Logistics

Deal may offer IndiGo a new hub, Gulf airline more seats from India

Ashwini Phadnis New Delhi | Updated on November 05, 2019 Published on November 05, 2019

Akbar Al Baker, CEO of Qatar Airways   -  PTI

Rahul Bhatia, co-founder, IndiGo

IndiGo, Qatar Airways partnership

The strategic business announcement between IndiGo and Qatar Qirways, which is to be announced on Thursday in Delhi, will take forward the close relationship that exists between Rahul Bhatia, co-promoter of IndiGo, and Akbar Al Baker, the Chief Executive Officer of Qatar Airways.

The fact that Bhatia and Al Baker are the best of friends is one of the best kept secrets in the global aviation industry. It is not uncommon for Bhatia and Al Baker to meet almost every time that they are in Delhi.

But can this friendship be transformed into a business deal? What can the two friends bring to each other’s airlines which can benefit both of them as well?

A win-win deal

The moment the invitation for the announcement came in, media circles have been rife with speculation about what this means for the two airlines and more particularly for IndiGo as Bhatia has been engaged in a prolonged open and legal battle against the other co-promoter of IndiGo Rakesh Gangwal. Is this Bhatia’s way of getting Gangwal to move aside once and for all and where will the strategic partnership between IndiGo and Qatar leave Gangwal? But leaving these questions aside, the first conclusion that can be drawn from the strategic business announcement between IndiGo and Qatar is that Qatar Airways can pump in equity into IndiGo — especially after IndiGo posted a ₹1,062-crore loss for the quarter ended September 2019.

India allows 49 per cent stake in domestic airlines and Qatar Airways has always shown an interest in having a stake in an Indian carrier.

Indo-Turkey ties

Then Qatar’s capital Doha can offer IndiGo the option of moving from Istanbul from where its tie up with Turkish Airlines offers the Indian carrier the option of carrying passengers from India to European destinations such as Amsterdam, Athens, Tel Aviv, Brussels, Paris and Prague on Turkish flights.

At the moment, relations between India and Turkey are not the best with Prime Minister Narendra Modi cancelling a proposed visit to Turkey after it raised the Kashmir issue at the United Nations General Assembly and also backed Pakistan at the Financial Action Task Force meeting.

Stake sale, financials

All these sound good for IndiGo; but what should not be forgotten is that in September this year Qatar Airways itself posted a net loss of $639 million, which was attributed to a loss of mature routes, higher fuel costs and foreign exchange fluctuations.

Two of these reasons are also applicable to IndiGo — high fuel costs and exchange fluctuations. So, both the airlines are not exactly in the pink of financial health.

Besides, Al Baker has made it clear more than once that the problem lies in the fact that the possible stake sale in IndiGo, if it were to happen, was too small to interest Qatar Airways.

“We have shown our interest to IndiGo many times. They are not ready, apart from the IPO, for a very small stake. We do not want to take 2-3 per cent stake. We will take substantial stake, at least 10-15 per cent,” Al Baker had told Indian media in September last year.

What the two airlines can possibly do is announce an enhanced code sharing partnership on Thursday which will allow each airline to carry each other’s passengers. This will be a win-win for both. Qatar Airways has the least number of seats to and from India among most of the big West Asian carriers.

While Emirates is operating 61,209 seats a week on its 171 weekly frequencies from India in the on-going winter schedule, Etihad Airways from Abu Dhabi is offering 42,525 seats a week on its 154 weekly flights. In comparison, Qatar offers 24,674 seats a week on its 102 flights. These three airlines are known as the big three Middle East carriers globally.

Published on November 05, 2019
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.