Could restricting traffic rights expansion of foreign carriers aid India’s homegrown airlines?

In a recent interview with a national daily, Air India CEO and Managing Director, Campbell Wilson, advocated for a strategic containment of traffic rights expansion, emphasizing the need to allow local airlines the opportunity to grow. Wilson asserted that it is challenging for Indian operators to establish non-stop capacity if there’s excessive competition. 

“I think the strategy is to contain traffic rights expansion so that local airlines have the opportunity to spin up and attain scale and become competitive… and then actual liberalization will happen. It’s very difficult for us to fly an aircraft to North America, if there’s a surplus of capacity that allows people to travel out by someone (airline) else, and so too much just leaks out. India will not get the non-stop capacity from an Indian operator to these markets,” Wilson said

He highlighted that there needs to be a balance between market liberalization and incubating the local market if we are to move towards growth and development of the Indian aviation sector and the economy as a whole. While he was talking from a ‘passenger’ point of view, the implications of this on cargo can’t be ignored. 

Wilson’s statement comes at a time when the Indian government faces requests for bilateral air service agreements from countries like the UAE, Qatar, Singapore, Indonesia, Malaysia, and Turkey. Wilson argues against increasing bilateral arrangements, reasoning that countries like the UAE have developed airports at the expense of Indian airlines. It is to be noted that India hasn’t revised arrangements with aviation hub nations since 2014.

Mark Sutch, Chief Commercial Officer, IndiGo-CarGo, shared insights into the competitive landscape. Brand IndiGo is experiencing consistent growth in both domestic and international networks, with a focus on cargo capacity expansion. Sutch acknowledged the dominance of non-Indian carriers in the arena of international cargo movement to and from India, citing differences in fleet and network structures.

“That is nothing new and is principally related to the fleet and network structure of Indian carriers versus non-Indian. To date, no Indian carriers operate wide-body freighters – and the number of actual all-freighter aircraft on the Indian register is relatively low,” said Sutch.

Regarding the impact of foreign carriers on domestic operations, Sutch stated that IndiGo’s growth is concentrated on regional routes due to its narrowbody fleet. However, the airline refrained from commenting on the market views of other carriers, including Air India.

A majority of experts would say that it is an exciting time for India as the economy marks a stronger place on the world map and attracts foreign investment from various sources. It will be safe to say that ‘all eyes are on India’ when it comes to trade. 

A large part of trade facilitation measures taken by the Government of India, especially those for international trade, is the strive towards becoming the most sought-after transshipment hub in the APAC region. Not just foreign airlines but other members of the global supply chain industry are also in the process of becoming a part of India’s supply chain machinery, or already are. Similarly, many big global brands have been opting for India to set up their manufacturing and supply chain operations. 

Talking exclusively about air cargo, the Ministry of Civil Aviation has set a target of reaching 10 million MT of cargo handled by the year 2030. With such aspirations in place, if the containment strategy proposed by Wilson is enacted, it may give Indian carriers an opportunity to consolidate their operations, become globally competitive, and enhance their presence on international routes. By protecting and nurturing the domestic market, Indian airlines could potentially develop non-stop connectivity to global markets without facing excess capacity challenges.

On the contrary, not implementing any increase in bilateral arrangements could lead to missed opportunities for Indian carriers. Other countries may negotiate additional rights with India’s competitors, allowing them to capture a larger piece of the growing outbound travel market. This scenario could limit the international connectivity options available from Indian operators and potentially hinder the growth of Indian aviation.

As suggested by Yashpal Sharma (Group MD – Skyways Group and President – Air Cargo Forum India), there needs to be a balance between domestic and international carriers if MoCA’s target is to be achieved. 

While he acknowledged that every business entity has the right to reflect what is in their favor, he also said, “An airline is just one stakeholder in the entire ecosystem of air cargo. While the Indian government would like to protect and help Indian businesses, it also needs to take a wider perspective. If you put protective barriers, you won’t be able to benefit on a larger scale.”

Sharma, talking in the capacity of the ACFI President, stressed that if we look at India’s growth rate and its future targets, we need to allow all businesses to complete and operate be it domestic or international. 

His opinion included supporting domestic businesses on one hand, while also managing international businesses that wish to invest and expand in India without any protective barriers against them. “This will bring more competitiveness, better pricing, and better efficiency,” he said. 

Agreeing with Sharma, David Shepherd (CEO, IAG Cargo) expressed strong confidence in the growth of India’s aviation sector and the economy as a whole. However, he also wasn’t in favor of limiting international carriers from the Indian marketplace in the entire scheme of things.  

“I think if you look at international flying in most countries around the world, there is a balance between the national and international carriers. There needs to be room for competition because it is competition that drives normalization in the economy. The government needs to make sure that the manufacturers are given a fair choice between those plying transportation services in the country,” he said.  

While domestic carriers like IndiGo are growing internationally, the impact of foreign carriers on operations and market positioning is an ongoing consideration. Moreover, under the Tata Group, Air India aims to boost its international presence.

Wilson anticipates the merger with Vistara, expecting legal completion by early next year and operational integration within 18 months. This process involves obtaining competition clearances from multiple countries. The national carrier had also set a benchmark with its magnanimous order of airplanes with both Boeing and Airbus. 

In conclusion, the debate around airspace rights expansion involves complex considerations. Striking a balance between supporting local aviation growth and embracing international collaboration is pivotal for India’s aviation future.