International airlines desire to fly on domestic Indian routes

The scope of Open Sky in India aims to make flying affordable

Business & Politics

News - Biz@India

October 24, 2016

/ By / New Delhi

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India's regional sky is now a lucrative investment prospect for global airlines

India’s regional sky is now a lucrative investment prospect for global airlines

As major foreign players in the airline industry show increasing interest in India’s regional air connectivity, the aim of the present government to make flying affordable looks achievable; however, the essential need is still to pass the litmus test.

The Ministry of Civil Aviation in India is striving hard to make flying an affordable reality for small town dwellers with the launch of the Regional Connectivity Scheme, ‘UDAN’. The market-based mechanism that looks at airlines to bid for seat subsidies is a one-of-a-kind scheme in the world and can create viable as well as profitable regional routes. The announcement is immediately reciprocated from the Gulf carriers showing interest in investing in the aviation market.

Foreign airlines flying regional

Major airlines from West Asia have already shown intent to connect regional routes, especially between the tier-II and tier-III cities. Industry players in the US and the UK are also engaging in discussions with the government regarding this. The minister of civil aviation, Jayant Sinha was quoted by Business Standard saying, “Some large global airlines from the Gulf have expressed interest to run regional airlines in India.”

Speculations around the major chunk of passengers coming from tier-II and tier-III cities intending to visit the Middle East for work might be one of the key inferences. While the government has changed the policy of FDI (foreign direct investment), there is an amicable window for international airlines in the country. The investment could be in the form of stake in an existing airline or a complete new regional airline in the country; which comes with a clause.

The FDI limit in domestic airlines was increased to 100 pc from 49 pc in June 2016. However, the policy also states that the principal place of operation must be in India. Thus, the intention of the Gulf or other international carriers to act as a feeder airline in disguise of a regional connector might not be well received in all the fronts. It is believed that cities such as Chandigarh, Vizag, Indore and Surat send a major work force to the Gulf region and thus, the interests are high from these carriers.

In the last half of the decade, Gulf carriers such as Etihad, Emirates and Qatar have played a major role in the aviation sector of India. Dubai and Doha being the most suitable gateways to Europe and the rest of the world for Indians are naturally on the top of the list for avid Indian travellers.

According to the figures from the Directorate General of Civil Aviation (DGCA), the market shares of the three major Gulf carriers in India during the period of 2015-16 are: Emirates (10.8 pc), Etihad (4.7 pc) and Qatar Airways (4.0 pc).

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