The proposal for auction is part of the civil aviation policy, which is expected to be finalised next month.
In its submission to the government, IATA has said such a policy could lead to distortions among carriers and lead to higher fares. It added auctioning of traffic rights might not be compatible with the International Civil Aviation Organisation (ICAO) policies, which urge countries to adhere to principles of fair and equal opportunity and non-discrimination.
Civil Aviation Secretary R N Choubey had, in an earlier interaction, said seat auction would be in compliance with ICAO norms.
In the draft civil aviation policy released in October, the government proposed an open skies policy with countries in South Asian and countries beyond 5,000 km.
The ministry also proposed auction of additional traffic rights beyond the existing rights to airlines from countries within 5,000 km. Bidding will be introduced if domestic airlines have not fully utilised their quota. The additional rights granted through bidding will be for a three-year period and proceeds would go to regional connectivity fund.
“As auctioning would only apply to additional frequencies to be operated by foreign carriers, the proposal would create a potentially important distortion between incumbent airlines and new entrants,” IATA has said. The new airlines will have to pay for traffic rights, which incumbents acquired free of charge.
That said, incumbent airlines, too, would have to pay for additional rights, which will be sought by them.
“Carriers that acquired additional frequencies through an auction process would, therefore, be at a disadvantage relative to incumbents and foreign carriers. Ultimately, the cost of this distortion would be borne by consumers through a higher cost of flying. IATA is concerned that the proposal would ultimately undermine the Indian government’s policy objectives of expanding connectivity,” the association has said.