Saturday, April 27, 2013

April, A Month of Surprises and Controversies

April has been an interesting month for Etihad and the region. No surprises, well maybe a few small ones.

The big news is Etihad's 24% equity stake in Jet Airways for $379 million, no surprises here.
This will increase Etihad's reach in India which was only 2% of India's international traffic in 2011/2012. It will also provide Jet Airways with an international hub in Abu Dhabi. The equity stake will come with the usual joint fuel purchases, insurance, maintenance and ground handling, etc. to save both airlines money.
The surprise is, two days later, the Indian Government signing an agreement with the UAE allowing for 50,000 seats weekly for each side from the current 13000 between India and Abu Dhabi phased in over 3 years. A move that miffed Indian carriers, and Jet airways wants 41600 seats (its current share is 4285 seats). So far so good, except Air India is now faced with a problem much bigger than Emirates. A GCC airline with a tremendous Indian market reach and feed. Air India is expected to get its act together and start competing, ah well more likely they will ask for more government subsidy, at a cost to the taxpayer which is much more than Etihad's FDI.

FDI was intended to inject foreign investment in the existing airlines to allow them to expand.
Well maybe not, earlier the Indian government approved a joint venture between Air Asia and the Tata Group, Air Asia India. A low cost airline that will compete with Spice Jet and Indigo. The two airlines least affected by the Etihad/Jet Airways deal. That will keep the aviation market in India in a state of flux.

Another surprise is a code share agreement between Air Canada and yes Etihad. Two years back a request for additional frequencies and destinations for Etihad and Emirates had Air Canada up in arms to the point that it strained diplomatic relations to the point the UAE government revoked the entry visa at arrival for Canadians among other things. Things have been improving and Canadians got their visas on arrival privileges back. It seems Air Canada realized there are Canadians living in the UAE.

Abu Dhabi was in the center of some controversy, a DHS proposal for a US Immigration and Customs pre clearance arrangement in Abu Dhabi. This had US Carriers, A4A and others complaining, putting it mildly, that this will provide an advantage to a foreign carrier in a city where no US carriers operate. Well, that prompted Dubai to put itself forward as an alternative, after all both Delta and United operate to Dubai and Emirates has more USA frequencies. I am sure we will be hearing about this in the coming few weeks.

Of course the old complaint of EXIM bank financing of foreign airlines' aircraft purchases came up again. Delta and others do not like it, according to them it affords foreign competitors owned by governments an undue advantage. These days competing aircraft are almost technically and operationally similar, so financing tips the balance. Europe has ECA to support Airbus, go figure Delta. Considering that US carriers don't even consider the MENA market worthwhile, taking the amount of direct flights to the region as an indication, the only thing it will achieve is loss of jobs at Boeing and their suppliers. US carriers have to learn to compete on service, I mean service comparable to GCC and Asian airlines and of course it would help if they increase the frequency from a daily flight to Dubai to a few other destinations in the region.

Last but not least, Qatar is demanding and Canada is resisting a request to move the ICAO headquarters from Montreal, where it has been since 1947. The reasons are location (too far for Europe and Asia), harsh winters, high taxes and of course visas, Canada makes it hard for delegates to get visas. Qatar proposed Doha as an alternative and is ready to build the new head quarters and fund the UN agency's running costs starting from 2017 (the lease for the HQ ends at the end of 2016)

On the lighter side of things passenger traffic increased in MENA and a few airlines were profitable!

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