The 25 aircraft expansion programme of Jet Airways, India's largest independent domestic carrier, has run into trouble.
The finance ministry has requested details from its civil aviation counterpart on why the Tata-Singapore Airlines (SIA) joint venture was rejected while approval was given for Jet Airways to expand. "If the Tata deal was rejected on the basis that the country [was unable] to absorb more capacity, then why was Jet allowed to increase its capacity?" asks a finance ministry official.
The treasury officials, who are working on a revival package for state-owned Indian Airlines, are insisting on a re-examination of the Jet expansion plan to assess its impact on the carrier. Jet Airways insiders see the finance ministry's move as an attempt to protect Indian Airlines.
However, Jet Airways says the finance ministry can do little to stop its fleet expansion, which has been approved by the Ministry of Civil Aviation. Jet has already procured four Boeing 737s and another six are due by early 1999. The carrier plans to take 10 more aircraft by 2001.
The civil aviation ministry has limited the operations and fleets of private carriers to protect Indian Airlines. Flying on domestic routes is mandatory for private airlines and their operations are subject to regulation by the Director General of Civil Aviation. The Aircraft Acquisition Committee regulates their aircraft purchases.
With its 20-aircraft fleet and the planned expansion, Jet Airways would be a tough rival for Indian Airlines, which has 52 aircraft. Jet Airways is well established domestically and is aiming for a one-third market share by 2001.
Jet Airways is no stranger to controversy. A parliamentary committee had earlier questioned whether its claim to have divested its foreign equity as required by law - Gulf Air and Kuwait Airways had each owned 20% - was genuine. A civil aviation ministry enquiry found that Jet chairman, Naresh Goyal, had bought the equity owned by the two Gulf state carriers.
Tata eventually withdrew its SIA proposal in protest against the government's failure to take a decision and pointed to the behind-the-scenes part allegedly played by the leading private airline.
Source: Airline Business
