Consolidation in aviation: calls for competition authority

The resurrected Jet-Sahara deal, which is almost there, would kickstart the much-anticipated market-driven consolidation in the Indian aviation industry, though the government has already set the ball rolling with the merger of the two state-owned carriers Indian and Air-India. The consumer is, however, likely to face pricier travel because of reduced competition.
The beleaguered aviation industry will likely welcome the deal, it means one desperate player less — Air Sahara had been dumping tickets, further eroding the already in the red finances of most airlines.
Post merger, Jet Airways-Air Sahara and Indian-Air India combine would command over 50% share of the total market and nearly 70% of the total capacity. More importantly, there would now be a clear division between full service carriers and low-cost airlines. Jet Airways-Air Sahara and Indian-Air India would together have over 90% of the domestic full service market and 100% of international capacity in the hands of local airlines.
Therefore, at least in the full-service segment there is a chance of cosy duopoly emerging. With Air Sahara out of the equation, even the low-cost segment is likely to benefit. With a dominant player gone, price increases could become easier. All this makes a competition authority a must, to protect the consumers’ interests in the rapidly changing aviation market.
12/04/07 Economic Times

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Categories: Air Sahara Apr 2007, General Aviation Apr 2007, Jet Airways Apr 2007