End Of A Monopoly

It seems better sense has finally prevailed in the government. Instead of allowing Air India to sit on large chunks of bilateral rights and allowing foreign carriers to utilise theirs and corner the market share, the government has decided to allow Indian private airlines to utilise some of the rights.

There are 834,000 weekly seats on international air routes connecting various countries with India. The Indian airlines have been able to utilise only 22.7 per cent of the total seat allocations. Air India utilises about 12 per cent and the other four private carriers that fly abroad utilise a combined average of 10.8 per cent. International carriers utilise 38 per cent of the total.

In other words, foreign carriers manage to utilise more than the Indian airlines because some rights were so far reserved for Air India.

The move could benefit domestic carriers but to what extent remains to be seen. One, many of the private carriers have massive financial troubles and introducing new routes —which will certainly bleed for a while before they make any money — may not be feasible under the circumstances.

The move will benefit some low cost airlines; their present fleet can be used to utilise the rights. It may not be wise for them to introduce new aircraft in their fleet for longer range destinations.

So, just like the move to allow airlines to import fuel may be of only limited use, this too may do little to improve the ssspredicament of many Indian carriers.

However, the new move could help airlines in the future once brighter, clearer skies are here again.

(This story was published in Businessworld Issue Dated 27-02-2012)