|Freedom to fly, at last?|
|Tuesday, 14 February 2012 00:00|
If the government actually moves to scrap Air India’s monopoly over bilaterals, or the right to fly to international destinations, it won’t come a day too soon. International routes are where airlines make the most money and, in the context of the fight over high sales taxes over ATF, there are no sales taxes to be paid on ATF for global flights—just this allows airlines to cut costs by around 8 percentage points. Despite having a lucrative monopoly, estimates are Air India has been unable to utilise its foreign flying rights in most cases—about 75% of flying rights on profitable routes like those to Middle East remain unutilised because of shortage of aircraft. In certain routes like Europe, Indian airlines currently use only 10% of the allowed capacity, which allows foreign airlines to wean away the traffic from Indian carriers and to expand their market share. With more international routes, low-cost carriers will gain as they have better turnaround time and efficient aircraft utilisation will generate more revenue for bleeding private carriers.
While flying short-haul international routes will be financially beneficial to private players, they must also look at developing sectors like Australia, New Zealand and Indonesia where the utilisation of flying rights by Indian airlines is nil. The civil aviation ministry estimates that private airlines have sought 50,000 international seats last year, of which 40% are for destinations in the Middle East. For Dubai, which is the most profitable route for Indian carriers, currently about 44% of the flying rights of Indian carriers remain unutilised and foreign airlines have been closing the gap significantly. Currently, India has bilateral air service agreement with 109 countries and freeing up foreign flying rights reserved for Air India will give a new lease of life to private carriers who were allowed to fly international routes a decade ago.