CCI nod formality; Jet-Etihad deal may progress: CAPA

Kapil Kaul of Center for Asia-Pacific Aviation (CAPA) believes the Jet-Etihad deal is unlikely to face further hurdles in its operations except if a PIL filed against it in the Supreme Court. According to him, the approval by the Competition Commission of India (CCI) is just a formality, the deal could progress and get operational. He sees this move as a big positive for the Indian aviation.

Speaking to CNBC-TV18 Kaul says the deal may lead to competition in the international airfares as it will be focusing more on the international operations of Abu Dhabi operations and is unlikely to affect the domestic market.

On Thursday the Cabinet Committee of Economic Affairs (CCEA) gave a green signal to the Jet-Etihad deal, according to which the Abu Dhabi based airline will be able to buy 24 percent stake in the Indian airline.

Below is the verbatim transcript of Kapil Kaul’s interview on CNBC-TV18

Q: The next thing that the deal needs is the CCI nod, do you think that will come through smoothly?

A: I don’t see a challenge with respect to CCI nod. I would expect that the deal is already operational even before the formal CCEA approval came. So, the CCI approval is a formality, the deal could progress and get operational. No issues any more to this deal except if there is a legal PIL pending in the Supreme Court (SC), there might be a challenge from that perspective but otherwise no challenge.

Q: On the issue of competition itself, how does this spear the pitch for all the Indian operators who operate on international skies, is life going to be tough, will margins come under pressure?

A: Prior to the announcement of Tata Singapore deal, I think our behest risk was that our international access is shifting more and more to Middle East. Currently, we have 25 percent of the market share within the top-three Middle East carriers and we see that going forward with Jet-Etihad deal and other bilaterals that will be given in the near-term, we could see that going over 50 percent and that is a big challenge that we would not have a strong robust long haul carrier because Jet is now a Middle East carrier. Though it operates with the Indian license, it is largely going to be supporting a Middle East operation.

Air India is pretty weak, it is pretty vulnerable and if the external and internal environment changes, Air India will be much stronger. So, we don’t have a very strong and robust long haul carrier which was a concern. But after the announcement of the Tata Singapore deal, I am hopeful that the approvals are given to them and that the deal can be put on a fast track, it rebalances to some extent the international traffic from India though Tata Singapore project on the international is depended on the revoking of the five-year 20 aircraft deal.

If that happens, then over a period of time it is possible that India could see rebalancing of India’s traffic to some extent back to India otherwise a shift in Middle East is moving faster than we anticipated.

Q: How will the market share change for Jet Airways post this deal? Do you think there will be a drop in airfares now in the Indian domestic space?

A: Domestic is a different ballgame because this deal is mostly to support international operations of Abu Dhabi. So, you will see a very integrated network which will be part of the Etihad global network, but I am not sure domestic will have any changes.

Q: Do you see the international airfares drop then?

A: Yes, to some extent because some of the routes especially where the new points of call have been approved, you would see the India Abu Dhabi leg becoming almost support for their international flights. To some extent, you will see a very competitive pricing in the international airfares. Domestic is a different business because the cost structure is almost untenable and there isn’t any scope for any further fare reduction.