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Business News/ News / India/  Hub tailwind likely for Indian airlines
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Hub tailwind likely for Indian airlines

Hub policy lays ground for competitive fares by domestic carriers

Differential charges would allow India’s airlines to provide more competitive fares for international destinations compared with foreign airlines, and therefore help them establish a stronghold in international travel. (REUTERS)Premium
Differential charges would allow India’s airlines to provide more competitive fares for international destinations compared with foreign airlines, and therefore help them establish a stronghold in international travel. (REUTERS)

New Delhi: Indian airline companies brewing plans to increase international flights might just get a fillip from the government. Under the draft national aviation hub policy, the government proposes to introduce differential charges for Indian and foreign airlines at airports in the country, two officials said. That would mean foreign airlines would have to pay more than their Indian counterparts for landing, parking, and ground handling, among others.

 

 

 

Last month, the ministry of civil aviation sent a draft policy note to other ministries—home, finance, external affairs, and tourism, among others—airlines and airports, seeking their feedback before issuing the policy note for public comment, said one of the two officials cited above, both of whom spoke on the condition of anonymity.

“Our plan is to ensure that Indian airlines are encouraged to induct more wide-body aircraft as that will facilitate an increased number of long-haul, non-stop connectivity, which is preferred in international flights," the second official said. Currently, Tata Group-backed Air India and Vistara are the only two wide-body aircraft operators in India. India’s largest airline IndiGo has also been in talks with aircraft manufacturers for wide-body aircraft, Mint had reported earlier.

Queries sent to the civil aviation ministry and the Delhi airport, India’s busiest by passenger traffic, remained unanswered till press time.

A senior executive with a foreign airline, who spoke on the condition of anonymity, said it would be difficult for India to implement differential charges as this may not be in line with global aviation norms.

However, some countries have similar policies in place already. India’s policy, therefore, won’t be unique.

Analysts said the move would help Indian carriers, adding the entire foreign flying rights regime needs an overhaul. “Differential charges are a standard phenomenon in foreign countries as well to provide a fillip to local airlines. If you want to charge them (foreign carriers) more, then charge them more but, in that case, bilateral seat limitations should not act as a deterrent," Mark D. Martin MRAeS, chief executive officer of aviation firm Martin Consulting said, adding the country should then move to an open skies policy to ensure fair competition.

Bilateral air services agreements (bilaterals) are agreements between two countries to either limit the number of flights operated between the countries or to allow unlimited access. India has bilaterals with 116 countries, inc-luding open skies agreements with the US and Japan, which allows unlimited number of flights from carriers of both countries. With most other countries, though, the bilaterals specify a limit on the number of flights. For instance, India and Dubai have a bilateral agreement that allows airlines from each side to operate flights a maximum of 66,000 seats per week.

Ameya Joshi, founder of aviation consultancy firm Network Thoughts, said that bringing all agencies together will be key to create efficiencies at Indian airports.

“The challenges in India becoming a hub will be infrastructure bottlenecks and transit across terminals. Large transit hubs such as Singapore and Frankfurt have seamless inter-terminal transfer, which does not require the passenger to go out of the secure area. Getting all stakeholders like Bureau of Civil Aviation Security, airports and customs onboard will be an uphill task," Joshi added.

Under the draft national aviation hub policy, the government is also assessing the possibility of dedicated terminals—one terminal exclusively for one airline—for large Indian airlines to ensure economies of scale. This would provide seamless transit to passengers of large airlines like, say, an IndiGo or an Air India, whose international travellers could then avail domestic flights from the same terminal and vice-versa.

This is also a global norm, where local airlines get a dedicated terminal at their airport like, for example, British Airways has at London’s Heathrow airport.

“Consultations with Delhi International Airport have been under way for nearly a year now, as the strategy is to set up the country’s first hub at Delhi, make it a success and then replicate the same model at other key airports such as Mumbai, Hyderabad and Bengaluru," the first official added.

The potential for India to emerge as a hub for international air traffic became more visible since end-2022, when domestic air traffic started surpassing expectations of stakeholders including the government, airports and airlines. Data from aviation regulator Directorate General of Civil Aviation (DGCA) shows that domestic air traffic during January-October 2023 stood at 125.5 million passengers, up 6% from the same period of 2019, and 27% higher than the year-ago period.

Helped by nearly 5% air travel penetration, emerging economy and a growing middle class, the recovery in India’s domestic air traffic has been the fastest in the world post the covid-19 pandemic.

The rise in international air travel demand, too, has been sharp. In the period July-September 2023, international air passengers carried to and from India by Indian carriers increased by 25% compared to the same period in 2019, to 7 million passengers. For foreign carriers, though, traffic is still 13% short of the 2019 period at 8.8 million passengers. As a result, the government had initiated consultations with airports and airlines in early 2023 to identify the opportunities and challenges in setting up a hub in India on the likes of Singapore, Doha, Hong Kong, and Dubai.

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Published: 05 Dec 2023, 11:09 PM IST
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