A news report in the Business Line of AUG 11 stated that the
Aviation Ministry has asked domestic carriers to file plans of overseas
flights. According to the report the
ministry is against allowing international airlines operating more flights into
India till domestic carriers catch up. Fifteen
days were given to the domestic airlines to file their plans for international
operations till March, 2014 and these fifteen days are over now. The ministry’s reasoning is that if foreign
airlines keep operating additional flights the Indian carriers have no chance
to grow. Is an open-skies policy bad for the Indian Aviation industry in
particular and the Economy in general?
Let us see.
Today, five Indian carriers Air India (AI), Jet Airways, IndiGo,
SpiceJet and Kingfisher (KF) Airlines are permitted international flights. At the time of writing KF, due to its
financial woes, has stopped operating its international routes. AI too suffered badly dues to its pilots’
recent 58-day strike. Foreign airlines,
at the moment, operate over 1300 flights a week to India while Indian carriers
operate less than 1000.
The decision to curtail the operation of foreign carriers will
definitely adversely affect them, especially the Gulf-based ones. Among these are Qatar Airways, Saudia and
Oman Air, all airlines that are keen to expand their Indian operations. Is this policy good or bad? In August I had posted three articles, or
should I day an article in three parts, on FDI in Civil Aviation. The same principle with regard to benefit to
the Indian economy applies here also. Let
us see how.
Among India’s international airports how many can be termed as
international hubs? Other than Mumbai and
Delhi I couldn’t think of any other. Sorry,
Bangalore has not yet earned this tag. By
restricting foreign carriers from entering India, are we going to shake this
off? I feel that current restrictions
have, instead of having a favourable effect on the Indian aviation industry,
actually have had an adverse effect. Restrictions
placed have prevented other airports from becoming international hubs. Further, travellers are given a limited choice resulting in not
just higher fares but also huge waitlists.
Dubai and Singapore are today two examples of nations, a
fraction of India’s size, that are now truly international hubs. Would this have happened if these nations had
to place restrictions on who should or shouldn’t land there? And, in both cases, national carriers,
Singapore Airlines and Emirates Airways, were huge beneficiaries. A passenger landing in Dubai and Singapore
can take a single flight to almost any major destination in the World. This has resulted in huge numbers of business
and leisure travellers using these airports benefitting not just the airports
but the nations’ economies as well.
A study recently conducted by the National Council of Applied
Economic Research (NCAER) and sponsored by the Dubai headquartered Emirates Airlines
(EK) concludes that an efficient civil aviation sector is important for economic
growth. This is because it is
inter-linked with other sectors in the economy, generating income and
employment through global commerce and tourism.
In the globalised World that we are living today, a well-managed civil
aviation infrastructure with efficiently-run, competitive airlines are an
absolute must. With expanding airport infrastructure
and more airlines operating, transport and communication costs can come down
drastically. This will lead to the promotion
of increased commercial and cultural activity.
The result more jobs, and ultimately unification of people and markets.
According to the sponsors of the study EK, who are keen on
increasing their operations into India, the
move to increase services of foreign carriers will result in direct as well as
indirect benefits for the country. There
are two ways in which this expansion could take place; one, through both higher
seat allocation and two, through additional points of service. Their findings are very interesting. At a presentation in New Delhi on Monday, SEP
3, 2012, Will Lofberg, Senior Manager, Public and Environment Affairs, said
allowing Emirates to operate 80,000 seats a week into India or carry 6.16
million passengers annually would lead to a direct contribution to the Indian
economy of $363 million and have a multiplier effect of $720 million. Below is a chart to show how. At the moment, this is all the data I have
but shall make further comments the moment I get a copy of the report entitled Emirates
in India: Assessment of economic impact and regional benefits.
As per the study, allowing EK to operate 60,000 seats
a week would allow it to carry 5.03 million passengers annually and directly
contribute $296 million to the Indian economy with a multiplier impact of $644
million. The study, though sponsored by
them, has been conducted by NCAER (www.ncaer.org), an independent body. Imagine what kind of a multiplier effect
would take place if India opened up its skies and allowed FDI in domestic
aviation. I’ve always maintained that we
should ignore what other countries are doing and follow our own model which is
good for our own economy.
Coming back to the presentation Mr. Lofberg mentioned
that EK, at the moment, is allowed to operate 54,200 seats a week into India
and since 2008, has not been allowed to increase that number. He also stated that EK’s India operations
carried 45 per cent of passengers between 10 Indian cities and Dubai, with the
remaining 55 per cent of passenger traffic being carried from Indian airports to
points beyond Dubai. I always maintain
that if EK can do it, why not AI or any other Indian carrier? On the contrary, I feel, that Indian carriers
have, with the help of the government, following a dog in the manger attitude. They
are opposed to allowing any more rights to international carriers to operate
more flights into India, arguing that foreign airlines carry passengers not
only to their home country but also to third countries from their home base. How exactly should it adversely affect them?
The study states that EK contributed
$596 million to the Indian economy by way of $274 million in the air transport
sector; $76 million in the petroleum and chemicals sector; $62 million in the
manufacturing sector; $39 million in the trade, banking and insurance sector
and $145 million in other sectors of the economy. The Dubai-based airline has provided direct
employment to 1,045 employees and supports a total of 72,323 jobs in India
through its operations. On the tourism
front, Emirates has brought in 529,928 foreign tourists in India in 2010-11, as
a result of which, $1,153 million were contributed to the economy as foreign
exchange earnings.
Every $1 contributed by EK to the Indian air transport sector generates
an additional $1.176 in the Indian economy, giving an output multiplier for
Emirates’ contribution in the Indian economy at 2.176. EK’s operations have a role in enhancing air
transport and tourism as it connects non-hub airports to a significant number
of points in India which would otherwise not be directly linked. If it expands to four additional destinations in
India: Amritsar, Pune, Mangalore and Trichy, apart from 10 cities from where
they are operating, it would benefit the Indian economy by $106 million and
would also lead to the creation of 13,011 jobs.
The study states that in 2010-11, 65 per cent of the expenditure were on
relatively small airports whereas only 35 per cent of Emirates’ direct
contribution went to three big airports – Mumbai, Delhi and Chennai (in terms
of passenger share). This indicates Emirates’ role in developing economic
activities at non-hub points.
