Aviation woes are not just about Air India

Volume 2 of Economic Survey 2016-17 highlights aspects which show that divestment of Air India is only one of the many problems that the aviation sector is trying to deal with. It talks about reforms such as privatisation/disinvestment of Air India, creation of aviation hubs and reconsidering the 0/20 rule as ways to improve Indian airlines’ share in the international market. (The 0/20 rule says that any airline that sets aside 20 per cent of its fleet or has 20 aircraft can fly on international routes.) All these are valid points.

There is a reason why foreign airlines have been able to walk away with a lion’s share of Indians travelling abroad. In the 1980s, the Government allowed only Air India and a few foreign airlines to operate to a restricted number of airports. In time, more airports were opened which allowed foreign airlines to operate to more parts of the country. But successive governments took decisions which did nothing to help Indian carriers get a share of the international market.

For example, in 2003 the Government announced an open sky policy with Asean countries (which includes Singapore, Thailand, Malaysia — favourite destinations among Indians), Myanmar and Indonesia, and Saarc countries which allowed Sri Lanka’s national airline, Sri Lankan, to ramp up its flights to India to over 100 a week from under 45 earlier. The open sky agreements allowed carriers of Asean and Saarc to operate an unlimited number of flights to 18 tourist destinations and a daily service to the four metro cities.

Less than two years later, India and the US signed a landmark agreement permitting any number of airlines to operate any number of flights to any point in each other’s territory. Bilaterals were signed with various other countries, chief among which were Dubai which saw the weekly seats that were allowed to each side go up to 54,200 from 23,000.

Indian carriers were largely unable to make use of these agreements; apart from Air India and Jet Airways none of the other domestic carriers had widebody aircraft and hence could not extend operations to Europe, US, Australia or Africa. Further, Air India was riddled with red tapism and delays in getting more aircraft. Jet Airways tied up with Etihad, moving its base first to Abu Dhabi and then to Amsterdam. This left no Indian carriers to match the number of flights that international carriers were operating to and from India. As the Survey points out domestic airlines used only 38 per cent of the international Available Seat Kilometres (ASKs) in 2016 compared to 60.6 per cent for Netherlands, 49.1 per cent for China and 48.9 per cent for the UK.

The Survey also says that top destinations of passenger traffic to and from India are UAE, Saudi Arabia, Qatar, Oman, Singapore, Malaysia and Thailand. However, these countries are not the final destinations of all passengers. They are used as stopovers/ hubs by their respective home airlines to carry passengers onward. “This is the 6th freedom of air which allows foreign airlines to fly from a foreign country to another while stopping in one’s own country. The 6th freedom has to a large extent been responsible for reducing the share of direct long haul flights for Indian carriers from 25 per cent in 2011-12 to 20.5 per cent in 2015-16,” the Survey says.

Granting 6th freedom rights to other countries was a step the gGovernment took without considering its consequence for Indian carriers which face a further disadvantage as they only operate point-to-point flights.

These steps have been so beneficial to foreign airlines flying to India that countries like Dubai and Qatar have repeatedly been asking for more flights. India has not granted this but the damage has been done: India cannot go back on the bilaterals. In this scenario privatising Air India will help the airline. But what that will do to the aviation scenario is debatable.