Monday, March 20, 2017

Enter Qatar: India Is Losing The Aviation And Airports War To Gulf-Based Carriers

A proposal from Qatar Airways to start a 100 per cent-owned domestic airline in India is likely to prove contentious, not least due to opposition from domestic players like Indigo and Jet, who claim the field is tilted against them. Among other things, the Federation of Indian Airlines (FIA) is likely to cry foul over three issues: one, that Qatar does not give Indian carriers the right to start a domestic airline in that country; that no country allows 100 per cent foreign ownership in a domestic airline, and, three, that this will shift international traffic to a hub in West Asia, and out of India. After Etihad Airways and Emirates Airlines, who have created hubs for international traffic from India in Abu Dhabi and Dubai, Qatar will create another hub in its capital Doha. Jet Airways survives because it plays feeder airline to Etihad in Abu Dhabi after being rescued from near-death by the latter.

Most of these arguments are protectionist. For example, what growth will Indian carriers get by operating in Doha, which does not have a huge domestic market worth speaking about? Secondly, how does India gain by not allowing 100 per cent foreign ownership? Wasn’t this the exact ownership limitation that drowned Kingfisher Airlines? Under current rules, a foreign airline can own 49 per cent directly, and foreign non-airline interests the balance. Qatar’s domestic Indian operations will be 100 per cent foreign-owned through the subterfuge, but then most Indian airlines too have NRI or foreign ownership whose ultimate ownership is often shrouded in mystery. The third point – that the hub will move out of India – holds some water, but for that we have ourselves to blame not the Qataris.

The global passenger hub is moving out of India not because Gulf-based carriers are deliberately favoured by Indian policies, but because we have not got our overall policy mix right. We charge huge premia for both fuel and airport infrastructure, while the UAE-based carriers benefit from their competitive advantage in both these areas.

To win in aviation, you need huge investments in airport infrastructure, so that airlines can be attracted to land here and create hubs. The airline business is a thin-margin one, and to succeed in it, you need to focus on lowering your costs on all fronts. This is precisely what our policies fail to do.
The mantra for success involves getting costs down in six areas: the key costs are CASK – or cost per available seat kilometre, which is the basic cost of offering one seat for a given distance in km. Then there is the cost of debt, fuel, maintenance, total flying time, and airport landing and parking costs.
20/03/17 R Jagannathan/Swarajya