Free run to foreign carriers takes toll on Air India
How foreign carriers caused AI's fall
New Delhi, Sept. 11: Greater flying rights to global airlines were at the expense of Air India and caused considerable losses to the national carrier, according to the Comptroller and Auditor General and analysts.
Till 2008, Air India operated on some of the most lucrative and money-making routes. However, under a new route rationalisation policy, as many as 32 profitable routes, including the Gulf sector, were "gift- wrapped" and given to international carriers.
"It was Air India that actually started the Gulf route as more of a duty. Later the airline made it profitable. After the first Gulf War, there were no flights from India for the sector. It was Air India, which started its operations to cater to Indians working in these areas. But later when they started making profits, the routes were given to airlines such as Etihad Airways, Qatar Airways, Air Asia, Singapore Airlines and several others and Air India was thwarted from expanding in the sector or even had its flights curtailed," aviation expert R.N. Pathak said.
Air India had 80-90 per cent load factor on most of the Gulf routes before private players were given the green signal to operate.
According to a senior Air India official, the carrier earned Rs 100 crore per annum, of which Rs 40 crore came from Doha and the rest was the revenue from the Bahrain station. "But out of the blue, on October 8, 2009, we were told via a memo that Doha and Bahrain sectors were closing despite our mute protests. Just a few days after that Jet Airways started operations, Etihad increased its frequency from three to seven flights a week and Emirates doubled its frequency from seven to 14 a week. We silently watched them take over what we believed was ours," he said.
Air India stopped operating on routes that include Bangalore-Bangkok, Chennai-Colombo, Calcutta-Bangkok, Calcutta-Singapore and London-New York.
The Comptroller and Auditor General of India, in its report tabled in Parliament, said, "Massive expansion of bilateral entitlements in respect of several countries (notably in the Gulf, Southeast Asia and Europe) has facilitated several foreign airlines (predominantly Emirates) in tapping the vast Indian market and funneling such traffic over their hubs to various destinations in the US, the UK, Europe and elsewhere. The entitlements exchanged are vastly in excess of the genuine flying requirements between the two countries and implicitly allow mega airlines to exploit sixth freedom traffic."
Sixth freedom traffic under the International Convention on Civil Aviation relates to the right to carry passengers or cargo from a second country (in this case India) to a third country (such as the US or Europe) by stopping in one's own country (in this case Dubai).
The CAG said the Gulf sector was Air India's most profitable segment before liberalisation. Sixth freedom traffic to and from India was largely captured by Emirates, Qatar Airways, Thai Airways, Singapore Airlines, Lufthansa, British Airways, Cathay Pacific, Continental and Northwest Airlines.
The report observed that Air India was denied a level-playing field, contributing to financial distress. "Even if ministers and officials profess not to be ministers or officials of Air India alone, the fact remains that it has to be given more than level-playing field, which it has not been given."
The CAG indicted the government's decision to purchase aircraft. Under the original plan before the merger, Air India in 2004 had sought to purchase 18 small capacity short-range aircraft (B737-800) and 10 medium-range aircraft (A340-300) with a positive net present value on a standalone basis. The CAG audit noted that on the advice of the ministry, Air India submitted a revised proposal for the acquisition of 50 medium-capacity long-range aircraft and another 18 carriers for Air India Charters.
Yahoo India
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