National carrier Air India needs to shape up to stay competitive, Civil Aviation Minister Ajit Singh said today, a day after Jet Airways, India's largest airline by market share, announced the sale of a minority stake to Abu Dhabi-based Etihad Airways.
This is a good time for Air India to strategise, he said, adding that the national carrier has very limited options.
Mr Singh said the Jet deal is a win-win situation as competition is good for any industry and will be beneficial to fliers.
The aviation industry expects passenger traffic to rise 9-10 per cent this year, he said.
"Is Air India equipped to handle the growth in passengers? Why complain about where others can fly," he asked. (Watch)
The Jet-Etihad deal is India's first major aviation investment by a foreign airline after the government eased ownership rules in September.
SL Narayanan, CFO of Sun Group -- the promoter of budget airline SpiceJet -- said the deal will refuel interest in the Indian aviation sector, which is expected to be the fastest growing commercial aviation market for the next several years. (Watch)
Aviation experts say the deal will direct traffic away from major aviation hubs in India, such as Delhi and Mumbai, to Abu Dhabi, where Etihad Airways is based. They also fear that Jet Airways will have to curtail its international operations and be reduced to becoming a feeder airline for its Abu Dhabi-based partner.
Mahantesh Sabarad of Fortune Equity Brokers said, "I think Jet will become a feeder carrier, a secondary ariline, possibly soon be relegated to the third spot in the Indian aviation space." (Watch)
Air India runs up a staggering operational deficit of Rs. 14 crore every day, according to the Dholakia committee set up to recommend measures to bring back the ailing airline to profitability.
Kanu Gohain, former director general of civil aviation, told NDTV: "One can read between the lines and say that this deal will certainly funnel out Indian traffic into Abu Dhabi from where Etihad will mount its flights to Europe and the US at the cost of other Indian carriers, particularly Air India."