INDIA: Flying Could Get Dearer As India Wants Auctioning Of Air Tickets

India plans a major shift in its aviation policy by putting restrictions on landing rights and seats to foreign airlines.

Air travel might be expensive for millions of non-resident Indians (NRIs) from next year as the Government of India plans a major shift in its aviation policy by putting restrictions on landing rights and seats to foreign airlines.

According to media reports, New Delhi plans to change the way it allocates capacity to foreign airlines from a state-negotiated method to an auction process to protect domestic carriers from overseas competition. Bilateral rights allow airlines of two countries to operate a fixed number of seats to a limited number of destinations in each other's territory.

"Foreign carriers that have already exhausted their seat capacity will need to buy additional capacity through an auction," Money earned by auctioning the seats will go into subsidising rural flights in India, the official was quoted as saying.

The country with a population of more than a billion people has Air Service Agreements (ASA) with 109 countries covering aspects relating to the number of flights, seats, landing points and code-share. The proposed seat auction policy will be enforced only on routes that are within a radius of 5,000km from India, according to media reports.

The move surprised aviation specialists and International Air Transport Association (Iata) as this model doesn't exist anywhere in the world. The apex body of aviation wants the Indian government to reconsider its proposal regarding auctioning of air traffic rights to foreign airlines.

"Such a policy could lead to distortions between carriers and lead to higher fares," Iata said in its submission. Auctioning of traffic rights may not be compatible with International Civil Aviation Organisation (Icao) policies, which urge countries to adhere to principles of fair and equal opportunity and non-discrimination, it added.

Foreign carriers not only offer competitive fares to passengers but also contribute a lot to the country's GDP, foreign exchange reserves and job creation. Emirates airline has exhausted its 6,000 seats per week through 185 flights to and from India per week. Emirates airline contributes nearly $849 million to India's GDP, according to its joint study with India's National Council of Applied Economic Research.

"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," Iata said.

In October this year, Indian government proposed an open skies policy with countries in South Asian neighbours and countries beyond 5,000km. The aviation ministry also proposed auction of additional traffic rights beyond the existing rights to airlines from countries within 5,000km.

Bidding will be introduced if domestic airlines have not fully utilised their quota, media reports said, adding that the additional rights granted through bidding will be for a three-year period and proceeds would go to regional connectivity fund.

A senior aviation analyst said it seems that the Indian government is trying every way to prop up poor players with policies that aren't existed anywhere else in the world.

"Auctioning off seats will only be beneficial to bigger airlines in India and may prejudice new or smaller airlines that don't possess the financial clout to compete," Saj Ahmad, chief analyst at Strategic Aero Research, said.

Currently, the number of seats an overseas airline can fly to India is governed by bilateral agreements between two countries.

Responding to a question Saj Ahmad believes that there is no threat to UAE airlines on India's move to sell seats by auction.

In a similar move, the Indian government signalled another major shift in granting traffic rights to foreign carriers. The government is looking at restricting the number of landing points for overseas airlines irrespective of their seat entitlements, according to media reports.

"It was looking at restricting the ports of call given to foreign airlines under bilateral rights, while remaining flexible on seat entitlements," a senior Civil Aviation Ministry official said.

Saj Ahmad said it seems that while India wants to portray a modern aviation policy, the country is unable to let Indian airlines to better compete with international rivals.

"So their solution to this perceived ill-balance is to resort to what is essentially protectionism. Rather than force Indian airlines to be more aggressive in their growth, India's policy makers think that by restricting non-Indian airlines in the country is the answer," he said.