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Indian skies on sale

Indian skies on sale
Every major international airline from almost every part of the world wants to expand operation in India. The country is witnessing the world's biggest air traffic growth at over 23 per cent since the end of 2015. In January, this year, the domestic air traffic grew to a record of 25 per cent. Some of the Gulf countries are even lobbying the government for permission to operate on India's domestic space making such unusual demand as allowing operational rights in highly security sensitive north-eastern parts of the country. Unfortunately, airlines from India are struck with limited routes and limited passenger ferries to and fro the country. And, the domestic air traffic business is being increasingly cornered by foreign-linked airlines operating in and out of India on the sly mostly through joint equity ventures with local private promoters.

India's so-called local airlines such as Jet Airways, Indigo, Vistara, and Air Asia are effectively foreign controlled irrespective of their official equity holding structure. Some are even operating out of international hubs. Vested interest groups are always lobbying the government for privatisation of India's own national flag carrier, Air India, which, thanks to the government's civil aviation policy, has long lost its dominant market position to other foreign-linked locally-registered airlines such as Indigo and Jet Airways.

It seems India is systematically surrendering its space and bilateral air traffic rights to foreign carriers, under every government since 1992. Official data shows India's domestic airlines such as Air India, Jet Airways, SpiceJet and IndiGo offer almost 50 per cent fewer seats than foreign airlines operating in India. On most international routes, capacity utilisation of Indian carriers ranges between 30 and 40 per cent. Yet, foreign airlines are not happy.

They want more. Indian airlines have been complaining that Gulf airlines are flying more seats into the country than allowed under the bilateral treaty between the two nations. Indian airlines accuse Gulf carriers of flying 5,000 extra seats per week in each direction, in a gross violation of the bilateral agreement. A majority of international travel between India and abroad happens through nearby hubs in the Gulf and south-east Asia. While this is only one part of the story, on the other, the state-owned Air India's share of the lucrative Gulf trade also shrank under the pressure of effectively foreign controlled Indian airlines. Air India has been on the receiving end in both local as well as overseas air traffic trade.

The AI carried only some 18 million passengers in 2015-16, showing a modest 6.6 per cent passenger traffic growth. Yet, its total revenue stood marginally lower at Rs. 20,526 crores in 2015-16 against Rs.20,613 crore in the previous year. The company's net loss, though, shrank by over Rs.2,000 crore to Rs. 3,837 crore. Paradoxically, the earlier UPA government and its flamboyant civil aviation minister Praful Patel, who presided over the controversial merger of Indian Airlines with Air India and went for a big acquisition of aircraft from foreign manufacturers at huge cost putting a massive debt liability on the airline, are seen as primarily responsible for the poor performance of the public sector airline and loss of its share of the air traffic business at home and abroad.

Indian carriers flew some 100 million passengers, last year, with an average seat occupancy rate of 84 per cent. The figures are based on passengers carried by 11 airlines -- Air India, Jet Airways, IndiGo, JetLite, SpiceJet, GoAir, Air Asia, Vistara, Air Costa, Air Pegasus, and Trujet. The so-called low-fare airline, Indigo's passenger share was around 40 per cent, more than the combined share of Jet Airways and Air India. According to the Airports Authority of India, the country's airports handled a total of over 254 million passengers in 2016, an increase of 20 per cent over 2015. This made India move into fifth place in the global air traffic rankings, overtaking Germany, and behind only the US, China, Japan, and the UK. While the US and China are well out of reach, it is possible that India could overtake the UK, which handled over 270 million passengers last year, this year or next year and possibly catch Japan by 2020.

Indian airlines are buying aircraft like never before to deal with the massive spurt in air travel within India and abroad. The country has close to 450 planes in service and almost double the number are now placed in order, making the ratio of orders to in-service aircraft the highest of any major market in the world. Several new services and direct flights by Indian airlines, including Air India, to foreign destinations such as Los Angeles, Tel Aviv are being added. However, the seat allocation between India and Gulf countries remains a contentious matter. Ironically, some of the West Asian hubs transport a vast number of air travellers from India to Europe and the USA and Canada and vice versa without any issue. Foreign carriers have a two-third share in all the international travel to and from India as of now, and previous governments gave foreign airlines access to a large number of cities in India.

The country is investing billions of dollars in upgrading its airports without having a strategic policy that would allow primary status to national carriers such as Air India to take a leading role in transporting traffic to and from India the way Lufthansa enjoys in Germany, British Airways in London, Singapore Airlines in Singapore, Thai Airways in Thailand, Qantas in Australia, Emirates in Dubai, Air France in France, KLM in The Netherlands, China Air in China, Alitalia in Italy and Air Canada in Canada, to name a few. It is time that the Narendra Modi government takes a fresh look at the country's civil aviation policy that allows a fair share of India's sky and passenger traffic to India's own airlines and develops India as a major hub for international travel.

(The views expressed are strictly personal.)

Nantoo Banerjee

Nantoo Banerjee

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