IA puts a bump on Jet’s runway

Indian Airlines CMD Vishwapati Trivedi has shot off a letter to the ministry of civil aviation protesting that Air Sahara cannot transfer its airport infrastructure that it does not own to Jet, which had recently bought Air Sahara

By Shahid Faridi

The controversy surrounding Jet Airways owner Naresh Goyal's decision to buy out Air Sahara has taken a new turn with Indian Airlines chairperson and managing director (CMD) Vishwapati Trivedi shooting off a letter to civil aviation secretary Ajay Prasad, questioning the right of Air Sahara to transfer some of its airport infrastructure, such as landing slots and parking bays, to Jet Airways.

Jet airways had announced an all-inclusive cash deal worth $500 million (Rs 2,300 crore) to buy India's third-largest carrier, Air Sahara. The deal, however, is awaiting regulatory approvals.
In the letter, Trivedi has drawn the attention of the civil aviation ministry to the statement made by Naresh Goyal that "the primary aim behind the acquisition [of Air Sahara by Jet Airways] is not to secure higher market share but to get a right to the airport infrastructure now used by Air Sahara".
Trivedi said that while it was evident that the government would examine the proposed merger from the competitive aspect and dominance in the market, the statement of the Jet Airways chairperson regarding the automatic transfer of facilities at the airports to the combined entity "also needs a closer scrutiny".

Explaining the circumstances in which the airport infrastructure was given to the new airlines after the liberalisation of the Indian civil aviation sector in early 1990s, the Indian Airlines CMD said that the landing slots and parking bays were given to the new entrants strictly on the basis of runway capacity, parking capacity and terminal capacity at various airports at different points of time.
While doing so, the then existing operators, Indian Airlines and Air-India, were not given any special rights to specific slots even on those routes that Indian Airlines could not use due to a shortage of pilots at that time.

"The slots were allocated purely on the basis of schedules filed and requirements projected. If any values were attached to these facilities, it would have tremendously benefited the existing carriers in terms of pure monetary value and thereby would have enhanced the value of the sole shareholder of Indian Airlines and Air-India, that is, the Government of India," Trivedi wrote.

The letter by the Indian Airlines CMD has come at a time when the ministry of civil aviation and one of its wings-the directorate general of civil aviation-has to pronounce its decision on whether to allow airport infrastructure to become part of the Jet-Sahara deal.

Trivedi said that the Jet Airways-Air Sahara deal "by its very emphasis on infrastructure and slots, places a very heavy value on so called rights to such physical infrastructure at airports. In our opinion, the value of such infrastructure should be realised by none other than the Government of India and/or the Airports Authority of India, and shared with the various operators in an equitable manner."

He suggested that, based on the existing policy, the ministry of civil aviation and the Airports Authority of India should distribute the landing slots and parking bays strictly on the basis of requirements of the scheduled carriers. "Any special rights should not be assigned to the buyer of the merged airlines, as Air Sahara cannot sell something that it does not own. If such a practice is allowed, it would create an undesirable value for the merged airlines, wherein these airlines have not paid any money for claiming ownership of those particular slots in the first place."

Trivedi also suggested that the terminal space, offices, buildings and maintenance hangars, etc, that are leased by an airline should also not automatically be transferred to a new airline or a merged entity without considering the requirements of other carriers whose operations are constrained by the limitations of infrastructure.

He said that Indian Airlines had not been able to stake its rightful claim to the airport infrastructure in the recent past since the fleet acquisition plan had got considerably delayed. Since, understandably, the procedure for the approval of public investment is more detailed, Indian Airlines often cannot expect to respond to market requirements by acquiring aircraft at the same speed as its competitors. He said that while allocating airport facilities vacated by Air Sahara in the context of the takeover by Jet Airways, this special constraint, applicable to government-owned airlines, must also be kept in view by the ministry of civil aviation.

A joint statement issued by Naresh Goyal and Sahara Group chairperson Subroto Roy said: "Jet Airways Indian Ltd and Sahara Airlines Ltd are pleased to announce the execution of a share purchase agreement for acquisition by Jet Airways Indian Limited of the entire capital of the Sahara Airlines Limited subject to regulatory approvals." The statement added that until all approvals were received, the two airlines would continue to operate independently.

The spanner thrown by the Indian Airlines CMD has turned the spotlight on the ministry of civil aviation and the directorate general of civil aviation, who will take the final call on the crucial aspect of transfer of airport infrastructure.