The news as sent out from the London-based Naresh Goyal’s Jet Airways and Abu Dhabi’s Etihad this past Wednesday April 24, 2013, was clear.
     What was a matter of conjecture is now fact: the two carriers have forged a strategic alliance under India’s Foreign Direct Investment (FDI) policy.
     According to the alliance, the UAE national carrier has agreed to subscribe for 27,263,372 new shares in Jet Airways at a price of Rs 754.74 ($14) per share.
     The value of the equity investment totals $379 million and will result in Etihad Airways holding 24 percent of the enlarged share capital of Jet Airways.


     Etihad Airways’ wider overall commitment to Jet Airways includes the injection of $220 million to create and strengthen a wide-ranging partnership between the two carriers.
     As part of this, Etihad Airways paid $70 million to purchase Jet Airways’ three pairs of Heathrow slots through the sale and lease back agreement announced on February 27, 2013.
     An amount of $150 million would be invested by Etihad Airways by way of a majority equity investment in Jet Airways’ frequent flyer program, ‘Jet Privilege,’ subject to appropriate regulatory and corporate approvals and final commercial agreements, which are expected for completion within the next six months.


     Under the strategic partnership, which is subject to full regulatory and shareholder approval, the airlines will gradually expand existing operations and introduce new routes between India and Abu Dhabi, providing “an ever wider choice to the travelling public.”
     They will combine their network of 140 destinations, with Jet Airways establishing a Gulf gateway in Abu Dhabi and expanding its reach through Etihad Airways’ growing global network.
     The release pointed out that passengers from 23 cities in India would benefit from direct connections to international destinations. New flights from Jet Airways’ home hubs and metro airports would further strengthen its current operations from these airports.


     Etihad Airways President and Chief Executive Officer, James Hogan, and the Chairman of Jet Airways, Naresh Goyal unveiled details of the investment. Hogan said:
     “We are certain the partnership (with Jet) will bring significant benefits and opportunities for global growth to both airlines.
     “It is expected to bring immediate revenue growth and cost synergy opportunities, with our initial estimates of a contribution of several hundred million dollars for both airlines over the next five years.”
     He also said that the Indian market was fundamental “to our business model of organic growth partnerships and equity investments.
     “This deal will allow us to compete more effectively in one of the largest and fastest-growing markets in the world.”
     For his part, Jet chief Naresh Goyal thanked the government of India, especially the Ministries of Civil Aviation, Commerce and Industry, and Finance, “for having the foresight to introduce the historic reform of allowing foreign direct investment into civil aviation in India. Infusion of FDI in the domestic sector will result in the improvement of the economics of aviation, grow traffic at our airports, and create job opportunities.”
     The deal with Etihad, said Goyal, would “further strengthen the balance sheet of Jet Airways and, more importantly, underpin future revenue streams, which will accelerate our return to sustainable profitability and liquidity.”


     The deal would have been accepted without protests but for the fact that Jet demanded a huge number of seats to Abu Dhabi.
     In early April this year, Jet Airways wrote a letter to the Ministry of Civil Aviation seeking a huge increase in the bilateral entitlements in favor of Abu Dhabi from the present 13,300 seats to nearly 54,000 seats each week, along with connection to 23 additional Indian cities. Former Minister and presently a member of the Parliamentary Standing Committee on Tourism and Transport, Dinesh Trivedi, shot off a letter to Prime Minister Dr. Manmohan Singh, voicing his “sense of concern and sadness, looking at the bleak future of our national carrier Air India.”
     He went on to state that Jet had asked for an additional 40,000 seats per week to Abu Dhabi.
     “If such an increase is allowed to happen, the total seat entitlement between India and Abu Dhabi will go up to a whopping 110,000 seats per week,” Singh said.
     “The creation of Emirates' specific capacity entitlements, coupled with unbridled access to all major cities in India for the airlines of the UAE, has already resulted in Dubai establishing itself as the primary hub for Indian traffic.
     “Already Emirates Airline is being called the ‘national airline’ of India, as it operates more flights and carries more passengers to/from India than Air India, our national carrier.
     “More than 70 percent of the passengers carried by Emirates Airlines, however, travel to points beyond Dubai on Emirates’ network.
     “Now, Abu Dhabi is also keen to emulate the success of Dubai and Emirates Airline, and is keen to establish Abu Dhabi as another hub airport on the back of Etihad Airways, and for this reason is aggressively seeking an increase in capacity entitlements,” Dinesh said.

     India is struggling to create a world-class hub at Delhi, faced as it is with competition from airports like Dubai and Doha in the Gulf and Bangkok, Hong Kong, and Singapore in South East Asia, and despite leading airports like Delhi and Mumbai having been privatized.
     While Delhi and other private airports along with the Government of India have made huge investments in upgrading infrastructure and building new, world class terminals, they are hampered by the competition posed by these well-established hubs and their aggressive mega carriers.
     Allowing Abu Dhabi to come up as another hub, which is only about three hours flight away from the major Indian metros, will kill all aspirations that India may nurture as a nation to establish a world class hub.
     Around the same time as the letter from Trivedi, the Civil Aviation secretary K. N. Srivastava convened a meeting of all stakeholders comprising domestic airlines and airport operators, both state-owned and privately-managed.
     To start with, domestic airport operators, particularly GMR operating Delhi and Hyderabad and GVK operating Mumbai and Bengaluru, conveyed their very strong objections to the Jet/Etihad deal.
     They said it would severely compromise the position of Indian airports as possible hubs—mainly Delhi and Mumbai.
     They said together an investment has been made of $7 billion dollars on these airport upgrades and modernization.
     Looking ahead, the word is that the intention is to spend more on the second and, perhaps, third phases.
     All this would frustrate their efforts and completely neutralize their finances.
     They reminded the Ministry of Civil Aviation of what Prime Minister Dr. Manmohan Singh had stated in July 2006 while inaugurating the modernized Delhi International Airport. He had said:
     “We created a hub for India in Dubai, allowing Emirates so many rights to India.”
     The airport operators added, “If the demand for seats was granted, Abu Dhabi would become the second hub for India.”
     The Prime Minister had then said India must develop its own airport hub in Delhi.
     To top it all, at the beginning of the year, Air India CMD Rohit Nandan sent a warning note to the government and the Ministry of Civil Aviation.
     Reacting to the 49 percent FDI by foreign carriers in Indian domestic carriers, Nandan said if the government did not penetrate new destinations, agree to demands for Sixth Freedom rights, or ferry Indian passengers onwards from hub airports, business to Dubai and Singapore would logically rise.
     Incidentally, the government did not respond to the Air India chief’s note.


     As the situation stands today, 40 percent of the total Indian international traffic is routed through the Gulf, with Emirates, Etihad, and Qatar handling the lion’s share of traffic.
     During 2011-12, Emirates’ market share of passengers from India to foreign destinations was 13.04 percent.
When asked for specific comments, Air India said the current entitlement of 13,300 seats could be increased by 2,400, while low cost carriers IndiGo and SpiceJet said it would go up by 5,000 and 5,900 respectively.
     None said they thought that number should rise by a whopping 40,000 seats.
     The Indian government has gone a step further than the 40,000 and enhanced the number of seats between India and United Arab Emirates to 50,000.
     In the bilateral talks that were held recently, the UAE had urged India to allocate an additional 40,000 seats per week, and grant Goa, Pune, Amritsar and Lucknow as additional destinations.
     The government sent out word as the news about the Jet-Etihad broke that India was looking at the negotiations in the “overall economic interest of India and government’s policy of liberalization for attracting foreign investment in India, including the civil aviation sector.”
     India had requested the UAE side to grant change of gauge facility at Abu Dhabi to Indian carriers in addition to ensuring full Fifth Freedom rights from the UAE.
     As per the present Air Service Agreement, the designated carriers of both sides have an existing entitlement of 13,330 + 2 percent flexibility (total 13,600) seats per week, with 11 points of call available to UAE.
     Both sides agreed to allocate an additional entitlement of 36,670 seats per week spread over a period of three years: 11,000 seats per week in year 2013, 12,800 seats per week up to the winter schedule 2014 and 12,870 seats per week up to the winter schedule 2015. Both sides also agreed to extend third country and domestic codeshare facility.
     The release went on to point out that the Indian side had not agreed to the request of the UAE for any additional points of call and removal of cap in terms of seats/frequency from each point of call.


     The deed has been done.
     We will have to wait and see if the move will lead to the immediate closure of Air India, for which Civil Aviation Minister Ajit Singh had lobbied hard to get a Rs 30,000 crore ($5,540 million) turnaround plan and of which Rs 5000 crore ($923 million) has already been spent.
Tirthankar Ghosh

      Dr. George Winegar (78) died last Saturday, April 20, after a freak accident as he fell off a truck.
      As a past Animal Transport Association (ATA) President, long time member, and regular conference attendee, George lived his life fully, cherished his friends, and had contact lists that are so long he almost had to have his own zip code to keep them all straight.
      George worked 33+ years for Veterinary Services of the USDA, including disease testing in Michigan and a two year assignment in Nicaragua.
      His career culminated in his assignment to Assistant Deputy Administrator of Veterinary Services in Washington, D.C.
      In this role he engaged in negotiating international animal health protocols while traveling to over 70 countries around the world.
      After the fall unloading his truck, George was taken to University of Michigan Hospital. Despite a valiant effort by the trauma center multi-disciplinary team, the battle to save his life was lost due to severe head and neck damage.
      His wishes were clear; he desired no heroics.
      He fought the good fight, but the injuries were too severe.
      “He was a man of faith and we had the opportunity to pray for him, read Scripture, and sing his favorite hymns,” his wife Lois said.
      Once life support was removed, he did not linger and passed peacefully surrounded by his family.
      His wife Lois asked his friends:
      “You honor George's memory by living life fully and remembering his most excellent example!”
      He is survived by his wife of 59 years, their children: Kathleen (Jim) Branch Nelson of Norfolk, VA; Brian (Jill) Winegar of Howell, Mi; Keith (Denice) Winegar of Lino Lakes, MN; Benjamin (Cindy) Winegar of Rancho Palos Verdes, CA, plus grand and great grandchildren.
      Funeral services will be held Saturday, April 27, 2013, at 4:00 at First United Methodist Church in Howell, MI.
      In lieu of flowers, donations may be made in his name to the Fowlerville Alumni Association, 6436 N. Burkhart Road, Howell, MI, 48855 or the Livingston County Genealogical Society, P.O. Box 1073, Howell, MI 48844.
Geoffrey

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