Page 26 - AAA MAY - JUNE 2013 Online Magazine

INDIA SECTION

INDIA MARKET

without disclosing which airlines his from Abu Dhabi to India is expected to
company is interested in. increase threefold, from almost 30,000 to
Rajiv Chib, associate director, 50,000 per week. “With Kingfisher almost
PricewaterhouseCoopers, says the out, only Air India and Jet Airways will be
Jet-Etihad deal has demonstrated the left to cater to international routes. There
interest international passenger carriers is actually scope for more,” a civil aviation
are taking in Indian domestic airlines. ministry official says.
“This [deal] shows that foreign airlines Meanwhile, the national carrier Air
are interested, as they see future growth India’s dominance in India’s international
in this sector. I expect another major market is under threat due to liberal
deal in this area happening by the year- granting of traffic rights and the airline’s
end,” Chib says. limited fleet, lower code shares, and
small frequent flyer partnerships. Air
Time to break into India? India officials blame the government for Unbundling for Revenue
But some analysts point out that most opening up the skies, as well as delays
international airlines would think in aircraft acquisition. “Abu Dhabi carrier Air India and other airlines are planning
twice before investing in loss-making Etihad’s access to the Indian market will to levy extra charges for certain services.
operations, and may instead opt for mean more foreign airlines will use this The Ministry of Civil Aviation has decided
creating their own airline by teaming up as a precedent to aggressively lobby for to unbundle certain services and charge
with Indian companies, something that increasing their presence in the Indian separate fees for seat selection, checked-
Malaysia’s AirAsia recently did. market,” they assert. in baggage, use of airport lounges, sports
AirAsia obtained approval from But international airline companies equipment and musical instruments.
India’s Foreign Investment Promotion are lauding the new foreign investment Globally, airlines are permitted to
Board to take a 49% stake in a new regulations, with some reservations. unbundle services and levy a charge
budget airline venture in India with “Simply welcoming foreign investment for each of the services. Aditya Ghosh,
Tata Sons and Telestra Tradeplace. into Indian airlines will not be enough President and Executive Director of LCC
The airline plans to start operations [...] India should create a level playing IndiGo says, “This is a significant step in
with three to four aircraft and take the field and stop giving privileged status to aligning India with global practices in the
number to almost 40 in next five years. flag carrier Air India,” an official of an airline industry to offer certain optional
Air Arabia is also looking to tie-up international airline says. Pressure is on services to the passenger on payment
with an Indian partner in a similar start- for the government to also remove taxes basis distinct from the tariff, taxes and
up, now that India has granted significant on airlines and punitive airport charges, surcharges etc. which are common to all
flying rights between India and Abu Dhabi and invest in efficient airports that can the passengers.”
on the back of the Jet-Etihad deal. Within handle increasing passenger volumes, Although the move is expected to
the next few years, the number of seats the official notes. cost passengers more, the government
says the objective is to facilitate airlines
offering low base fares for price-sensitive
Investment Needed travellers, while at the same time offer
choice to service-seekers at a price. “We
Efforts to modernise airports via PPPs will start charging passengers extra for
may not progress until steps are taken the premium services the moment we get
to revive investment sentiment in the an official notification and confirmation
sector. Although the Airports Authority from the DGCA,” says K. Swaminathan,
of India, the Civil Aviation Ministry and Air India’s spokesman.
the country’s Planning Commission Several private airlines including
have opened more airports for PPPs, the SpiceJet and IndiGo had been charging
sector is attracting only about 2% of total passengers extra for seat selection until
PPP investment. “The biggest problem the government barred them from doing
besides the policy issues is the lack of so in 2011, and it is estimated that Indian
finance, especially the equity on the carriers lost 75 billion rupees (US$1.4
part of promoters. The borrowings are billion) in the financial year ended March
expensive and difficult to find as well,” 31, as a result of increased expenses
says R N Dhoot, ASSOCHAM President. and declining passenger traffic.

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