The Economic Survey has suggested a mix of protectionism for domestic airlines and liberal norms for flying abroad to bolster their share in international air traffic.
The second volume of the Economic Survey 2016-17 released on Thursday said large increase in capacity entitlements under bilateral air service agreements with foreign countries has helped the foreign carriers in gaining a large share in the international traffic to and from India as the domestic carriers have underutilised their rights.
Overall, roughly 38% people fly in and out of India through Indian carriers and the rest 62% from foreign carriers, as per official estimates in January-March this year.
“Indian domestic airlines have a very lower share in international traffic to and from India,” the Survey said. “Factors like foreign airlines utilising the sixth freedom of the air, expansion of capacity entitlements under bilateral air service agreements with foreign countries, lower utilisation of India’s own capacity entitlements, the 0/20 rule and fleet constraints are responsible for the same,” it added.
Sixth freedom
Sixth freedom is the bilateral air traffic right to fly from a foreign country to another foreign country while stopping in one’s own country. . For instance, Emirates operates flight between India and the UK while stopping at Dubai, its home state. The sixth freedom traffic constituted 61.14% of the total international traffic in 2015-16, up from 59.15% in 2014-15. The Survey said this has reduced the share of direct long haul flights for Indian carriers from 25% in 2011-12 to 20.5% in 2015-16.
The Survey showed Gulf countries - UAE, Saudi Arabia, Qatar, Oman and the South East Asian countries - Singapore, Malaysia and Thailand as the top destination of passenger traffic to and from India. It said these countries were invariably used as stop-overs or hubs by their respective airlines to carry passengers onward to USA, Canada, Europe, among others.
The Survey said that the government should focus on building its own aviation hubs as “India is as advantageously placed in terms of geographic location as Dubai or Singapore.”
Capacity increase
It noted that the capacity entitlements between Dubai and India have increased six-fold between 2003 and 2017. It increased nine-fold in case of Oman and 12-fold in case of Qatar. “While capacity entitlements are reciprocal in nature, the benefit of such increases in capacity entitlements have accrued more to the foreign partner vis a vis India. This is because India’s utilization of these rights is lower than the foreign counterparts,” it said.
Flying abroad rule
In its National Civil Aviation Policy released in 2016, the Central government had diluted the contentious ‘5/20 rule’ that required an Indian airline to have five years of domestic flying experience and 20 aircraft in its fleet before it can fly to overseas destinations. According to the present norm, known as the 0/20 rule, a domestic airline needs to deploy at least 20 planes on the domestic sector before getting the right to fly on international routes from India. The Economic Survey said the 0/20 rule should be further diluted.
The incumbent airlines, including IndiGo, SpiceJet, Jet Airways and GoAir, that are eligible to fly on international routes had opposed any move to dilute the 5/20 rule even as the new airlines Vistara and AirAsia pleaded the government to do away with the decade-old restrictive norm.
The Survey further said that Air India’s disinvestment will also help India regain international share. “There is a need for committed action plan on privatization or disinvestment of national carrier Air India to enhance its operational and management efficiency because it is a major carrier of international traffic to and from India, accounting for 11.4 per cent of the total international travel,” it added.
