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 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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Opinion: Bold admissions Mr. Singh. Now please free Air India

The newly travelling youngsters may not have the pathos, but the Maharaja of national carrier Air India is a brand cherished by most persons of my age, with ties to India. We remember, with pride, the fact that Air India was the first all jet airline in the world; one of the earliest adopters of the Boeing 747 jumbo jet and the Airbus A300. We cherish the warmth and grace of days gone by, and then we are dragged in to the present and land, with a thud, on the dismal state of affairs at the airline today.

Sloth rules the daily operations, political interference is the mantra, petty factionalism hollows the foundations like termites sucking the resources of the airline without a care for the consequences.

Every so often, one puts aside rational thinking and tries to feel some sympathy for Air India, hoping against hope, for some optimistic future for the beleaguered airline, and then Air India delivers, with amazing regularity, a dose of bad news; and it is almost always, self-inflicted.

Over the last few days the airline is being blackmailed by the striking Indian Pilots Guild (IPG) representing erstwhile Air India pilots, who want exclusive access to the Boeing 787 Dreamliner, blocking the re-training of their pilot "colleagues" from the pre-merger Indian Airlines, despite a Supreme court ruling to the contrary.

It borders on criminal, that such petty issues are being used to justify the cancellation of almost the entire international schedule of Air India, causing it daily losses already in the hundreds of crores, less than a month after the government has committed a whopping Rs. 30,000 Crore ($6 billion), taxpayer funded, bailout of the airline, an amount greater than the central government's outlay for the health department this year.

The IPG is a perfect example of the political and labour aristocracy nexus that plagues Air India. This pilot's union's is led by Jitendra Awadh, who is not a pilot, but a career politician from the same party of former civil aviation minister Mr. Praful Patel, during whose tenure, Air India went from profit, to annual losses topping $1.5 billion.

Unlike Mr. Patel who ducked last year's scathing indictment by the Comptroller and Auditor General (CAG) of his ministry's operations, the current minister Mr. Ajit Singh made some refreshingly candid admissions during his interview with Karan Thapar on CNN-IBN. (Watch the 22 minute video here.)

He accepted that government should not be in the service industry, especially a specialised one like an airline. He accepted that the days of a government owned national carrier are long gone. He accepted that the merger of Air India and Indian Airlines, forced through by Mr. Patel, and considered one of key reasons for the ills of Air India, is still only on paper, far from complete, and receiving only lip service at best.

Undeniably true statements Mr. Minister, but then, when you admit government's inability to run an airline, why keep perpetuating the folly by insisting on government control of Air India's operations? When you admit that government owned national carriers are extinct like dinosaurs, why pretend to try and revive Air India, that too, under government interference?

Sir, if you truly believe in your admissions, and I believe you do, you need to abandon all this pretence that is at the heart of Air India's problems. Stop throwing good money after bad. Stop this criminal waste of taxpayer money, which is on the surface ostensibly committed to revive the airline. Stop protecting "past managements".

Air India has still has some capable people, but they are drowned out by the hordes of political lackeys that have infected the airline over the years. Unlike your many predecessors, you have shown your resolve by not bowing to the blackmail of strikers, now you need to raise the sense of responsibility up a notch. You have to isolate and remove all the causes of failure, in all quarters, right from the ministry to the doorman at Air India's office.

Air India can be revived, but never while its operations are under government control. Yes, it will be a herculean effort to loosen the stranglehold of the vested interests, but it can be done. If not full privatisation, take a leaf out of Mumbai, Delhi, Bangalore, and Hyderabad airports and commence with PPP (Public Private Partnership).

Use the PPP route to transparently auction and place Air India's operations under private control. Give that private management the freedom to run the airline, and deliver the benchmarks, goals, and results you have already demanded from and agreed to with Air India.

It is time to free Air India Mr. Singh.

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Tailspin: Praful Patel and the fall of Air India - A must read article

It is not very often that I recommend an article that appears in the print media.

The Caravan is one of the oldest publications in India, first launched in 1940.

In the December 2011 issue, Praveen Donthi has written a mammoth article going into great detail the history of Mr. Praful Patel and his recent tenure as civil aviation Minister, and the conincidental disasters suffered by the national carriers Air India and Indian Airlines.

It is one of the most comprehensive articles any serious Air India watcher or aviation analyst must read.

I must warn you though. The article is long. 12,000+ words, over 500 lines. So I suggest printing it or copying it on to an e-book reader.

Read "Tailspin: Praful Patel and the fall of Air India"

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TV Interview: Karan Thapar grills Praful Patel on the Air India C.A.G. report

Noted TV personality Karan Thapar grills former civil aviation minister Mr. Praful Patel in this interview on CNBC-TV18.

Mr. Praful Patel is known to be a smooth operator. One might even call him the "Teflon Minister". It is interesting to see Mr. Patel squirming, trying not to answer directly and trying to divert the what he wants to say, and certain actions which point a needle of suspicion at the functioning of the ministry under his leadership.

Mr. Thapar is known to be a skilled interviewer, and did raise a direct question -- one on the minds of many Indians. "Why did your government (UPA-1) not shut down or privatise Air India instead of creating this massive boondoggle?"

As expected no clear answer from the former minister.

I was surprised that Mr. Thapar was not his usual aggressive self, instead, letting the former minister go hammer and tongs at the Comptoller and Auditor General in an effort to deflect criticism.

You can download the complete CAG report here. It is worth the read, especially Chapter V, the part on bi-laterals and the role of the ministry.

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