Qatar Airways and Etihad set to battle over Indian market
Establishing a new airline can pose a risk for Etihad, which already is in dire straits financially. Yet it is mitigating some of the risks – Etihad has a partner Air Arabia and the LCC will be based in Abu Dhabi, instead of India, where foreign ownership laws prevent non-Indian entities from owning more than 50% of airline shares.
In addition, launching a low-cost carrier dedicated to serve the Indian market makes a lot of sense – despite rapid growth, full-service carriers in India are struggling, including the national flag carrier, Air India. One foreign investment example, which is also running at a loss, is Vistara – a joint venture between Singapore Airlines (49% stake) and Tata Sons (51% stake) so far has not been profitable, with the latest results in FY2019.
But a low-cost carrier still requires a hefty sum of investment, as shown by AirAsia India, a joint venture between AirAsia Berhad (49% stake) and Tata Sons (51% stake). Despite rapid growth as passenger numbers jumped up by 54% in 2018 compared to 2017 (6.8 and 4.4 million, respectively), the airline is still running at a loss – $87 million (INR6.19 billion) read the last line in the airline’s FY2018 financial report. AirAsia India is yet to achieve a profitable year.
This might point to the fact why Qatar Airways aims to establish a partnership with IndiGo, instead of launching their own airline.
Qatar Airways to announce partnership with IndiGo
The Qatari flag carrier plans to announce a codeshare partnership with the Indian low-cost carrier on November 7, 2019, reports Bloomberg.
“It is not something about buying a stake, it’s commercial,” Chief Executive Officer of Qatar Airways, Akbar Al Baker, has reportedly noted. But the airline was interested in a stake at IndiGo for a long time now. Reports in 2015 indicated that Qatar Airways was looking to invest in SpiceJet, another Indian low-cost carrier. The Doha-based airline denied the rumors by claiming that “Qatar Airways confirms that the only airline it is interested in is the Indian carrier Indigo”.
Interest in IndiGo never dwindled. When Al Baker confirmed that it will not establish an Indian domestic airline in September 2018 due to confusing ownership laws, he once again reiterated that Qatar Airways would be interested in acquiring a stake in the Indian carrier, as IndiGo “is efficiently run, it is the largest domestic airline in India,” said Al Baker, “other than them, I’m not really interested,” he added.
Qatar Airways has been running at a loss since 2018, as the imposed blockade negatively impacted its expenses. Meanwhile, IndiGo has recently posted its biggest quarterly loss of $149.50 million (INR 10.6 billion) related to severe operational issues with its Airbus A320 aircraft.
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