By the Blouin News Business staff

Jet Airways announces the departure of India’s hub airports

by in Asia-Pacific, Middle East.

Jet Airways and Etihad

Jet Airways chairman Naresh Goyal (L) and Etihad Airways CEO James Hogan. Photo Credit: AFP/Sajjad Hussain

Naresh Goyal (above, left) long opposed international airlines taking stakes in India’s carriers. His change of heart may redraw the route maps of Indian and Gulf civil aviation.

After months of negotiations, the London-based Indian entrepreneur has struck a deal with Etihad, the fast-expanding Abu Dhabi airline, to take what will be a 24% stake in his Indian airline, Jet Airways. It will give highly leveraged Jet access to cheap financing and aviation fuel (heavily taxed in India) with which to expand its hold on the fast-growing Indian market for domestic and international air travel — already the world’s ninth-largest.

A deep-pocketed partner gives Jet a jump on the arrival of Malaysia’s low-cost AirAsia in India, as well as that of an expected foreign partner for budget carrier Spice. (And possibly one for Vijay Mallya’s grounded Kingfisher Airlines, whose hopes for a deal with Etihad are now dashed.) For its part, Jet will feed India’s domestic traffic into Etihad’s global network. The potential losers are India’s national flag-carrier Air India, the airports at Mumbai and Delhi, and Etihad’s regional rivals, Dubai-based Emirates, which currently flies the most passengers between India and the UAE, and Qatar Airways.

It is not just that that this deal will represent the first investment in an existing Indian carrier by a foreign airline since Delhi relaxed ownership rules last September to allow foreign-held stakes of up to 49%. It will potentially relocate India’s hubs for international air travel to the UAE.

At the same time as Goyal struck his deal, in what is widely seen as a sweetener, India’s and Abu Dhabi’s governments agreed to expand the number of passengers that can be carried each week between their two countries, bringing it up to the same volumes as can travel between India and Dubai. For many Indians travelling to Europe or the U.S. and vice versa, flying via Abu Dhabi or Dubai is no more time-consuming than flying via Mumbai or Delhi.

The current bilateral agreement between India and Abu Dhabi provides for 13,000 seats a week on the routes. This is now to be increased to 50,000 seats over three years. That will take it to the same level as the bilateral agreement with Dubai. Etihad won’t, however, be able to connect to any more than the 11 airports in India it now has access to. It had sought to raise the number to 23, including tourist destinations such as Goa.

Preventing it from doing so was a sop by the Indian government to the domestic lobby of local airlines and airports, whose vigorous opposition to the Jet-Etihad deal serves as a testament to how much is at stake. With Etihad able to fly to 23 cities either directly or through codeshare arrangements with Jet, it would have been even more difficult for Mumbai and Delhi to fight the rearguard action they have been staging to keep their positions as India’s hubs for international air travel. Abu Dhabi and Dubai are looming ever larger in that role, with Jet as a willing accomplice.