granting excessive rights to the airline during the tenure of Praful Patel as minister. Emirates is facing the "Devil's Alternative". The spotlight is shining bright on it, however, with India accounting for 11% of Emirates huge global capacity, the airline cannot just let Etihad-Jet Airways (Jetihad) just gobble seat capacity.

Elections are looming next year, some very skilful and smart "lobbying" will have to be done.

Another tactic will be similar to Jetihad. Emirates can opt for to invest in one of the remaining India carriers, IndiGo, SpiceJet, or GoAir, in hopes of gaining additional capacity. It is doubtful the promoters of IndiGo who have access to large sums of cash will accept acquisition, GoAir has indicated its willingness, but is too small within India and does not have any international operations yet. SpiceJet is the wild card. Are the Marans ready to dilute or even exit the airline business with their Maxis and Astro business relations under investigation? Emirates is hesitant to invest in foreign airlines after its poor experience with Sri Lankan Airlines, but will the airline have to bite the bullet to keep its India dominance alive?

Another option is for Emirates to code share with one of the large domestic players like Indigo or SpiceJet in order to increase its Indian feed and encourage them to operate additional flights to Dubai. Emirates currently code share on Jet Airways flights from Mumbai and Delhi to Dubai. Flydubai flies only to three destinations Hyderabad, Ahmedabad and Lucknow and would like to increase its Indian presence (which is less than 2% of its capacity). It is capable of serving smaller secondary airports thanks to its fleet of narrowbody 737-800s, and could provide additional feed for Emirates’ super-hub in Dubai. While flyDubai and Emirates are technically separate entities, both are owned and operated by the government of Dubai and increased integration of the route networks is possible.

But code sharing is a short term solution. Ultimately, the real fix has to be driven through the India-UAE bilateral. Emirates needs the increased capacity for itself and flydubai. Emirates can leverage Dubai’s position as a global business hub and destination for Indians to ask for increased services. Indians are the top expatriate investors in Dubai property (9 Billion AED) and the UAE is the second largest trading partner of India with billions of dollars in reciprocal investments. With almost two (2) million NRIs (non resident Indians) living in the UAE, many affluent, the UAE has a solid basis to ask for increased seat capacity in the next round of bilateral talks. However, it would need to find a powerful Indian advocate to help in its cause. Jetihad was able to secure such a large growth in bilateral capacity to Abu Dhabi in large part thanks to the political influence of Jet Airways head Naresh Goyal. It remains to be seen whether Emirates can find a similarly connected individual to help advance its interests, and by extension those of flydubai and even Air Arabia.

Regardless, with the current state of flux in Indian Aviation, Emirates will not stand still in response to Jetihad, expect something to happen, and soon.

Oussama Salah, who blogs at “Oussama’s Take”, is an aviation geek and aviation professional with 35 years of experience in the Mena/GCC airline industry. He is a regular contributor to Bangalore Aviation with his insightful and knowledgeable comments.

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India and Singapore enhance bi-lateral air capacity by 10%

by Devesh Agarwal

India and Singapore signed a new Memorandum of Understanding (MoU) on bilateral air services arrangement in the presence of Civil Aviation Minister, Shri Ajit Singh and Minister of Transport of Singapore, Mr Lui Tuck Yew on April 2 in Singapore. It rationalizes the capacity entitlements of both countries in terms of seats per week in each direction with a route specific cap for Singapore on each route. The MoU also enhances, by 10%, the capacity entitlement with India now entitled to operate 29,400 weekly passenger seats from India to Singapore and the designated airlines of Singapore entitled to operate 28,700 weekly passenger seats from Singapore to India. No additional point of call has been given to Singapore. India also did not agree to the demand of Singapore for additional point of calls from Pune and Madurai.

The common pool rights to the extent of 5160 seats earlier available to Singapore, which provided greater operational flexibility to Singapore carriers at major metro centres viz Chennai, Delhi and Mumbai, have now been withdrawn. The designated airlines of Singapore can operate with any aircraft type except A-380. The delegation level talks were held between Dr. Prabhat Kumar, Joint Secretary in the Ministry of Civil Aviation and Mr. Yap Ong Heng, Director-General, Civil Aviation Authority of Singapore. Both the sides have agreed to review and update the air services agreement and meet every two years to discuss various air services matters.

Shri Ajit Singh, during his visit to Singapore, also held Minister- level discussions with Minister of Transport of Singapore, Mr. Lui Tuck Yew and Second Minister of Trade and Industry, Mr. S. Iswaran, to explore the possibility of co-operation in the area of civil aviation. Both the sides, while expressing satisfaction on growing trade and economic co-operation, felt that there was a need to foster greater co-operation in the area of airport development and airport management. Besides, institutional- level co-operation is needed in the areas of training in aviation skill development, maintenance repairs and overhaul services, aviation safety and exchange of technology transfer in air space management and air navigation services.

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India seeks Lufthansa help for Air India to join Star Alliance, again. Jet can join too.

At the Directors General of Civil Aviation conference being held in New Delhi, India's civil aviation minister, Mr. Ajit Singh said that his ministry would once again seek the help of German carrier Deutsche Lufthansa for Air India to enter (may be re-entry) the Star Alliance. In August, the world's largest grouping of airlines had rejected the national carrier's application to join the network.

The minister also offered a carrot saying, that the ministry was open to Air India and Jet Airways joining the alliance at the same time. The Star Alliance has already invited Jet Airways to become a member, but the private Indian carrier has not yet initiated formal steps to becoming a member.

The Economic Times reports and quotes the minister

Civil Aviation minister told media that Lufthansa, which is the founding member of Star Alliance, was given a lot of benefits to ensure that Air India joins the grouping.

"I believe a lot of facilities were given to the airline (Lufthansa) so that it would mentor Air India to join Star Alliance. They were given a lot of flights, it was made almost open skies for them. Now we are going to talk to Lufthansa to adhere to the plan we had," Singh said.

This is an exposè of a very serious nature. As AJ from Live from a Lounge puts it

The Government of India, being the interested party, and the owner of Air India, gave away national property (bilateral rights to fly) bringing in a lot of Lufthansa flights to India, just to ensure Air India got into the alliance.

At a time when the country is abuzz with unchecked distribution of natural resources like Coalgate and Spectrum, unbridled granting of bi-lateral air services capacity is a serious charge, one that has been previously levelled on the ministry when Praful Patel was at the helm, by an organisation no less, than the Comptroller and Auditor General of India. But then, coming to think of it, the statement by Mr. Ajit Singh relates to the time when Mr. Praful Patel WAS the minister of civil aviation.

Mr. Singh also informed that the ministry was looking at the all the existing bilateral Air Services Agreements, and exploring if the limitation of aircraft type could be removed. Such a move would mostly benefit existing middle eastern operators to India Emirates, Qatar Airways, Etihad, along with Singapore Airlines and possibly Lufthansa.

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India and Brazil sign new bi-lateral air services agreement

BASIC and BRIC economic group partners India and Brazil signed a new bi-lateral air services agreement (ASA) recently superseding an earlier 2006 agreement, with an intent to drive greater trade, economic investments and tourism between the two nations.

The new agreement allows for any number of designated airlines (which was previously limited to one per country), to operate up to 21 services per week in each direction with any aircraft not exceeding the capacity of a Boeing 747 (Code E) aircraft.

The designated airlines of each side are entitled to operate any point in each other’s territory, via any intermediate point and beyond to any point.

It remains to be seen how this agreement will spur flights between the two countries since no airline from either country operates flights.

There is open sky agreement in existence for all cargo operations between the two sides.

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India set to sign liberal aviation pact with EU

India set to sign liberal aviation pact with EU

NEW DELHI: Indian airlines are set to get an improved access to European destinations. A liberal aviation pact between India and the European Union (EU) is on the cards, which will enable this as well as give EU carriers better access to India. In a way, the pact will work like an ‘open skies’ agreement between India and the EU.

According to civil aviation ministry sources, Indian carriers will get to operate a virtually unrestricted number of flights to European destinations like London, Paris and Frankfurt.

They can also enter into code-share pacts with European carriers without seeking government approval. On a reciprocal basis, European carriers will also get similar market access to India and be able to ink pacts with Indian counterparts without going through elaborate government clearances.

The proposed horizontal aviation agreement between the two sides provides far more flexibility than the air service arrangements being pursued by India with individual EU members. The liberal aviation pact between two of the world’s largest trading partners is expected to be signed in September when prime minister Manmohan Singh visits France to participate in the India-EU summit.

“Germany and the UK have already agreed to the terms of the proposed agreement. We are expected to negotiate with other member states as well shortly. The agreement is expected to be signed during the PM’s visit to France in September this year,” a civil aviation ministry official said.

The EU has similar agreements with China and the US. Currently, 26 bilateral air services agreements exist between EU members and India. The horizontal agreement between India and the 26-member EU would also allow people from either side to book an integrated ticket for travelling by different modes of transport.

It will also ensure technical co-operation between the two sides in areas like aviation safety, security and traffic management.

The proposed pact between the sides would remove nationality restrictions (from the EU side) in the bilateral air services agreements between EU members and India. This will allow any designated airline from the member states and India to operate flights to each other’s territory where a bilateral agreement with India exists and traffic rights are available.

The agreement will also pave the way for routing flexibility to European carriers, which means designated carriers of different countries may use each other’s traffic rights. For example, if a designated French carrier exhausts all its bilateral traffic rights with India, it can still operate additional services using traffic rights of the Netherlands.

But this comes with a rider—the French airline would have to operate from the country whose rights are being used.

It’s estimated that US and EU traffic constitutes about 30% of India’s total international air traffic.

Source : The Economic Times

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