Etihad sees benefits from Jet partnership in India
The national carrier of the United Arab Emirates (UAE), Etihad Airways, has announced significant growth in the Indian market. In 2015, passenger numbers to and from India rose by a staggering 63 percent – to 3.3 million passengers from two million the year before. Traffic between the Middle East and India growing so rapidly could be down to the significant Indian population in the region.
The industry in India is still largely untapped, but it has a high growth trajectory. This is because of the likes of modern airports and growing emphasis on regional connectivity. India is the ninth largest civil aviation market globally, with a market size of around $16 billion.
The Indian market is expanding rapidly, with India’s airports serving over 190 million passengers between 2014 and 2015 – an increase of 12.5 percent. Since 2002, volumes have more than quadrupled, and on average a growth of 13 percent per annum has been reached. As India’s economy has grown, volumes have generally risen – exceptions include the economic downturn in 2008.
Etihad are the first airline to invest in an Indian carrier under the current Indian Foreign Direct Investment Rules. Between the two airlines, 250 weekly flights are served between Abu Dhabi and 15 cities across India. In terms of travel between India and UAE, both are market leaders and the Indian market is one of Etihad’s largest source of business.
Changes could come into play for the Indian civil aviation market, with a dispute over the validity of the 5/20 rule. This rule, brought in over a decade ago, stipulates that Indian air carriers should have at least five years flying experience and a fleet of 20 aircraft to become eligible to fly abroad. Civil aviation minister Ashok Gajapathy Raju believes this rule is pulling Indians down and has no scientific meaning.
A concept has been devised to replace the rule by introducing domestic flying credits. This concept would mean that domestic airlines would need to accumulate 300 domestic flying credits (DFC) before commencing flights to South Asian Association for Regional Cooperation (SAARC) countries and countries with territory located entirely beyond a 5,000 kilometre radius from New Delhi.
Since 2004, international traffic in India has almost tripled – to 50.8 million. Within the next five years, international traffic in India is expected to increase by eight percent, and it is predicted that more than 50 million Indians will be travelling overseas annually. In fiscal year 2016 airlines operating in India are projected to record a collective operating profit of $1.29 billion.
"Bilateral relations between the UAE and India continue to grow based on years of friendship and deep commitment to strengthen economic, cultural and trade ties," said James Hogan, President and Chief Executive Officer, Etihad Airways.
“With Etihad Airways and Jet Airways together offering over 44,000 seats each week between Abu Dhabi and India, we are clearly are a key contributor to India’s dynamic economy. There is further room to grow and we are looking at the many opportunities that exist to develop our operations.
Trade between the two countries is estimated to grow by more than 60 per cent in the next five years from the current level of around US$60 billion, with investments and imports/exports in a variety of sectors, including energy, defence, manufacturing, aerospace, health, education, tourism, science and technology. The UAE is the 10th biggest foreign – and largest Arab – investor in India.
Abu Dhabi International Airport, the hub for Etihad Airways, reached record figures for the 2015 calendar year – largely down to Etihad. For the first time in the airport’s history, the two million a moth mark was surpassed four times; in July, August, September and December – more than 23 million passengers visited the airport in 2015. India topped the list of the strongest country destinations from Abu Dhabi in 2015.
Etihad’s current Indian destinations from Abu Dhabi are Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Jaipur, Kochi, Kolkata, Kozhikode, Mumbai and Thiruvananthapuram. Jet Airways offers the additional Indian gateways of Pune, Lucknow, Goa and Mangalore, as well as numerous domestic connections.
Before the Jet Airways deal, Etihad carried only two per cent of the international traffic to and from India. “Our investment in Jet Airways was aimed at being part of the Indian success story," added Hogan. "We have helped bring Jet Airways back to profitability. Today, Jet Airways is our number one equity partner for revenue and passenger contribution on Etihad Airways, and India is Abu Dhabi’s number one source market for international visitors.”
By 2020, India could become the third largest aviation market with the right policies in place, and government agencies project that around 500 brownfield and greenfield airports could be acquired by then. By 2030, India could be the largest aviation market.