By Sanat Kaul
In India the strong influence of Air India over the ministry of civil aviation led to a conservative policy towards such agreements in spite of repeated requests of ministries of commerce and external affairs to be more liberal. Did this lead to an overall economic loss to the country as business people could not get tickets when needed? No such calculation has been made but the answer is likely to be in the affirmative.
In the past it was always Air India’s inability to meet the requests of foreign airlines for more capacity in matching the flights performed by them into and out of India that discouraged the government from giving more international routes into India.
The conflict was whether Air India is more important than India as the demand from foreign airlines for transporting passengers, especially during winter season, far exceeded the sanctioned capacity.
As a last resort, to meet the annual demand of passengers going into and out of India during the winter season, the Director General Civil Aviation would declare an ‘open sky’ for the winter season permitting foreign airlines to bring in bigger or more aircrafts.
This policy met with limited success as airlines find it difficult to change their schedule or size of aircraft at short notice for half the year because of their commitments worldwide. However, in recent times the influence of Air India in bilateral negotiations has diminished. Air India no longer has the right of first refusal in getting foreign routes.
With private airlines of India being allowed to operate abroad from India from 2002, Air India tried to maintain its prime position. This was done by three means: First, it managed to get a commitment from the government of first right of refusal for new foreign routes when given to other airlines. Second, private airlines were not permitted to go abroad unless they had completed five years of operations in India. The third was an embargo of 5- years on the lucrative Gulf routes for other Indian airlines.
Not allowing any domestic airline to take foreign routes even when they were not being served by Air India amounted to a national waste. These were administrative decisions and discriminated against private airlines of India. A new foreign airline without any previous experience could come into India if it was designated by another country but our airlines could not go abroad unless they had completed 5- years and had 20 aircrafts with them.
The first anomaly has been done away with by allowing our airlines to go abroad and fill up our vacant bilateral slots. As a result private airlines of India now carry more passengers than Air India and are opening up new routes. However, the second policy of not allowing Indian airlines to go abroad unless they have completed 5- years of domestic flying also needs a review. The third regarding Gulf routes have also been done away with in 2007 on completion of the five year embargo.
With a booming market, there is no reason why foreign airlines should take away our international traffic disproportionately. Ideally, Indian airlines should handle 50 per cent of the actual international traffic while foreign airlines coming into India should handle the other half. This correction is now taking place slowly as a result of our change in policy and now private airlines carry more passengers internationally than Air India.
This brings us to the issue of creating an international hub at Delhi, Bangalore or Hyderabad. Dubai and Singapore airports have grown as hubs partly because India never had an airport capable of providing a good and friendly hub. Now with Delhi, Hyderabad and Bangalore having good and capable airports promoting one of them as hubs is a distinct possibility.
Promotion of an international hub requires a good and cheap transit airport and government support, especially with regard to a liberal bilateral aviation policy for that airport/ city. Can we achieve this feat? Difficult, unless we evolve a proactive policy towards it. The concession agreement signed between Airports Authority of India and GMR Group for Delhi International Airport Limited (DIAL) provides for 26 per cent equity for Airports Authority of India (AAI) and 74 per cent for GMR group. However, it also stipulated that AAI will not bring in more than Rs. 500 crore as equity.
This faulty condition did not allow higher equity base when desired by GMR and they had to resort to collecting Airport Development Fee (ADF) more as viability gap funding measure. The first step towards correcting this anomaly has been taken by reducing the airport development fee by half.
The second step is now being taken by directing AAI to bring in more equity into DIAL.This corrects the anomaly in the original concession Agreement of 2006.These two steps will hopefully reduce the high costs of Delhi airport followed by Mumbai airport and make them more competitive.
Among the future steps needed are to reduce the sales tax on ATF by bringing it under the category of “declared goods” thereby attracting only 4 per cent tax unlike around 30 per cent in some states. There is also a need to look into possible cartelisation by the four public sector undertakings in manipulating Air Turbine Fuel prices. INAV