Dubai’s Emirates airline and other Middle East carriers should be forced to freeze their expansion plans to routes in India and the country’s Ministry of Civil Aviation should look at options for rollback of existing routes granted to foreign airlines, the Comptroller and Auditor General of India (CAG) has said in a report.
In a scathing report on the country’s aviation sector filed to India’s Parliament, by the CAG, the national auditor, said Air India, the national carrier, was “in a crisis situation”, with even the “salary payments and ATF obligations becoming difficult.” It blamed the Indian government’s open sky policy, which also included bilateral agreements with other countries, to favour private and foreign airlines at the expense of its loss-making national carrier.
“The massive expansion of bilateral entitlements in respect of several countries (notably in the Gulf, South East Asia and Europe) has facilitated several foreign airlines (predominantly Emirates) in tapping the vast Indian market and funneling such traffic over their hubs (e.g., Dubai) to various destinations in the USA, UK, Europe and elsewhere, through what is termed as sixth freedom traffic,” the report accuses.
According to the report, the sixth freedom – the right to fly from a foreign country to another foreign country while stopping in one’s own country – has gained considerable importance. “For example, the sixth freedom traffic of Emirates involves flying passengers from India through Dubai (its home state) to UK/ USA. Many international airlines especially those operating from city states/ small states (e.g. Emirates/ Dubai; Qatar Airways/ Qatar; Cathay Pacific/ Hong Kong; Singapore Airlines/ Singapore) derive a large portion of their passenger traffic revenues from sixth freedom traffic,” the CAG said.
Nearly one-third of the 32 million international passengers travelling to/from India in 2009/10 travelled on international carriers, leveraging sixth freedom rights, with only a third of current weekly seats and available seat kilometres (ASKs) deployed international from India being operated by Indian carriers.
In the CAG report, it was noted the percentage of sixth freedom carriage in 2009/10 of total passengers carried was as high as 59 per cent for Emirates, 78 per cent for Qatar Airlines, 87 per cent for Lufthansa, 49 per cent for Singapore Airlines and 61 per cent for British Airways. These five carriers together hold a 23.4 per cent capacity (ASKs) share of international services to/from India.
Carriers such as Emirates, Lufthansa, British Airways, Qatar Airways and Singapore Airlines have successfully expanded in the Indian market, often at the expense of local carriers, and offering onward connections via their respective hubs to destinations in US and Europe, currently underserved by the local airlines.
The CAG report further added that the “the entitlements exchanged are vastly the in excess of ‘genuine’ flying requirements between the two countries and implicitly allow ‘mega-airlines’ with the giant hubs to exploit sixth freedom traffic.”
The report illustrates its allegations with statistics on the Dubai sector. “As an illustrative case of the liberalization of bilateral entitlements, the sequence of events relating to the Dubai sector, covering the period from May 2007 to March 2010, (when the seat capacity was increased from 18,400 seats/ week to 54,200 seats/ week and points of call in India were increased from 10 to 14), clearly demonstrates the one-sided nature of benefits to Emirates/ Dubai (through enhancement of entitlements and additional points of call in India),” it said.
“This evoked the repeated protests from Air India on the lack of reciprocity and the funnelling of sixth freedom traffic by Emirates through Dubai from interior locations in India. Even change of gauge facility at Dubai International Airport, which would at least have provided an opportunity for Indian carriers to funnel traffic in smaller capacity aircraft from interior Indian locations and take them onward to UK/ USA/ Europe and other destinations in larger capacity aircraft was not adequately pursued, nor linked to grant of additional benefit,” it alleged.
“Repeated requests from AIL resulted in vague commitments from UAE Authorities for such facility, not at Dubai Airport but at the upcoming Jebel Ali Airport (an impractical option for AIL and other Indian carriers) and that too with distant timeframes between 2012 and 2018! Clearly, while Dubai actively protected the commercial interests of its airlines, MoCA [India’s Ministry of Civil Aviation] failed to obtain appropriate quid pro quo while granting concessions,” the report alleged.
Emirates, the largest international airline operating to/from India, holds around a 40 per cent capacity share on India-UAE services, 23 per cent of capacity on Middle East-India services and an approximate 10 per cent capacity (seats) share of total international air traffic from India, according to Innovata data, only slightly behind the 14.1 per cent for Air India and the 11.3 per cent at Jet Airways, India’s two largest international operators.
In India, Emirates had a total of 104,258 seats for the week Oct 3-Oct 9, 2011, behind local airlines Air India (140,585) and Jet Airways (112,912) but ahead of other international airlines including Qatar Airways (37,103), Air Arabia (33,696), Thai Airways (31,425) and Lufthansa (30,030).
Among the corrective measures suggested by the CAG, whose report is non- binding, is imposing strict freeze on Emirates’ and other mega-carriers’ India expansion plans as well as rollbacks of landing rights where possible.
“Most of the liberalised entitlements for bilateral rights granted to foreign airlines (especially in Dubai, Bahrain, Qatar and other Gulf/ SE Asian countries) has been utilised for sixth freedom traffic and not for genuine traffic to the other country. AI and other private Indian airlines are handicapped by the lack of adequate hub facilities and other factors (e.g. lack of agreement for change in gauge at Dubai Airport) from competing effectively with other predominantly sixth freedom carriers (e.g. Emirates),” the report contends.
“Till India has its own effective and efficient hubs and AI/ other Indian carriers are able to exploit them effectively (say within 3 to 5 years), entitlements for airlines/ountries predominantly dependent on sixth freedom traffic (notably Dubai, Bahrain and other Gulf countries in the first instance) should be strictly frozen by MoCA,” the report advised.
“Options for rollback of excess entitlement granted beyond genuine traffic requirements may also be explored by MoCA,” it added.