Ease norms to make India a global aviation hub: Economic Survey volume-2

More cover for domestic carriers while negotiating bilateral traffic rights

The Survey has suggested a more liberal rule on plying abroad for airlines, to bolster India’s share in international air traffic, and more protection for domestic carriers while negotiating bilateral traffic rights. 

Expansion of capacity entitlements under bilateral service agreements with other countries has hurt Indian carriers, it says. Foreign airlines dominate the traffic to and from India. The Survey gives reasons for these. One is foreign airlines utilising what is termed the “sixth freedom of the air” (the right to carry passengers or cargo from a second country to a third one while  stopping in one’s home country). Also, expansion of capacity entitlements under bilateral service agreements, lower utilisation of India’s own entitlements, the 0/20 rule (a domestic airline can’t apply to ply abroad unless it has at least 20 aircraft) and fleet constraints.

“Indian domestic airlines have a very lower share in international traffic to and from India,” the Survey observes.

An example of the sixth freedom is Emirates operating flights between India and Britian while stopping at Dubai, its home. Such traffic constituted 61.1 per cent of the global total in 2015-16, up from 59.1 per cent in 2014-15. The office of the Union comptroller and auditor general has in successive reports blamed unbridled grant of this right to Gulf countries as one reason why government-owned Air India got hit hard.

Overall, 38 per cent fly in and out of India through Indian carriers, the other 62 per cent of travellers do so from foreign carriers, by official estimates in January-March this year.

In its National Civil Aviation Policy, issued last year, the central government had diluted the contentious ‘5/20 rule’ that required an Indian airline to have a minimum of five years of domestic flying experience and 20 aircraft before being allowed to go to a destination abroad. This was replaced by the ‘0/20’ rule. explained earlier. At the time, the incumbent airlines — IndiGo, SpiceJet, Jet Airways, GoAir — that were eligible to ply abroad had opposed any dilution of 5/20, rule even as new airlines Vistara and AirAsia pleaded that this restriction be removed.

“Reforms such as privatisation or disinvestment of Air India, creation of aviation hubs and reconsidering the 0/20 rule are some suggestions to improve Indian airlines’ share in the international market,” the Survey noted.