Financial Daily from THE HINDU group of publications
Tuesday, Dec 28, 2004
Logistics - Insight
Can Indian carriers soar in the open skies?
It will get a new dimension when the Civil Aviation Minister, Mr Praful Patel, visits Washington on January 13, to explore the possibility of the two countries further opening up their skies to each other's carriers.
Early 2004, an official of the Washington-based Federal Aviation Authority (FAA) visited New Delhi to urge Indian authorities to completely open the skies between India and the US.
Considering the shaky financial situation of most American carriers, the push for open skies will lend a new strategic meaning to the relations between the two nations.
As per the the Civil Aviation Ministry proposals, formulated at the instance of the Prime Minister, Dr Manmohan Singh, both Air India and Indian Airlines will be strengthened and their operations synergised to deliver best value to the government, their 100 per cent owner. The private carriers have also been included as Indian Scheduled Carriers and will get to operate besides the unutilised routes of Air India some new routes as well.
When air-taxi operators were converted as scheduled operators in 1994, they were defined as Scheduled Domestic Operators. A change in definition may become necessary when they go international.
According to the draft details, liberalisation of international air services has been a continuous process to meet the rising demand for global travel.
Bilateral agreements are decided on reciprocity and there is now a heavy imbalance with 65 per cent of the available rights used by foreign carriers and Indian official carriers using only 35 per cent.
Foreign airlines derive disproportionate economic advantage of traffic rights. Of the 100 countries with which India has Air Services Agreement, airlines of 51 operate to India while only 25 nations are connected by Indian carriers Air India and Indian Airlines besides the SAARC capitals where now Jet Airways and Air Sahara also fly.
The commercial agreement such as code share and royalties in favour of Air India hardly compensate for the loss of economic opportunities to India in terms of business, employment and tourism.
The Civil Aviation Ministry thinks that as in IT, telecom, roads, broadcasting and automobiles, the Prime Minister's Office should move boldly in civil aviation also. But by stating this, it masked the important FDI aspect in aviation as none of the sectors bars Foreign Direct Investment.
For example, it is the US IT giants that have invested in IT business ventures in India. So also in automobiles, broadcasting, and telecom.
The past four years, India has adopted the limited open sky policy to cater to peak season demand by permitting designated airlines to operate unlimited services to their respective points of call for three to six months.
During the limited open sky period in 2003-04 (December to April), foreign airlines made available 2.74 lakh additional seats. It could have been Advantage Indian Carriers.
In these days of competition, no paying passenger believes in patriotism. He wants direct connection, competitive tariffs and good products. During the open skies from November 2004 to March 2005, foreign airlines requested for 2,387 extra flights translating into 5.85 lakh additional seats.
In December 2003, the Vajpayee Government announced, unilaterally, that Asean carriers could increase their flight frequency to four Indian metros to seven a week or a daily flight without any seat cap.
It even allowed these airlines to double their frequency to two metros provided they increased their frequency to any one metro to a daily operation. Mr Praful Patel is now taking this to its logical conclusion.
After the Vajpayee Government abandoned privatisation of Air India and Indian Airlines, the Manmohan Singh government is strengthening them. Indian Airlines' plan to buy 43 Airbus aircraft is expected to receive Cabinet approval by March 2005.
For Air India it may happen by April. After reaching political consensus, the Civil Aviation Ministry finalised the draft policy details of which are as follows:
Simultaneously, initiate the acquisition plan. Air India's Request for Proposal to buy 50 wide-body aircraft covering ultra-long range, medium-capacity long-range (MCLR) 300 seat plus category and MCLR 250-seater category has received good response.
Pending the launch of its LCC Air India Express to serve Gulf and South-East Asia from May 2005, Air India is leasing seven single class 180-seater Boeing 737-800s to suit the LCC character.
While Mr Vijay Mallya who is launching Kingfisher Airlines has been critical, the Ministry wonders how he is seeking foreign routes even before launching his operations. Interestingly, some of the critics are those who were Air Taxi operators in 1993-94 but dropped out later.
Already three Asean members Singapore, Malaysia and Thailand have granted designated carrier status to their other airlines in addition to Thai, SIA and Malaysian.
India will thus automatically get to nominate multiple carriers for traffic between India and the three Asean nations which will smoothen the take-off for Jet and Sahara.
It is here the UK bilateral where frequencies have been increased to 40 per week assumes significance.
Besides daily London Heathrow connections from Delhi and Mumbai, Air India is starting new thrice a week service on the Amritsar-Birmingham-Toronto route.
The thinking is that two PSUs should not compete on these routes and instead Air India from the public sector and Jet Airways from the private sector with an already established quality product should compete on the India-UK/US routes.
If the January 13-14 talks in Washington on India-US bilateral end on a positive note with both sides agreeing to open skies, it will open up tremendous opportunities for Air India.
The airline that connects India to New York, Newark, Chicago and Los Angeles will be able to tap the huge Indian Diaspora in Houston, San Francisco, Los Angeles and Washington DC besides increasing its frequencies to other US destinations.
The decision to buy 50 wide-body aircraft assumes significance in this context. Air India will also fly eastward, with a daily flight to Hong Kong from Delhi and if new bilateral agreements are clinched, it could from there connect to the US West Coast, a route now monopolised by Asean carriers.
(The author is a Delhi-based freelance writer.)
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