NEW DELHI:
AirAsia India, which plans to start operations sometime this year, knows it will have to fight hard with existing carriers for a piece of the market. Actually, the battle with rivals has already begun, even before
Tony Fernandes’s joint venture with the
Tatas takes wing. The latest round is being fought in the Directorate General of Civil Aviation (DGCA), with the incumbents strenuously objecting to the grant of an air operator’s permit to AirAsia India and complaining that the new entrant will disrupt industry “equilibrium”.
Gurgaon-based low-cost carrier
IndiGo, the country’s airline largest by
market share, and the Federation of
Indian Airlines lobby group have both objected to AirAsia’s entry. The letters, reviewed by ET, were in response to a public notice from DGCA seeking objections and suggestions on granting the permit. A DGCA official told ET that the views would be taken into consideration and a decision arrived at “soon”.
IndiGo President Aditya Ghosh said the relaxation of foreign direct investment rules in September 2012 had not been aimed at helping set up new projects but was meant to act as a lifeline for loss-making airline companies laden with debt.
“IndiGo’s primary objection opposing the application of
AirAsia India Private Ltd for grant of licence to operate a new greenfield scheduled airline in India is based on the grounds that it is not permitted under the foreign direct investment policy as enunciated by the government,” the letter said. “The reason and rationale of the policy was to provide the opportunity for existing airlines to access muchneeded capital, improve the viability through expanding route networks and skills from international airlines,” it added. Both representations are identical except for some changes.
FIA’s letter has been signed by the associate director of the lobby group, Ujjwal Dey. The association represents
Jet Airways, GoAir, SpiceJet, IndiGo and
Kingfisher Airlines, the last of which hasn’t been flying since October 2012.
The points have been raised before, Ghosh said in an SMS reply to queries. “IndiGo has not raised any new objections,” Ghosh said. “Subsequent to the objections filed by the FIA on behalf of Jet Airways, Jet Lite, SpiceJet and GoAir on February 11, IndiGo only sent a letter on February 17 to the DGCA in support of some of these objections.” It should be pointed out that IndiGo is the country’s only carrier that has consistently been making profit. As an unlisted company, it’s not obliged to make quarterly earnings announcements.
FIA and IndiGo both said a new entrant is not in the “long-term interest of existing airlines and consumers of the country.” They add: “The new joint ventures would have the opportunity to unfairly compete with the existing airlines, with huge losses and starved of capital, and thereby ensure that the existing airlines become even more vulnerable which could result in their ultimate closure.” FIA said the service proposed by AirAsia would result in “wasteful duplication” and “diversion of traffic” from existing airlines. IndiGo said that under “no circumstances” was the aviation sector ready to “inherit a fresh airline”.
IndiGo and FIA also said a damaging price war was likely to ensue, which would “only lead to cumulative losses”. But that should also be read in the context of AirAsia having stopped international operations to four Indian cities, which would indicate that the local carriers flying those routes have been competitive, as ET reported on February 15.
According to the submissions of both IndiGo and FIA, the accumulated losses of existing airlines as of March 2013 have hit Rs 77,000 crore. A senior aviation ministry official said the objections weren’t a surprise.
“We had expected such comments from the airline industry, but we have been very clear that the
FDI policy is for both greenfield and brownfield airlines,” said the person, who didn’t want to be named. “However, the final call remains with the DGCA.”
It’s pertinent to note that Subramanian Swamy’s petition against AirAsia’s application is coming up for hearing in the
Supreme Court on Friday. FIA’s petition has been tagged along with that of Swamy. IndiGo had previously welcomed the prospect of competition.
