Air India believes the enhanced bilateral rights given by India to Abu Dhabi will result in additional international passenger traffic being diverted to the Jet Airways, Etihad Airways combine.
The Competition Commission of India (CCI), which is currently evaluating the deal, had sought the national carrier Air India's views on the deal.
In April, the aviation ministry more than tripled the number of weekly seats allocated between India and Abu Dhabi to 53,000, which is to be done over three years.
Of this, 24,000 seats have already been allocated for the winter schedule from October 2013 to March 2014.
In its letter to the CCI, Air India claims the demand for travel between India and Abu Dhabi does not justify the large number of weekly seats.
The additional traffic will feed Etihad Airways and Jet Airways' operations to Europe and US, which is why the Jet-Etihad deal is anti-competitive in nature, a senior Air India executive said.
However, despite levying allegations that the deal is anti-competitive, Air India has not elaborated on the market share it expects to lose once the alliance becomes operational.
Currently, Air India is the third-largest international carrier to and from India with an 11% share in a total market size of 45 million passengers as of FY13. Its low-cost subsidiary Air India Express has another 4% market share.
Jet Airways is the market leader with 13% share and Dubai- based Emirates occupies the second slot with nearly 12%. Abu Dhabi's Etihad does not even figure in the top 10 carriers carrying international passengers to and from India.
The deal between Jet Airways and Etihad Airways, which will see the Gulf airline purchase a 24% stake in the Naresh Goyal-owned airline for R2,060 crore, is currently awaiting clearance from the CCI. The deal has already been cleared by the cabinet committee on economic affairs.
Apart from the direct cash infusion, Jet Airways will also be able to get $300 million of low-interest rate loans from Etihad Airways, which would help the cash-strapped airline retire part of its existing high cost debt.
For the second quarter of fiscal 2013-14, Jet Airways posted a record net loss of R891.01 crore and its net worth has been eroded to a negative Rs 1,734.55 crore.