The hub of the matter: Airport competitiveness to shape air treaties

The recent disagreement between Emirates President Tim Clark and IndiGo Chief Executive Officer (CEO) Pieter Elbers over bilateral air-service agreements reflects the emerging competitive paradigms between West Asia’s state-owned airlines and India’s private sector-driven industry. At the annual general meeting of the International Air Transport Association, Mr Clark, who heads West Asia’s largest airline, had criticised the Indian government for its “restrictive” policies towards bilateral seat agreements with foreign airlines. He had sought increasing seat capacity between India and Dubai from the current 65,000 per week to 140,000. The Indian government has contended that it needs to counter the unfair advantage these carriers have in their ability to ferry more passengers through their state-owned hub airports for connecting flights to the United States (US) and Europe at the cost of Indian carriers flying long-haul routes. Mr Clark’s criticism was rebutted by IndiGo’s CEO, who stated that the Indian government’s approach was “fair and balanced”. In between both opinions lies the question of enabling Indian airlines’ strategic pivot to international connectivity. From one perspective, the Indian government’s approach could be viewed as protectionism. But domestic airlines contend that their expansion into international skies needs to be treated as part of the larger question of developing Indian airports as hubs.

 

The subtext here is that the Indian airline industry is looking to expand international connectivity substantially. In 2023, Tata-owned Air India had placed mammoth orders for 470 aircraft from Airbus and Boeing. It topped it up with 100 more aircraft from Airbus last year as part of its plans to significantly expand its long-haul operations. IndiGo this week doubled its order of widebody Airbus aircraft to 60, adding to a 500-aircraft order placed in 2023. These airlines’ ability to compete on value with international airlines in this vibrant, growing market is not in doubt. They are right in contending that doing so is critically dependent on developing India’s major airports as hubs that can compete with the formidable Gulf trio. India’s efforts to develop as an east-west hub have foundered in the past mainly on these two counts.

 

India has 34 international airports and 124 domestic airports. Of these, only Delhi figures among the top 10 airports in the Asia Pacific and West Asia, mainly on account of connectivity rather than quality of infrastructure and service. Beyond that, baggage handling, limited terminal capacity, and inadequate runways are common problems across Indian airports. Delhi is the only Indian airport to have four near-parallel runways; Mumbai has two that intersect, which means it cannot operate simultaneous takeoffs and landing. Dubai has two parallel runways but will soon have five. Only six Indian airports qualify as Cat III B standards, which means they can qualify to operate in all weather conditions. The fact that only 22 airports make profits points to management weaknesses. Add in the higher prices of aviation turbine fuel (ATF), mainly on account of high taxes charged by states, and it is clear that Indian airports have some distance to fly to become viable international hubs. If the Indian government accelerates the transformation of India’s airports, it will be able to negotiate bilateral air agreements from a position of strength.