Will Jet Airways’ grounding end up benefiting foreign players more than its Indian rivals?

Not ready for competition?
Not ready for competition?
Image: REUTERS/Vivek Prakash
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The lure of India’s fast-growing aviation market is attracting more foreign carriers to the country.

Domestic airlines like IndiGo and SpiceJet, which have been aggressively adding aircraft and international destinations recently, may soon have to contend with Delta Air Lines, Virgin Atlantic, and Air France-KLM that are eyeing a share of India’s huge outbound passenger traffic.

These carriers are former partners of the now grounded Jet Airways, which had inked code-sharing agreements with them. The pacts enabled Jet’s passengers to book seats on any of these airlines to European and US destinations.

Ever since the debt-laden Jet halted operations on April 17, its foreign partners have been looking to start overseas services from India on their own.

“When the situation with Jet arose we decided it was important to continue our growth plans in India,” Dave Hodges, country manager of the UK-based Virgin Atlantic India, told Quartz. “We acted quickly to announce a new service starting on Oct. 28 (this year) connecting Mumbai with London, and onwards to the US.”

Delta Airlines, too, is launching its own services. “Delta is looking forward to launching its non-stop service between Mumbai and New York’s JFK (John F Kennedy international airport) on December 24, 2019,” a spokesperson for the US-based carrier told Quartz.

The new route will mark the re-entry of Delta to Indian aviation since it suspended a Mumbai-New York non-stop flight in 2009, after three years of operations.

Similarly, the European airline Air France-KLM, is expected to increase the frequency of its flights from Mumbai to Amsterdam. It is also planning to roll out new flights from Bengaluru soon.

A moot question that arises from this is: will foreign players upset the global plans of Indian carriers?

Impact on Indian aviation

Some experts feel the entry of foreign players will have a negative impact on Indian aviation.

“Many (domestic) carriers are addressing the capacity constraints that the industry witnessed after Jet’s grounding and are already expanding their fleet on a large scale. With foreign players coming in, the sector could be prone to over-supply,” said Kinjal Shah, aviation analyst at the rating agency ICRA.

However, there’s a counterview.

“There isn’t any big player who has replaced Jet on international destinations. Besides, these foreign airlines can provide the value for money to customers with their quality service, leading to healthy competition in the industry,” said Ashish Nainan, research analyst at the credit ratings agency CARE.

At present, Air India is the only long-haul carrier with non-stop flights on international routes. SpiceJet, IndiGo, and Vistara are announcing new routes but none of them can fill capacity glut left by Jet’s collapse.

Before its grounding, Jet accounted for 12% of the 7.8 million passengers headed overseas in the quarter ended December 2018. In January this year, it carried over 360,000 outbound passengers from India—more than any other airline, according to the industry watchdog directorate general of civil aviation (DGCA).

Data from the online travel platform ixigo shows the bookings of Jet fliers mainly got diverted to airlines like Indigo, GoAir, and Vistara. But the growth has been in single-digits.

Good for flyers

While the impact that foreign airlines will have on domestic aviation is debatable, international flyers can certainly expect better deals.

“Post suspension of Jet flights, strained capacity combined with an increase in travel demand led to 35-40% increase in airfares in the (peak) travel period of May and June this year,” an ixigo spokesperson said. “With several international airlines now launching new direct routes and exploring new codeshare agreements with Indian  carriers we expect international airfares to normalise over time.”

Experts are of the view that the new players will trigger competitive pricing for European and US destinations. “Flyers have been paying massive prices owing to different reasons and some new players entering the market give hope of fare correction which is long due,” said a Mumbai-based aviation expert on condition of anonymity.