Etihad deal good for Jet, but not for Indian aviation: experts

Jet Airways' decision to sell a minority stake to Etihad Airways for Rs 2,060 crore may not bode well for the Indian aviation sector, especially national carrier Air India, experts say.

India's first major aviation investment by a foreign airline after the government eased ownership rules in September comes close on the heels of Jet seeking a three-fold expansion of air service capacity between India and Abu Dhabi.

The deal will direct traffic away from major aviation hubs in India, such as Delhi and Mumbai, to Abu Dhabi, where Etihad Airways is based, the experts add.

Jitendra Bhargava, former executive director at Air India, told NDTV, "The deal would have been fully, unconditionally welcomed had it taken place three months ago. The very fact it is taking place in the wake of Jet's request to the government that the seats on the India-Abu Dhabi sector be increased from 13,000 seats to 53,000 seats makes it look like that the valuation has been triggered by such a development."

Jet is reportedly planning to connect to 23 Indian cities with Abu Dhabi in the long and medium term, requiring over 41,000 seats per week by 2016.

Under the current bilateral agreement with Abu Dhabi, Indian carriers are jointly allowed to operate 13,300 seats each week on that route, with 2 per cent operational flexibility on this capacity.

Sources told NDTV late on Tuesday that India and Abu Dhabi had agreed to expand their bilateral capacity to over 53,000 seats per week.

On why the deal is not a good development for the Indian aviation sector, especially national carrier Air India, Mr Bhargava said the Indian government's aviation policy is contradictory.

"On the one side you are infusing funds into Air India to keep it afloat and on the other side you are facilitating the taking away of passengers. The deal cannot be described as being in the interest of the Indian aviation industry," he added.

Air India runs up a staggering operational deficit of Rs 14 crore every day, according to the Dholakia committee set up to recommend measures to bring back the ailing airline to profitability.

Kanu Gohain, former director general of civil aviation, told NDTV: "One can read between the lines and say that this deal will certainly funnel out Indian traffic into Abu Dhabi from where Etihad will mount its flights to Europe and the US at the cost of other Indian carriers, particularly Air India."

"No doubt there will be some benefits to passengers, and from the connectivity point of view, but one should understand that if we allow too many concessions and liberty, then after Dubai, Abu Dhabi will become the second hub of connectivity to the Western hemisphere," Mr Gohain added.

Indian carriers, battling stiff competition and high operating costs, have also sought massive expansion in their weekly schedules, with IndiGo demanding over 5,000 more flights, SpiceJet 5,936 more and Air India 2,400 additional services, official sources said.

"It will not end with (the) Abu Dhabi bilaterals. We know Emirates and Qatar Airways are in the queue. There will be no No. 2 left on the India-Abu Dhabi sector," Mr Bhargava said.

"We may say that this will benefit the passengers... You will lose for all times to come the opportunity to develop a hub in Delhi, Mumbai or Kolkata, he added. Why is it that Indian aviation still does not have a national aviation policy?"