Any market that is dominated by a handful of players can never be good for customers since the companies have the ability to dictate prices. Customers are at a greater disadvantage in India where competition laws are weak and there is no regulator to go to and complain (such as in telecom, where competition has brought down tariffs dramatically) against the carriers.
If Jet Airways' acquisition of Air Sahara goes through, it will, without a doubt, create a dominant market player, thus opening the spectre of higher air tariffs, or even predatory pricing, which that could eventually kill the low-cost carriers.
What can make Jet's dominance complete is the fact that it is also talking to Air Deccan, the largest low-cost carrier in the country, for a marketing alliance. Air Deccan's executives say that the alliance could be on different fronts -- sharing of engineering infrastructure, exchange of passengers when flights are cancelled, combination offers and so on.
So, when someone from Dehradun wants to fly Mumbai, he can use Air Deccan to reach Delhi and then Jet Airways to reach Mumbai. It is not illogical to conclude that such a relationship could be used to keeping air tariffs on a tight leash.
But first let us look at the numbers. According to industry estimates, Jet Airways' market share has slipped from 44 per cent some time last year, to around 39 per cent now, thanks to some tough competition from both low-cost and full-service carriers. At the same time, Air Sahara, Air Deccan and new players such as Spicejet have gained market share.
But the emerging equation in the skies could alter dramatically if the new combinations that are being worked out finally see the light of the day.
For instance, Jet Airways and Air Sahara together lord over 53 per cent of the domestic air market -- a figure Jet Airways did not manage to hit even in the mid-1990s when it faced competition from only the state-owned Indian Airlines. And if Air Deccan is added to the combine, the share climbs to 66-68 per cent.
The dominance of Jet Airways and Air Sahara is more in prime markets such as Mumbai and Delhi that, in any case, account for over 30 per cent of the country's air traffic revenue.
In Mumbai, for instance, industry estimates suggest that during peak hours in the morning and evening, over 60 per cent of the departures are controlled by the two airlines. Similarly, 55 per cent of the peak hour departures in the morning in Delhi are from the two. If you throw in Air Deccan, the numbers could be still higher.
Of course, you could argue that most low-cost carriers operate only in non-peak periods so customers would still have enough choice. But if you look at all the flights that depart from Mumbai and Delhi throughout the day, the share of Jet Airways and Air Sahara is between 43 per cent and 45 per cent.
Now look at it from a different perspective: infrastructure. The two carriers control a substantial portion of the parking bays in these cities, which is crucial as without these you cannot fly from these locations in the morning. In Mumbai, for instance, over 60 per cent of the 49 parking bays are under their control, while the duo controls 50 per cent of the existing parking bays in Delhi.
However, some experts believe that in spite of acquiring a market share of 53 per cent, the Jet-Sahara combine will not be seen as a dominant player under monopoly rules, because the market will still have a single large player in Indian Airlines with a large market share, is under government control and willing to ward off any attempt to hijack the market.
Also, Indian Airlines has not shown itself to be a weak player in terms of responding to competition in the past five years.
Still, the government needs to investigate, despite Civil Aviation Minster Praful Patel's statement that consolidation is good for the industry (it does not mean it should be bad for customers), if the Jet Airways-Air Sahara deal, provided it goes through, will lead to a market dominance or not.
It's a question not peculiar to India; it is a challenge faced by most countries that have deregulated their airline industry resulting in a consolidation in the market place.
In 2000, for instance, the US justice department launched an anti-trust investigation when United Airlines planned to acquire US Airways fearing that the days of cheap air travel could be over.
A year before that, the government had filed an anti-trust suit against American Airlines for dominating routes and cutting fares to drive out competitors. Similarly, the proposed Jet-Sahara deal should be put under the microscope before it passes muster.
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