Representative image
Representative image

Is Vistara, Singapore airlines proposed cooperation anti-competitive?

ANI | Updated: Dec 14, 2020 14:17 IST


By Lee Kah Whye
Singapore, December 14 (ANI): The Competition and Consumer Commission of Singapore (CCCS) on December 8, posted a media release asking for public feedback with regards to a proposed Singapore-India Commercial Cooperation Framework Agreement between Singapore Airlines (SIA) and TATA SIA Airlines Limited, the company that operates Vistara. The two parties entered into this agreement on February 13 this year before the full impact of COVID-19 pandemic was felt by the airlines' industry.
The CCCS, which regulates competition in Singapore, received a joint application from SIA and Vistara seeking a decision on their proposed cooperation on November 30. The cooperation includes prorate arrangements and expanded code sharing to grow traffic between India and Singapore as well as between India and "certain agreed markets".
Singapore established the CCCS in 2005 for the purpose of enforcing and investigating unfair trade practices, which have an adverse effect on competition, resulting in unreasonable pricing practices. Its mission is to make markets work well to create opportunities and choices for business and consumers in Singapore. It has the power to stop anti-competitive activities and impose financial penalties.
As of September 2019, SIA operated air passenger services to more than 63 destinations in 32 countries and territories using a fleet of 125 aircraft.
Vistara is a joint venture between Tata Sons and SIA with Tata owning 51 per cent of the airline and SIA the remaining 49 percent. It is positioned as a premium airline, which was launched with the stated goal of redefining air travel in India with a "personalised flying experience." Service commenced on January 9, 2015 with a flight between New Delhi and Mumbai, and its maiden international flight was between New Delhi and Singapore on August 6, 2019. This was followed soon by flights between Mumbai and Singapore. Pre-COVID, with a fleet of 45 planes, it flew to 39 destinations, out of which seven are international. As of June 2019, it had a 4.7 per cent share of the domestic carrier market, making it the 6th largest domestic airline.
Although scheduled international passenger flights continue to remain halted since March 23 due to the pandemic, scheduled domestic passenger flights resumed in India on May 25 after being suspended for two months due to the lockdown. At that time, carriers were permitted to operate not more than 33 per cent of their pre-COVID domestic. International flights under the Vande Bharat Mission have been flying since May and flights under bilateral air bubble pacts since July.

In their submission to the CCCS, Vistara and SIA declared that pre-COVID, they had 16 overlapping origin-destination routes, both direct and non-direct between Singapore and India, which could be merged. However, they believe the "aggregation in passenger shares" is not significant in the overlapping routes and will unlikely have any actual adverse effect on competition.
The passenger shares and volume between Singapore and Bhubaneswar, Singapore and Guwahati, Singapore and Gao, and Singapore and Port Blair indicate there will "unlikely be any actual adverse effect on competition." The airlines also argue that there are many existing competitors on the overlapping routes and the barrier to entry is low should other airlines wish to compete on these routes.
They two airlines further claimed that the proposed cooperation will result in significant consumer and economic benefits and efficiencies. They say that with the cooperation, there will be an increased likelihood that the reinstatement of capacity will be expedited once COVID travel restrictions are lifted. Furthermore, connectivity between Singapore and India will be improved, which will benefit both countries' aviation and tourism sectors, increasing the potential for parties to add capacity and improve fare availability. In addition, inventory and pricing coordination will lower prices due to cost consolidation. They added that more competitive fares will eventuate because of reduced double marginalisation.
The cooperation will also bring significant benefits to both SIA and Vistara's corporate account customers and benefit members of both airlines' frequent flyer programmes.
"The agreement will further strengthen SIA's and Vistara's existing partnership and enable them to offer seamless services to their customers by harmonising efforts incapacity planning, sales, marketing, joint fare products, customer services and operations," SIA said in a statement.
The competition commission will be looking into how the proposed collaboration, which may result in a reduction of flights and seat capacity, will affect consumer choices as well as ticket prices. With airlines struggling to survive, it is yet unknown how the travel industry will emerge from the coronavirus induced downturn, and how many airlines will emerge unscathed.
Companies, who are getting used to video meetings, are likely to reduce corporate travel, the target market for SIA and Vistara. A post COVID world may see air travel demand reduced along with fewer airlines in operation. This will certainly impact the tie-up between Vistara and SIA as well as the travellers on the routes affected by the this. Much is unknown at this stage.
This feedback exercise will run until December 21. (ANI)

Loading...
iocl
iocl