IndiGo, Tatas protest govt's basis for allotting Jet Airways slots

Jet airways
The country’s largest airline, IndiGo, and the Tata Group, which operates Air Asia India and Vistara, have opposed a government decision to allocate Jet Airways slots only to those deploying new aircraft. Such a decision, they say, will harm their commercial viability and negate a level-playing field.

 

In a letter to the government, IndiGo Chief Operating Officer Wolfgang Prock-Scahuer said, “aircraft inductions are planned in advance by airlines and cannot be expedited at such short notice. This leaves virtually one airline with the ability to corner Jet Airways slots and entitlements since it is the only other airline other than Air India Express to operate Boeing 737 aircraft,” The letter was reviewed by Business Standard. Though the letter did not name any airline, the referece was obvious: SpiceJet.

 

A senior Tata executive said, “There is disparity in business logic asking airlines to bring in additional aircraft for temporary slots. Leasing aircraft for short term is a very costly proposition for airlines.”

 

Ajay Singh-led SpiceJet stands the best chance of getting new slots at the two busiest airports in India. Government officials confirmed that SpiceJet is best suited to add grounded Jet Airways’ Boeing-737 planes as it operates similar aircraft. SpiceJet said it would add 27 aircraft in the next 10 days. Commonality of fleet has also made it easier for SpiceJet to rapidly induct Jet Airways crew members who are trained on the similar aircraft.

 

For IndiGo, Vistara and Air Asia India, immediate induction of fresh capacity becomes difficult as they use Airbus A320 aircraft, according to company executives.

 

The ministry of civil aviation had on Tuesday said that slots of Jet Airways would be given to other airlines for three months based on their ability to add immediate capacity addition. “Jet Airways slots will be allocated on a temporary basis for three months only to those airlines which bring in additional capacity,” the ministry said.

 

SpiceJet refuted the claims saying that rules are transparent and apply to all airline operators. “Any rule is applicable to SpiceJet as much as it is to other airline operator. There is a completely transparent system put in place. To suggest this has been done to favour one particular airline is baseless and defamatory in nature. The same rules apply to all operators many of whom have been aggressively inducting capacity,” a SpiceJet spokesperson said.

 

Around 110 pairs of Jet’s slots in Mumbai and 85 pairs in Delhi are being redistributed to other airlines. Slots at the two airports are scarce with limited growth in runway capacity even as airlines are inducting new planes rapidly.

 

A change in customs law last week made it easier for SpiceJet to induct Jet’s aircraft. Last week, the finance ministry waived off the mandatory customs requirement that an aircraft used by an Indian airline be flown back to the country of registration of the aircraft lessor and then fly back to India for registering with a different operator. Following this change,   SpiceJet was able to expedite the process of inducting Jet’s aircraft into its fleet, rivals argued.

 

However, a large part of SpiceJet’s fleet was also replacement for the grounded Boeing 737 Max and rivals say the new additions cannot be counted as net capacity addition.” IndiGo would like to understand if the new capacity addition are being factored against the grounding,” the airline asked the government. 13 Boeing 737 Max of SpiceJet were grounded last month. The airline was supposed to induct another 20 Max during FY 19.

 

IndiGo has sought distribution of slots to airlines based on the capacity deployed by them on domestic routes in the last five years. “Whenever there is scarcity of resources, the five-year-look-back principle needs to be adhered to as it would recognise the effort and investment the airline operators have undertaken,” Prock Schauer wrote.

 

The Tata group wants preference for Vistara and Air Asia India saying  new airlines need slots to grow or it would impact their growth plans. “New airlines need slots to grow or else there will be a duopoly or monopoly in the sector," the Tata executive said.

 

Civil Aviation secretary Pradeep Singh Kharola defended the rule saying airlines were pulling out planes from the less lucrative sectors to use them on metro routes. "This is an extraordinary situation where a large capacity has gone out of the market due to shutdown of Jet Airways. Our first priority is to regain that capacity. Hence, aircraft addition is necessary.’’ He added that airlines cannot be allowed to pull out planes from Guwahati and Bagdogra to fly them between Delhi, Mumbai, Bengaluru. ‘’This will take away air connectivity from many parts of the country," he said.

 

"Once the capacity is regained for peak summer schedule, we will allow airlines to rejig their network," he added.

 

However, executives said such a diktat was against the basics of a free market, hampering commercial decision-making. "This is contrary to the principle that airlines are free to restructure their networks as long as they adhere to the Route Dispersal Guidelines (RDG) norms. Also, when airlines change network, they ensure that already booked passengers are not effected so that they don't lose goodwill. Government doesn't need to ensure that," the Tata executive said



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