Thursday, March 09, 2017

Qatar Airways' plans to set up an airline in India may face political and regulatory hurdles

New Delhi: Qatar Airways has been interested in traffic from India for a long time. It was wooing India’s biggest domestic airline, IndiGo, for an equity partnership earlier to gain a foothold in this market but IndiGo did not respond to its overtures. Frustrated at IndiGo’s persistent refusal, Qatar has now come up with a proposal to set up an airline in India from scratch. The recent government move to allow 100 percent FDI in commercial aviation may seem to be the trigger for this bold move by Qatar. Whether it will succeed in overcoming the myriad regulatory hurdles in this endeavour remains in doubt.

But what is more important to understand is its actual motivation in eyeing the Indian traffic: It wants to make Doha a bigger international aviation hub and the Indian narrow body traffic will likely feed into the existing global network of Qatar Airways. The focus of the government of Qatar (which wants to invest through its sovereign fund) and Qatar Airways is onward traffic from Doha; let us not be fooled about any intentions of a new airline in India setting up a wide domestic network or feeding domestic underserved routes.

As per revised FDI norms, equity stake of a foreign airline in an Indian carrier cannot breach the 49 percent mark. But a relaxation of restrictions last year means foreign sovereign wealth funds and portfolio investors can potentially acquire 100 percent holdings – this is possibly the route that the Qatar government and its airline will take to seek approvals for a new airline venture in India.
Qatar’s desperation about India stems from the fact that it has, for long, been interested in increasing bilateral weekly seat entitlements but hasn't been unsuccessful. Its entitlements stand at a little less than 25,000 seats a week when the airlines from neighbouring UAE – Emirates and Etihad – have almost double the weekly seat entitlements. The Indian government has not been keen to enhance Qatar’s entitlements, taking the plea that our airlines are not even using a bulk of their current seat entitlements and that an increase will only help Qatar.
09/03/17 Sindhu Bhattacharya/First Post