Jet and Kingfisher form a cartel but call it pathbreaking alliance

Jet and Kingfisher with a combined market share of nearly 60% have announced operational alliance to save costs. Their argument is that they are losing Rs. 20 crores everyday.

Vijay Mallaya has described this agreement as path breaking. Yes, it is pathbreaking in one way but not the way Vijay Mallaya thinks.

First, let me discuss why it is not a pathbreaking agreement as Vijay Mallaya thinks. You know I am getting a little peeved at these big shot industrialists when they call everything they do as path breaking. We had Malvinder Singh of Ranbaxy describe his selling a controlling interest in Ranbaxy as path breaking. We all know people have been selling controlling interest in their companies since a long time. I think even Ranbaxy has bought controlling interest in various companies. They did it in the case Escorts Hospital. So whats new?

Trying to combine backend operations that Jet and Kingfisher are trying to do is nothing new. Mobile operators were trying to come together to pool all their towers together. So there is nothing pathbreaking about what Jet and Kingfisher are doing.

Now lets find out why it is pathbreaking. Jet bought Sahara and landed into trouble. Vijay Mallaya bought Air Deccan and got into trouble. Vijay Mallaya has been very aggressive in the airline industry. I remember that he had placed one ofthe largest order for planes even though he had barely launched his airline. There were rumours that he was even trying to but Spice Jet. Now Vijay Mallaya bought Air Deccan fior all the wrong reasons. Some of the reasons cited were as follows:

(a) He wanted to fly International
(b) He wanted to buy out competition. He had even remarked after buying Air Deccan that the airline industry should pay him for reducing the competition.

Now he is trouble and he has found a path breaking solution which is as follows:

(a) Reduce the competition further by joining hands with Jet.
(b) Enter into an agreement which is against the law. Coming together of competitors with a combined share of 60% is monopolistic and is clealy the formation of a cartel by whatever name called. Now lets see how easy it is to fool the media in this country. None of the newspapers have called this alliance a cartel. Why? Because when a reporter asked Vijay Mallaya whether they were forming a cartel, he denied it. Now do you think he would have responded positively to that question? The media has accepted Vijay Mallaya’s word and no one is even talking about the illegality of this issue and the adverse effect it will have on the consumers.
(c) Cheat the customers by keeping the prices high.

Lets see what Mark Martin, a senior advisor at KPMG has to say, ” …………. It makes no sense to aggressively compete with each other because their competition is foreign carriers. They don’t want to kill each other in bargain.” What a thoughtful analysis? First, Jet and Kingfisher are competing with each in India. Second, they are competing with each other on foreign routes. Third, the same can be applied to all the companies who are competing with foreign companies and form monopolies. Mark is not think of the consumers and general public. In fact, ifthis happens, KPMG would probably run out of business because there will be fewer companies to give advise to. Fourth, Jet and Kingfisher are not important when the general good of the public is involved. Did Vijay Mallaya ask the general public whether he should place huge orders to buy aircrafts or when he was buying Air Deccan? If he cannot compete fair and square, he should sell but he can’t try to save himself by breaking the law and form a cartel. It is his problem if he is living beyond his means. Sixth, Vijay keeps talking about his saving of Rs. 1500 crores but what about the survival of rest of the players in the industry. They will go out of business as they will not be able to survive with the advantages of cartel which Jet and Kingfisher will have.

So Vijay, if you read this post, I hope you will do the right thing. Fight fair and square. Don’t come up with schemes to cheat the customer.

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Comments

Steel Cartel
Cement Cartel
Telecom Cartel
Airline cartel

Just under 4 years of UPA rule.

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It is a cartel and the nerve of Mallaya to invite the government of India to participate in the cartel through its proxy Air India. Amazing…You do not think there would be a conflict of interest? The government needs to investigate the Jet-Kingfisher cartel…not participate in it.

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