Jet Etihad deal- what’s next for other companies?

In an important development for the airline industry, a five-member majority (Chairman and four members) of the Competition Commission of India (CCI) cleared the purchase of 24% stake in Jet Airways by the Abu Dhabi-based Etihad Airways. One member, Anurag Goel, dissented. It is also not clear whether the CCI relied on public opinion to arrive at its conclusions.

When assessing a merger, the CCI first determines a relevant market, or the market affected by the merger. In this case, the CCI has held that the relevant market would be for international air passengers as Etihad does not operate in the domestic market. However, Jet Airways may continue to operate in the domestic market in future, and the impact on domestic passengers and other competitors after the merger would continue to be a concern in the Indian aviation sector.

The CCI holds that the market in an airline merger is looked at on the basis of a ‘city pair’ approach. According to this, every combination of point of origin and point of destination (Delhi-Dubai is a city pair) of a flight is considered to be a separate market from the consumers’ point of view. An assessment by the competition law would be required when there is an overlap of routes travelled by the merged airlines.

This is because acquisition would lead to the reduction of a competitor. Therefore, if both the airlines fly Delhi-Abu Dhabi and Mumbai-Abu Dhabi, the impact of the merger is assessed separately on both these routes or city pairs. Perhaps, the most interesting takeaway from this decision is to read the majority and minority views of the competition bench on the city pairs affected by the merger. A case in point is the Abu Dhabi-Mumbai and the Abu Dhabi-Delhi routes, where the combined market share of the two airlines is greater than 50% but the majority does not anticipate any harm to the competition.

Read the full report here, Business Line


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