Mumbai, Jan. 19: Indian Airlines, the state-run carrier that once dominated the country’s skies, maintained a studied silence on Jet Airways’ takeover of Air Sahara, but its perky, private rivals clamoured for immediate government intervention to halt the creation of a new monopoly that could ground their operations.
The big beef is over precious airport infrastructure that Jet Airways will now control.
“We are not concerned about the combined entity cornering a market share of more than 50 per cent; we are worried about the resultant monopoly in the airport infrastructure whereby Jet Airways may get more parking slots and more aircraft. The government should sort out the infrastructure issues,” said Vijay Mallya, chairman of Kingfisher Airlines, which dropped out of the race for Air Sahara recently.
Kingfisher had submitted a bid for $400 million, much lower than the Ernst and Young valuation of between $750 million and $1 billion.
Most players admit that a wave of consolidation in the airline industry is inevitable, but they are worried about the ramifications for the future if another monopoly is built.
“Any consolidation is good for the industry and this acquisition will create greater segmentation between full-service and low-cost carriers,” said Ajay Singh of SpiceJet. “However, the government should ensure that the larger market share is not used in any anti-competitive manner like an irrational price war to create a monopolistic environment, which will prove detrimental for the industry.”
The quibble over the numbers has already begun: most private airline officials said the merger would create a new monolith with a market share of well over 50 per cent. Naresh Goyal, chairman of Jet Airways, however, said Jet has a market share of about 35 per cent now and this would go up to about 41 per cent after it takes over Air Sahara.
“It is early days yet to gauge the business strategy which would be adopted by Jet Airways post acquisition and any attempt to guess whether they would adopt monopolistic measures would be totally speculative,” said a senior Air Deccan official.
“We are sure that the government realises that creation of a monopoly is bad for any industry. The aviation sector, which has recently started witnessing a boom, should not be subject to such vagaries,” added an Air Deccan official.
GoAir, the latest entrant into the sector, also voiced its concerns over the allocation of infrastructure facilities among the new entrants and the low-cost carriers.
“While the deal makes a lot of business sense for Jet Airways and should create healthy competition in the industry, the only thing that worries us is the infrastructure allocation,” said Jeh Wadia, managing director of GoAir.
“However, we have no doubt that the government will ensure that the infrastructure is allotted equitably. We will surely form a single industry voice in the coming times and voice our concerns to the relevant authorities,” he added.
“We believe that the deal is not proper since different licences have been issued to different parties and two parties cannot gang up in such a manner and put other players at a disadvantage,” said an official of another leading airline.