Etihad’s bold push into new territory

The hue and cry in India against Etihad’s deal with Jet Airways, which provides the Abu Dhabi airline access to the lucrative Indian market, is typical of the response of Indian industry and the country’s political class to any instance that allows competition. The industry, used to decades of protectionism and government patronage of inefficiency, has never welcomed change with open arms.

So, it is no wonder that India’s domestic airlines, led by national carrier Air India, have raised an alarm.

There is no doubt that access to the Indian market for Etihad, which picks up nearly a quarter of Jet Airways ownership along with more than doubling of the seats between selected Indian cities and Abu Dhabi, will hurt Air India. But a bigger threat to India’s national carrier is its own inefficiency and lackadaisical approach in terms of operations and management.

Notwithstanding the fact that some of Air India’s fears may be real, in terms of potential loss of market share and the ability of an airline like Etihad, with access to huge resources and international linkages to start a price war, the UAE airline’s move is part of a much bigger gameplan. Air India’s loss may be just incidental.

Etihad’s ascendance as a premier airline has been achieved in tough competition with a world-beater airline like Emirates. In terms of service quality and profile, the Abu Dhabi airline has done quite a bit of catching up and is today ranked among the global frontrunners along with Emirates.

Just as Emirates is increasingly eating into the market share of leading European network carriers such as Air France, Lufthansa and British Airways, Etihad is giving the European carriers a run for the money. In much the same way, Abu Dhabi is now building up as an international hub, an area in which Emirates has achieved phenomenal success and is a major driver of its growth as a leading international carrier.

The Jet Airways deal is seen as a key move in Etihad’s pursuit of its global ambitions as the airline considers access to Indian market fundamental to its organic growth in the coming days. The tie-up brings significant benefits and opportunities to both airlines: it helps Etihad tap into India’s rapidly growing travel market, providing additional passenger traffic to the airline’s Middle Eastern, North American and European destinations while giving Jet Airways access to an expanded global network.

Etihad can now expand operations and introduce new routes between India and Abu Dhabi and combine a network of 140 destinations, with Jet Airways establishing a Gulf gateway in Abu Dhabi and expanding its reach through Etihad’s growing global network. Passengers from 23 cities in India stand to benefit from direct connections to international destinations.

Etihad’s acquisition of a stake in Jet Airways is consistent with its other recent strategic moves, including equity stakes in a number of carriers including Air Berlin, Aer Lingus, Air Seychelles and Virgin Australia. The airline won access to the North American market recently through a code share agreement with Air Canada, which will now connect Etihad’s Abu Dhabi hub with the Canadian airline’s Toronto hub.

The deal effectively opens Canada to passengers travelling from Middle East while giving passengers from Canada access to Etihad’s networks across the Middle East, Africa and Asia.

Etihad is also catching up on new landing rights and bilateral aviation treaties with countries. Emirates had benefited from bilateral aviation deals in the past by virtue of its status as the UAE national carrier by default. But with Etihad taking that position now, benefits from new bilateral deals, such as the one with India, increasing the number of seats between Abu Dhabi and various Indian cities as well as access to the Canadian market, which had earlier been caught up in some contentious issue, will now go to the Abu Dhabi airline’s kitty.

It would do Air India a lot of good to realise that the Etihad game plan is much bigger than competition with the Indian national carrier.