 "Dubai, Sharjah substitutes for Abu Dhabi airport:CCI")
The Competition Commission of India (CCI), which cleared the Jet Airways-Etihad deal earlier this week, has said the Dubai and Sharjah airports act as substitutes for the Abu Dhabi airport.
However, Anurag Goel, a member of the commission, passed a dissenting order in the matter. In its majority order—passed by Chairman Ashok Chawla and four other members—the commission said passengers travelling on nine routes between India and the UAE were “generally more price-sensitive and less time-sensitive”.
It added, “It must be stressed in the case of passengers travelling to Abu Dhabi, there are three international airports in the UAE that passengers might consider as substitutable with each other—Abu Dhabi, Dubai and Sharjah.”
It said several carriers served Delhi and Mumbai with direct flights to/from Dubai. Both Emirates and Etihad offer free shuttle bus services between Abu Dhabi and Dubai. There are other modes of transport between these cities, too. Goel’s dissenting order said passengers weren’t choosing Abu Dhabi or Dubai as substitutes for one another. It said of the 579,292 passengers who travelled between Kozhikode and Dubai last year, only two flew on Etihad (to Dubai via Abu Dhabi). Similarly of the 1,271,202 passengers who travelled between Abu Dhabi and India last year, only four flew on Emirates (to/from Abu Dhabi via Dubai).
“It is evident air services to different airports in the India-UAE sector are not treated as substitutable products by consumers and airlines,” Goel’s order said. The dissenting order said the Jet-Etihad alliance would create an appreciable adverse effect on competition.
The majority ruling, however, cleared the deal. The entity ruled the proposed combination “is not likely to have appreciable adverse effect on competition in India”.
The commission relied on two airline submissions about the UAE being a single-source market for air traffic. “The market share of Jet and Etihad combined in all nine non-stop origin and destination city pairs (between India and the UAE) is below 36 per cent and face intense competition from other airlines serving the same routes. The elasticity of demand is expected to be sufficiently high on all origin and destination pairs, as the commission observed Indian passengers flying to these destinations were fare-sensitive and, in many cases, time-insensitive. So, any tendency to raise fares on such routes will not be profitable for the airlines,” the order said.
The commission also pointed to the specifics of nine routes (Abu Dhabi to Bangalore, Ahmedabad, Mumbai, Delhi, Chennai, Hyderabad, Thiruvanathapuram, Kochi and Kozhikode). It said Jet-Etihad market share in Mumbai and Delhi was about 50 per cent, but Air India had a share of 32 per cent and 24 per cent, respectively. Etihad has a majority share on the routes to other cities. The commission said cheaper indirect flights and substitutability with Dubai didn’t raise competition concerns. In fact, this could restrain the alliance’s marketing power, it added.
As there were several other airline alliances in place, “the Jet-Etihad combined market share on Abu Dhabi-Delhi and Abu Dhabi-Mumbai routes would not mean competition was absent on West-bound traffic from India. In fact, competition would be present from alternative networks and alliances/systems for West-bound traffic,” it said.
However, Anurag Goel, a member of the commission, passed a dissenting order in the matter. In its majority order—passed by Chairman Ashok Chawla and four other members—the commission said passengers travelling on nine routes between India and the UAE were “generally more price-sensitive and less time-sensitive”.
It added, “It must be stressed in the case of passengers travelling to Abu Dhabi, there are three international airports in the UAE that passengers might consider as substitutable with each other—Abu Dhabi, Dubai and Sharjah.”
It said several carriers served Delhi and Mumbai with direct flights to/from Dubai. Both Emirates and Etihad offer free shuttle bus services between Abu Dhabi and Dubai. There are other modes of transport between these cities, too. Goel’s dissenting order said passengers weren’t choosing Abu Dhabi or Dubai as substitutes for one another. It said of the 579,292 passengers who travelled between Kozhikode and Dubai last year, only two flew on Etihad (to Dubai via Abu Dhabi). Similarly of the 1,271,202 passengers who travelled between Abu Dhabi and India last year, only four flew on Emirates (to/from Abu Dhabi via Dubai).
“It is evident air services to different airports in the India-UAE sector are not treated as substitutable products by consumers and airlines,” Goel’s order said. The dissenting order said the Jet-Etihad alliance would create an appreciable adverse effect on competition.
The majority ruling, however, cleared the deal. The entity ruled the proposed combination “is not likely to have appreciable adverse effect on competition in India”.
The commission relied on two airline submissions about the UAE being a single-source market for air traffic. “The market share of Jet and Etihad combined in all nine non-stop origin and destination city pairs (between India and the UAE) is below 36 per cent and face intense competition from other airlines serving the same routes. The elasticity of demand is expected to be sufficiently high on all origin and destination pairs, as the commission observed Indian passengers flying to these destinations were fare-sensitive and, in many cases, time-insensitive. So, any tendency to raise fares on such routes will not be profitable for the airlines,” the order said.
The commission also pointed to the specifics of nine routes (Abu Dhabi to Bangalore, Ahmedabad, Mumbai, Delhi, Chennai, Hyderabad, Thiruvanathapuram, Kochi and Kozhikode). It said Jet-Etihad market share in Mumbai and Delhi was about 50 per cent, but Air India had a share of 32 per cent and 24 per cent, respectively. Etihad has a majority share on the routes to other cities. The commission said cheaper indirect flights and substitutability with Dubai didn’t raise competition concerns. In fact, this could restrain the alliance’s marketing power, it added.
As there were several other airline alliances in place, “the Jet-Etihad combined market share on Abu Dhabi-Delhi and Abu Dhabi-Mumbai routes would not mean competition was absent on West-bound traffic from India. In fact, competition would be present from alternative networks and alliances/systems for West-bound traffic,” it said.
The Competition Commission of India argues:
- Passengers travelling on nine routes between India and the United Arab Emirates generally more price sensitive and less time sensitive
- Several carriers serve Delhi and Mumbai with direct flights to and from Dubai. Emirates and Etihad offer free buses between Abu Dhabi and Dubai
- Of about 580,000 passengers who travelled between Kozhikode and Dubai in 2012, only two flew on Etihad (travelled to Dubai via Abu Dhabi)
- Of about 1.3 million passengers who travelled between Abu Dhabi and India during 2012, only four flew Emirates (travelled to and from Abu Dhabi via Dubai)