Innovative or monopolistic - pros and cons of the Jet-Kingfisher deal
15 Oct 2008
Mumbai: An innovative alliance that is in tune with the needs of the times, or a monopolistic formation which is bad news in the making for the travelling public? A number of questions are now being asked of the stunning Jet-Kingfisher deal, which has taken the country's business sector completely by surprise. It is not every day that closest rivals in a sector come together to realise mutual benefits.
Together, a Jet-Kingfisher combine will control 60 per cent market share in the domestic civil aviation sector.
Meanwhile, industry analysts are already hailing, what they say appears to be a new era of co-operation in the airline sector, particularly when it is facing tough times. Others feel that the alliance is likely to come under the regulatory scanner as route rationalisation - a major component of the understanding that both airlines have struck up - is likely to affect competition on routes where both airlines have a significant presence.
On the positive side, the alliance will help improve load factors and increase aircraft utilisation for both the airlines. It would also allow both carriers to deploy a joint fleet of 189 aircraft on domestic and international routes and cross-sell flight inventories.
The alliance, experts point out, would have superior bargaining power with industry suppliers, such as those of fuel, aircraft, catering services etc. Such leverage would result in notable cost savings.
Other measures such as common ground-handling, cross utilization of flight crew, training and utilisation of other technical resources is also expected to shore up operating margins.
Meanwhile, reports suggest that officials of the Monopolies and Restrictive Trade Practices Commission (MRTPC) may have already begun seeking more information from the companies in an effort to unearth any anti-competitive aspects of the agreement.
Some Competition Commission of India officials have said that in cases where an arrangement, such as that struck-up by Jet and Kingfisher, leads to de-facto integration of operations and a higher market share, it would need to be examined closely to ensure that it does not adversely affect consumers and the economy.