Much ado about Jet-Etihad deal

ASHWINI PHADNIS | Updated on March 12, 2018

What’s wrong with a bilateral deal with Abu Dhabi, if it makes travel cheaper?

It is time to have a clear policy on how the Indian Government wants to work out bilateral agreements on air services. This is the message from the controversy generated over the Jet Airways-Etihad deal.At the heart of the Jet-Etihad controversy is the point that India signed a bilateral agreement on April 24, hours after details of the buy out was made public --- it was after months of negotiations that Jet Airways had finally struck a deal with the Abu Dhabi-based Etihad to sell a 24 per cent stake in the airline for over Rs 2,000 crore.

Etihad is the sole carrier from Abu Dhabi so it will get to operate all the seats from the UAE side while from India the seats will be divided among Jet Airways, Air India, IndiGo and SpiceJet.

Others maintain that India is signing bilateral agreements with all and sundry and that this goes against the interests of Indian carriers. To bolster their argument, they point to the Directorate General of Civil Aviation’s (DGCA) Web site.

A quick glance at the site shows that India has exchanged close to 1,00,000 seats a week with Dubai, Abu Dhabi, Ras Al Khaimah and Sharjah, all of which are within a few hundred miles from one another. For many, this is akin to every State in India saying that it will have its own bilateral air services agreement with various countries globally.

UAE calling

Airlines from Dubai alone are currently allowed to operate 54,200 seats a week to and from India. Two carriers — Emirates and FlyDubai — are allocated the rights from the Dubai side while from the Indian side Jet Airways, Air India, Air India Express, IndiGo and SpiceJet operate to Dubai. In keeping with this agreement, Emirates operates 185 weekly flights linking 10 Indian cities.

Now the Indian Government has exchanged seats with Abu Dhabi which has seen an increase in the number of seats, from 13,600 to 36,670. The equation thus is getting highly skewed in favour of a particular region in the world.

Advantage, Indian traveller

This is one side of the story. Those in favour of the bilateral pact point to the 1.8 million Indians who live and work in the UAE.

Incidentally, this is the second largest number of Indians living in the Gulf region after Saudi Arabia where about 2.45 million Indians live. Indians living in UAE and Saudi Arabia constitute over half the total population of Indians living in the Gulf region.

Those in favour of bilateral agreements argue that more flights to these countries has benefited Indians living there. Earlier, they had to spend their yearly savings to make one trip back home.

But after the exchange of liberal bilateral agreements with various Gulf states, the situation has eased. In this context, they mention how fares between Dubai and interior points in India have tumbled by almost one-third after more airlines have been given permission to operate between the two countries.

What also irks those in favour of the existing bilateral system is that the Government seems to be on the back foot after it signed the bilateral agreement with Abu Dhabi. It needs to explain the rationale behind the exchange of these bilateral agreements.

Senior Indian Government officials, though rather belatedly, have now started justifying the latest exchange of seats with Abu Dhabi, pointing out that Abu Dhabi has agreed to invest $50 billion in infrastructure projects in India.

This is not something new. In the days when Air India was the only India carrier flying abroad from India, its officials used to talk in hushed tones as to how India had exchanged bilaterals with various West Asian states as they had agreed to provide gas, oil and other resources that India was desperately seeking if it provided additional traffic rights to these countries.

Then, the Indian Government did not need to explain its actions as flying was a luxury restricted to very few people, there were very few Indians flying abroad and the competition between airlines, both domestic and international, was not as intense as it is today.

Proactive approach

But in the changed scenario, perhaps the Government needs to be a little more proactive. A possible way forward could be that it makes public a detailed economic analysis of what benefits accrue to Indian passengers, the Indian economy and the Indian aviation industry because of the decisions that it has taken on bilateral agreements.

In fact, this is something that many have been asking it to do for a while. The promoter of AirAsia, Tony Fernandes, has all along maintained that it is necessary to educate policymakers about the multiplier effects of enhancing air services. An Emirates-sponsored study conducted by NCAER also pointed out that allowing the Dubai-based airline to operate 80,000 seats a week into India or carrying 6.16 million passengers would lead to direct contributions to the Indian economy of $363 million and have a multiplier effect of $720 million.

The Government’s unconvincing answers to its critics after the Jet-Etihad deal is not helping matters. And till such time that it decides to change its approach on how it handles the situation, this controversy will keep raising its ugly head.

Published on July 09, 2013

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