Clear the runway The Financial Express Tuesday, January 24, 2006 at 0000 hours IST
Task cut out, as airline consolidation takes off Rumblings of discontent have been aired after the much-publicised takeover of Air Sahara by Jet Airways. Civil aviation minister Praful Patel's reaction, that others in the aviation business need not fear a monopolistic situation arising, is clearly a signal to the players and the political establishment (the Left, in particular) that the government will keep an eye on the goings-on, with the takeover giving the combine a 50% market share and considerable clout in terms of fleet and infrastructure. While there is talk of an alliance being cobbled to take on Jet-Sahara, competitors like Kingfisher have already made their apprehensions known. On the flip side, with civil aviation showing signs of a major boom, with several new players planning forays and customers having wider choice, players will be keen to gain first-mover advantages by trying to ally or consolidate, something the minister also underscored. In Jet's case, it has done both. And competition will ensure all players regularly revisit their strategies in an industry known to be under pressure on margins. A consolidation move of this kind gives Jet, the largest private sector player, an immediate opportunity to move up several notches in market share. The real issues, however, are twofold. Critically important are the constraints on infrastructure. With the primary airports of Mumbai and Delhi under severe strain and a woeful lack of support infrastructure at most other airports, the primary task before the government is to ensure these are quickly in place, so the airlines aren't hamstrung on that front. The airport modernisation plans for Mumbai, Delhi and the others will have to be pushed through at the earliest in the interest of airline companies and the consumers. The other, equally important, issue is the fact that the Competition Commission, which ideally would have been the body examining an acquisition of this sort in the absence of a regulator, is still to be activated. Unless these two key issues are addressed, voices of dissent and protest are bound to mark any consolidation attempt in the sector, particularly since several new airlines are waiting to enter the fray.
