Inside the Centre’s plan to boost Indian airlines overseas | Mint

Inside the Centre’s plan to boost Indian airlines overseas

The Indian government is working on a plan to make Delhi airport the country’s first aviation hub.   (Photo: Getty)
The Indian government is working on a plan to make Delhi airport the country’s first aviation hub. (Photo: Getty)

Summary

  • Despite appeals by several foreign airlines, India has refused to increase bilateral flying quotas with other countries. Instead, the government wants Indian carriers to fly Indian passengers overseas.

MUMBAI : In 2017, the aviation ministry was headed by Ashok Gajapathi Raju, a leader of the Telugu Desam Party, which was an ally of the Bharatiya Janata Party (BJP) until 2019. BJP leader Jayant Sinha was his deputy. In an odd case documented at the time, the deputy stymied his own minister. An attempt by Raju to increase the flying rights to Dubai was blocked by Sinha, who was of the view that certain carriers from West Asia, including Emirates, Dubai’s flag carrier, had built a business model at the cost of Indian carriers. And to this date, Dubai and India have not been able to agree on increasing bilateral foreign flying entitlements despite several requests by the former.

A scathing report on India’s bilateral aviation pacts with several countries, issued a few years earlier by Vinod Rai, then the Comptroller and Auditor General (CAG), may have influenced Sinha’s views on bilateral aviation pacts.

“It is undoubtedly true that the liberalised policy towards foreign carriers in the bilateral agreements benefitted the Indian traveller, but what it did to Indian carriers is an entirely different story. The sequence of events, which took place between mid-2007 and mid-2010 — a period of three years — wreaked havoc on Indian carriers, both public and private," Rai wrote in his memoir, Not just an accountant, published in 2014.

Bilateral agreements are air-service agreements between two countries. They allow airlines from two nations to fly between the two countries within a mutually agreed quota. India has signed bilateral air services agreements with 145 countries. The quota in each agreement is on the basis of seats per week or flights per week, as well as on the basis of open skies pacts, which allow unlimited access in terms of the number of flights.

In the book, Rai writes that Emirates was the biggest beneficiary of India’s largesse between 2007 and 2010. The entitlement is at 66,000 seats/week and the last increase was agreed upon in early 2014.

Rai was the CAG when the government’s auditor published reports on the then civil aviation ministry’s handling of the bilateral aviation pacts, as well as on decisions around Air India, then the country’s national carrier. The findings of those audit reports, along with reports on coal auctions and the auction of telecom airwaves, were used by opposition parties to hammer the United Progressive Alliance government during the 2014 Lok Sabha elections, and helped bring the Narendra Modi-led BJP to power.

The CAG’s audit findings have shaped the views of the BJP government, which is not happy that city states such as Dubai and Singapore have developed their airports as aviation hubs fed by a large number of passengers from India. This has led to an unofficial ban on any increase in bilateral flying rights by India, and that proscription is in place even today.

Boosting Indian carriers

Several international airlines have been working hard to sway India’s firm stand and negotiate an increase in bilateral flying rights. So far, their efforts have not borne fruit. To a large extent, that is because the government is of the view that Indian carriers, which have access to a huge captive market, can become global players.

The plan of making Indians fly on Indian carriers has been given some momentum with the sale of Air India to the Tata Group and the airline company’s subsequent record order for 470 aircraft, 70 of which are wide-bodied planes that can fly the long haul to markets in Europe, the UK, the US and Canada. IndiGo, India’s largest domestic carrier, is also reportedly negotiating a large aircraft order that may include wide-bodied planes.

In an interview with Mint, Union civil aviation minister Jyotiraditya Scindia also stated that an audit of bilateral usage by Indian carriers is on and any further decision on bilaterals would be taken post the audit. But, he added that the government, in consultation with stakeholders, is also working on a plan to make Delhi airport India’s first aviation hub, a key part of its larger strategy to get Indians to travel abroad on Indian carriers.

Sixth freedom traffic

In India, Emirates has always been based in Mumbai, but that changed recently, when the airline shifted its offices to Delhi. The reason for the shift: The management wants its India representative closer to the government to negotiate a deal on an increase in bilateral rights.

Emirates is not the only one. At an aviation conference held in Delhi last month, almost all the international airlines in attendance sought an increase in flying rights with India. They include Emirates, Jazeera Airways and Turkish Airlines. Separately, Malaysian carriers, Qatar and Singapore Airlines have also sought increase in entitlements.

These airlines have a network spanning the globe and are supported by a large airport in their home country that facilitates the hassle-free transfer of passengers coming from one country and going to another. In aviation parlance, such passengers are known as sixth freedom traffic: they are passengers flying from country A to country C via country B, which is the home country of the airline carrying them. Barring Jazeera Airways, each one of the airlines mentioned above wants flying rights to carry sixth freedom traffic from India.

Emirates, Turkish, Qatar and Singapore, among others, do not have a large market in their home countries and hence need passengers from a third country like India to fill their planes beyond their home country.

Industry analysts estimate that even today, about 60% of total passengers flying out of India in airlines from these countries are sixth freedom passengers going to Europe, the UK and the Americas. To tap this traffic, the government wants Indian carriers to increase direct connections to these markets. Most of the countries seeking rights do not have a captive market in their home countries, whereas India is home to 1.4 billion people and a growing middle class.

Making a case for more rights for Dubai, Emirates president Tim Clark said that the airline wanted to contribute to India’s growth story. “We want to be part of it (the growth story). We are not here to threaten... We are here to add value to the Indian economy … by providing a range of products that other carriers are not able to, operating to multiple destinations where we know the Indian demand is...," Clark said at a conference in Delhi last month.

Another airline, Jazeera Airways, on the other hand, says it does not have any plans to carry sixth freedom traffic from India. “We are a very small airline with 19 airplanes... neither us or Kuwait Airways (another airline from the country) have any interest or capability to carry long-haul connecting traffic on routes that interest expanding Indian carriers. Our focus is just to cater to the home market of India and Kuwait," the airline’s CEO Rohit Ramachandran told Mint.

What local carriers want

While foreign carriers want bilateral flying rights to increase, domestic carriers do not see lack of rights as an impediment to their international launch or expansion plans.

For instance, Akasa, India’s newest airline, believes that there are enough rights available to launch international flights to the Middle East. “It will either be the Middle East or Far East because that’s all we can fly to. And you can narrow it down to where the bilaterals are available. And, in some cases, airlines are squatting on rights but not utilizing them—that evaluation is on at this stage," Akasa’s chief commercial officer Praveen Iyer told Mint.

Another airline executive, who did not want to be named, supports the government’s approach and does not want India to offer any more foreign flying rights to countries with network carriers. “In the short- to medium-term, passengers may have to pay high fares but Indian airlines will benefit during that period since there is a plan by Indian companies to expand internationally," the executive said.

Minister’s view

While foreign airlines may have a list of demands, the Indian government does not seem to be in the mood to entertain airlines that are eyeing sixth freedom traffic from India.

“It is important for me to give every avenue possible to my customer. That means certainly looking at international airlines and increasing their footprint into India... but also looking at our flag carriers growing their footprint internationally," said Scindia. “And that is why I have been stressing to our airlines that we need to induct more wide-body aircraft so that we can cross the seven seas and make our mark there. I am very glad that in the last 1.5 years, many airlines have now started ordering wide-body aircraft."

He added India would also want to see foreign airlines providing point-to-point connectivity. “My insistence is not necessarily only direct connectivity from but also direct connectivity to. Therefore, encouraging foreign carriers to also directly fly to India from their countries," he added.

While not giving a free hand to global network carriers that want sixth freedom traffic from India is one part of the government’s strategy, the other part is to prepare airports to become aviation hubs and have airlines align with that.

The two-pronged plan

There are two key prerequisites for any country to become an aviation hub. One is a strong airline that has a global network connecting all the key parts of the world. The second is supporting airport infrastructure that allows a smooth transfer of international passengers from one aircraft to another.

With the Tata Group-owned Air India placing a record aircraft order, India will soon have its own global airline providing direct connections to key markets such as the US, the UK, Europe and Canada, along with other short- and medium-haul destinations to the east of India.

As for the other part of that strategy, the government has set in motion a plan to prepare airports in India to become aviation hubs. It has decided to start with the airport in Delhi, where changes will be made to ensure timely connectivity between flights and reduce connection times to a minimum.

“We are working with stakeholders to look at how we can prepare Delhi airport to become a hub. A consultant will be hired to look at international comparables to see how we can go about doing that. So, that is work in progress," Scindia said.

Explaining the requirements to become a hub, Scindia explained: “We need a concentration of airlines, domestic to international connectivity, and minimum connect time between airlines. We need to ensure that the volatility in terms of arrival and departures between flights is flattened out."

All these aspects will be looked at by the consultant, which will submit its report in the second half of this calendar year. Further down, the plan is to include other major airports of the country, too, thus, providing connections to every part of the country. The consultant is likely to study models followed by airports such as Heathrow (London), Dubai, Doha and Singapore.

Much to be fixed

Industry veterans believe that India has the potential to become an aviation hub and that the country may not have to depend heavily on sixth freedom traffic since it has a huge passenger base.

“India absolutely has the potential, market, and need to create its own world-class hubs, and the government making this a priority is commendable," said Sanjiv Kapoor, aviation veteran and CEO-designate of Jet Airways.

Kapoor suggests that India could learn from global airports and bring in a lot of efficiencies within the existing airport infrastructure.

“For hubs serving domestic-to-domestic and domestic-to-international connections such as in the US and EU, security is typically done only at the originating airport and not again at the connecting airport," he pointed out. “In India currently, passengers are required to go through security again at the connecting airport even if arriving on a domestic flight, and this impacts speed, efficiency and throughput, which are essential for hubs."

Similarly, he said, hub airports with multiple terminals such as Singapore, Dubai, Frankfurt and London Heathrow offer airside connectivity between terminals to maximize efficiency and reduce connection time and hassles, he added. While India may not need a lot of sixth freedom traffic, easing transit visa norms for passengers transferring via India would be a step in the right direction, said Kapoor.

The government has started working on a plan to turn India into an aviation hub. Aircraft inductions by Air India and IndiGo are key spokes in that plan. Air India’s planes will start joining the fleet from mid-2025 and IndiGo’s induction of the Airbus 321 XLR, which can fly up to Amsterdam, will also start only 2025.

In the interim, however, Indian flyers will have to continue to choose from the limited flights available to go overseas, and very likely pay higher fares. That is, perhaps, a small price to pay considering the bigger plan to have Indians flying on Indian airlines when they travel abroad.

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