Modi 3.0 may increase quota for foreign flights

Air traffic between Indian cities and select foreign destinations is set to boom as the government readies to permit more international flights, two people aware of the matter said. The plan comes in the wake of demand for more flights to and from India.

“Consultations with the industry started before the election, as there is demand from some airlines as well as airports in India," one of the two people cited above said on condition of anonymity. “The plan is to allow an increase in foreign flying rights to destinations where Indian carriers need to increase flights.” 

While consultations on which countries will benefit are yet to start, one of the people cited above said that some countries that may be considered could be destinations in the Middle East like Qatar and Dubai, where both sides have exhausted their flying rights.

The issue has split the Indian aviation industry, with new Indian airline Akasa Air and foreign airlines like Emirates and Saudia in favour of increasing flying rights, while Air India has clearly made its opposition known to any such move.

Understanding flying rights 

International flights are permitted under so-called bilateral flying rights. For example, if India signs an agreement with, say, Australia to allow a certain number of flights by Indian carriers from India to Australia, Australian airlines can then launch the same number of flights to India.

India has such bilateral flying pacts with 116 countries. More rights mean more air traffic between two countries. However, Indian airlines have been unable to fully utilize their flying rights on some routes, while many of their foreign peers have exhausted these, and have been pressing for more.

Since taking charge in 2014, the Narendra Modi government has maintained that foreign carriers had gained an undue advantage in bilateral foreign flying rights and have built aviation hubs by sourcing their traffic from India.

What Indian airlines say

The international air traffic segment in the world’s third-largest and fastest-growing aviation market has come into the spotlight with Indian carriers such as Air India, IndiGo, and Akasa placing orders of over 1,600 aircraft in a span of about 11 months. 

While new airlines such as Akasa Air seek bilateral extensions on exhausted but lucrative markets such as Dubai, older carriers with renewed ambitions have been concerned about liberal bilateral extensions, fearing undue advantage to foreign carriers.

“If we don't open up Dubai for the next 10 years, I can assure you that airfares to Dubai can reach ridiculous levels... We will continue to petition to increase bilaterals,” Akasa Air founder and chief executive officer Vinay Dube said last week on the sidelines of the CAPA India Aviation summit.

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However, Air India, the largest full-service carrier of overseas traffic with over 13% market share, has reiterated that granting bilateral rights to foreign carriers will impact the growth plans for Indian carriers in long-haul connectivity and the ambition of setting up a global aviation hub in India.

"We are committing to that (new aircraft) on the basis that there would be an economic return to that investment, which, if you add it all, is well over $100 billion. If the rug is pulled from under us, if we can’t fill the aircraft, we will not take them,” Air India chief executive officer and managing director Campbell Wilson said at the CAPA India aviation summit.

What foreign airlines say

Several foreign airlines, on the other hand, have firmed up plans to approach the government with their requests for an increase in flying rights.

“Today, we have not exhausted the bilaterals in terms of number of seats per week, but we have hit the limit in terms of number of stations,” Sanjiv Kapoor, executive vice-president, strategies of the Saudia Group told Mint. “The relationship between the two countries is good. During those recurring discussions, we are hopeful that bilaterals will be expanded in terms of number of destinations and eventually also seats.”

The bilateral air service agreement between Saudi Arabia and India permits designated airlines to operate a total of 20,000 seats per week in each direction, subject to a frequency of 75 flights per week. 

However, it has just eight stations in India: Delhi, Mumbai, Bengaluru, Lucknow, Hyderabad, Chennai, Calicut, and Kochi; and three stations in Saudi Arabia: Jeddah, Riyadh, and Dammam.

“We will like to expand to more places such as Kolkata, Ahmedabad...the growth is coming a lot from tier-II (cities),” Kapoor added.

Similarly, Emirates, the largest foreign carrier for India with around 10% share of international traffic to and from India, has also been seeking an increase in bilateral air travel rights between India and Dubai as the existing cap on seats is exhausted. 

“We have had 65,000 seats in each direction since 2015. That is nine years ago. If you are telling me that Indian market has not grown internally internationally in nine years, particularly between India-Dubai market... really?! The Indian community here is huge and in UAE, it grows all the time. It needs air services. The business case is staring government of India in the face. It is their call," Emirates president Tim Clark told Mint last week.

“There has been no meaningful increase in bilateral flying rights with India for about 10 years now and the Indian diaspora has almost doubled in several countries during this period," an executive at another foreign airline said, requesting not to be named. “This mismatch has led to a multifold increase in fares. The government should increase flying rights to ensure that fares stay under control and the travelling public benefits.”

According to the latest data from the Directorate General of Civil Aviation, airlines carried 17.3 million passengers to and from India in October-December, with 7.7 million passengers, or 44.5% of the total, carried by Indian airlines and the remaining 55.5% carried by overseas carriers.

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