Gated airlines

Govt-mandated caps on airline landing slots unwelcome

The government’s proposal to cap the number of landing slots an airline can hold in congested airports — principally, Delhi and Mumbai — is a good example of applying the wrong solution to a valid problem. The plan is to set an upper limit in percentage terms for landing slots for an individual airline per airport, and, once it reaches the threshold, it will be last in queue for new slots and eligible only if other carriers reject those slots. The plan has been floated at the instance of incumbents and new entrants. These airlines claim that the current allocation policy is enabling market leader IndiGo, which has a 43 per cent market share, to monopolise landing slots in congested airports and build its monopoly at the cost of other airlines.

 

Slots are decided by the Slot Allocation Committee of airport operators, which follow International Air Transport Association guidelines. Since about 2007, the allocation has been based on usage — an airline gets to keep its slot if it has used it for 80 per cent of the time and half the slots freed up under this “use it or lose it” norm are reserved for new airlines. The key issue is that IndiGo is leveraging its dominant 43 per cent market share to cut fares, raise the frequency of its flights and block landing slots. Airlines complain that there are no prime-time slots available in the major airports. From a pure consumer interest point of view, there is some merit in the competitors’ argument. No industry should create conditions that enable one company to build a dominant position at the cost of competition.

 

But there are several issues that need to be considered in this respect. First, the government may not be the appropriate entity to exercise judgement on slot allocation. True, it is a joint-venture partner in these airports, but it also owns and operates a major competitor, Air India, the third-largest airline by market share. Oddly, no airline appears to have a problem with the fact that the national carrier owns appreciably more slots in Delhi and Mumbai than does IndiGo — 169 to 150 in Mumbai, 111 to 97 in Mumbai. Second, since the issue appears to focus primarily on alleged anti-competitive behaviour, it would be incumbent on the Competition Commission to judge the issue and suggest solutions. Third, penalising an airline for being successful by applying uber-standards of cost control and efficiency is surely an illogical way to address the problems of smaller competitors.

 

The obvious solution to the problem would be for the civil aviation ministry to move towards speeding up the expansion of airport infrastructure. But this takes time to come on stream — the Navi Mumbai airport’s tortuous progress being a case in point. Ahead of that, there are common-sense solutions too. Enabling allocated slots to be shared with other airlines during slack hours (typically between 11 am and 5 pm) is one solution (though Mumbai’s runway upgrade precludes that till April). Re-auctioning slots after a fixed period is another. The broad point is that the development of the domestic aviation industry has been a visible beneficiary of liberalisation, and re-imposing government control to address an airline-specific issue will set an undesirable precedent.