India twiddles its thumbs as foreign airlines grab traffic

Indian air carriers are well behind foreign peers in utilising the traffic allocated under the bilateral services agreements India has signed with 109 countries.

There are 834,000 weekly seats on international air routes connecting all these countries with India.

The Indian airlines have been able to utilise only 22.7 per cent of the total seat allocations.

Air India utilises 11.9 per cent and the other four private carriers that fly abroad utilise a combined average of 10.8 per cent.

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International carriers utilise 37.9 per cent of the total. (All flights together fill only about 60 per cent of the seat allocations, done in absolute numbers, under the agreements).

A big part of the Indian problem is the civil aviation ministry's sitting on applications to fly abroad, to protect the interest of government-owned Air India.

The latter is losing huge amounts of money and the ministry feels allowing any carrier to ply abroad, for the first time or to expand, would further hit AI.

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A top airline official said this attitude hampered their growth and that of airports.

"Not allowing us when the international carriers are utilising almost all their bilateral seats is not proper. We had made plans for the winter schedule that is currently on and the coming summer schedule but all our requests for permission are pending with the government," he said.

IndiGo and SpiceJet are worst hit currently due to this ministry stance, as these two carriers are in an expansion phase.

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Most of the requests pending with the ministry are for destinations in West Asia and Southeast Asia, where a lot of bilateral rights remain unutilised by the Indian side.

In the Malaysia, Singapore, Thailand and Hong Kong sectors, international carriers are utilising 86 per cent, 72 per cent, 77 per cent and 59 per cent, respectively.

Indian carriers utilise 12 per cent, 55 per cent, 39 per cent and 59 per cent of the seats on these routes.

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Similarly in West Asia Indian carriers have been able to utilise only 47 per cent on the route to Sharjah, 55 per cent in Dubai and 91 per cent in Oman, where international carriers have been able to utilise 93 per cent, 99 per cent and 100 per cent, respectively.

Another airline executive explained that flying short-haul international routes was financially beneficial in many ways.

"The first benefit comes when we get fuel at a cheaper rate, in the range of 15-20 per cent. High fuel prices are a big reason for our bad financial condition. Another benefit comes in the form of higher auxiliary revenue through in-flight sales."

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Also, he explained, flying international raised fleet utilisation because international operations can happen in the night when the aircraft would otherwise be idle.

"Low-cost carriers like us utilise aircraft for 12 hours a day and that can increase up to 18 hours, in the case of international operations. More aircraft utilisation translates into more revenue," he added.

"The government should have a long-term approach for the sector and look beyond Air India, and give permission to Indian carriers to fly international. There is no reason why seats should be unutilised when there is demand from the carriers," says Amrit Pandurangi, senior director, Deloitte Touche Tohmatsu, a financial advisory firm.

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If Indian carriers are not allowed, international carriers would take the passenger traffic for that destination by utilising sixth freedom rights, he noted.

This permits a foreign carrier to fly passengers from one country to another while stopping in its own country.

In 2009-10, nearly a third of all international passengers who flew in and out of India were by foreign carriers which utilised sixth freedom rights.