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Corporate Jun 12, 2013

Etihad deal means $800 mn is flowing into India, not just Jet: Ajit Singh

By Sindhu Bhattacharya

The Indian Government's decision to allow a four-fold jump in weekly seat entitlements to Abu Dhabi's flag carrier Etihad Airways (by 2015) brought truckloads of criticism to Civil Aviation Minister Ajit Singh's door. Not only have numerous questions been raised over the timing and extent of the deal between Jet Airways and Etihad in the context of these seat entitlements, even a Parliamentary Standing Committee has made scathing comments against the decision.

Now Janta Party's Subramanian Swamy is threatening to file a PIL over the decision unless the Prime Minister intervenes. Meanwhile, Dubai based Emirates and Qatar Airways are clamoring for a quantum jump in seat entitlements too, saying their requests have been pending for a long time. In a freewheeling chat with Firstpost on board an Air India Dreamliner aircraft, Singh held forth on all these contentious issues. Edited excerpts:

Representational image. Reuters

Representational image. Reuters

FP: What is the outlook for Indian airlines in 2013-14? CAPA has said some airlines will return to profitability this fiscal.

Singh: The airline business works on very thin margins. It is dependent on oil prices, global economic scenario etc so estimates can go awry. But domestic passenger traffic has begun to improve in the last two months - it was down last year. Also, FDI will help the sector since banks are already overexposed to aviation companies and now are not in a position to even provide them working capital.

This is where the deal between Jet Airways and Etihad Airways helps. This deal is not only about Etihad buying Jet shares, the Abu Dhabi airline is also investing in things like London Heathrow slots of Jet, in that airline's frequent flyer programme etc. In all, the deal means $800 million is flowing into India.

FP: But the Jet-Etihad deal has seen much opposition. The Standing Committee headed by Sitaram Yechury has slammed it, SEBI has raised several questions and even the Competition Commission of India is examining it.

Singh: SEBI and other agencies have raised certain queries and these are being answered. The Standing Committee has made some observations but there is no report with me. Whatever they have said is among themselves.

And what has Mr Swamy alleged? One of the objections is that Heathrow slots were sold by Jet and that slots are national assets. But the ministry has never had anything to do with slots. We do not decide who these slots are leased out or sold to by private airlines. The other allegation is that the Jet-Etihad deal was done just when the bilaterals were enhanced. But this is not correct. Negotiations between India and Abu Dhabi on seat entitlements were on for 6-8 months. The Abu Dhabi Government wrote to us in January first and then in April...what is the collusion here you tell me? Just that the Jet-Etihad equity deal and bilateral renegotiation happened at the same time?

FP: Emirates and Qatar are now asking for more seats. Will you agree?

Singh: Yes, Emirates has asked. We will evaluate our international passenger growth and also how the existing bilateral rights are being used by Emirates (before deciding on their request). They have not even used the current entitlement fully and I believe they are using only 50,000 seats a week against 54,200 they are entitled to.

FP: What is the update on the AirAsia proposal? Have differences between your ministry and FIPB been cleared?

Singh: The airline has given the names and details of its top foreign directors and these have been sent for clearance to the Home Ministry. When these permissions come, we will help expedite clearances from our ministry for setting up the new airline. Initially, our interpretation of the FDI provision did differ from that of FIPB but now it [the difference] is cleared and the process for AirAsia is smooth.

FP: What are your plans on route dispersal guidelines (which mandate services by all airlines to remote areas)?

Singh: We have now asked the Airports Authority of India to build airport infrastructure in small towns and cities. AAI will get Rs 3000 crore this year (as revenue share) from Delhi and Mumbai International Airports. We want it to deploy this money in building airports and lowering charges for airlines to operate to non-viable and smaller destinations. Airlines will not have to pay landing, parking and navigation charges here. And AAI will get concessions like waiver of municipal taxes etc. Later on, we may ask states to underwrite seats on these sectors. But one thing is clear. The Government will no longer specify any route dispersal guidelines.

by Sindhu Bhattacharya

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