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Fortune for Indian Airlines

In the 1950s and 1960s, several countries in Asia and Africa were gaining independence. The first things these countries did were  (a)  invent a flag (b) decide on a national anthem and (c) establish a national airline. But setting an airline and efficiently managing it required both resources and management skills.

The Gulf countries witnessed a huge surge in their incomes post the 1971 oil crisis. Most of these countries are small with little natural resources, except oil. With their sparse population, managing big business was an additional problem. With the oil prices zooming, several of these thought the civil aviation sector, employing manpower from across the globe, can be a lucrative business. Several oil-rich countries set up their airlines in quick succession.

Saudi Arabia, the largest producer of oil and Kuwait were among the earliest. In subsequent years, one witnessed several airline companies established in the Gulf region – Emirates, Gulf Air, Etihad Airlines... These countries also built modern airports. Dubai emerged among the largest of these and competed with the likes of Singapore and Hong Kong. The Gulf airlines, buoyed by oil wealth, went for a large fleet of modern aircraft. Emirates was one of the earliest to go for Airbus 380 aircraft, the largest in operation.

The location of the Gulf, en route to Europe and the US, was a significant advantage. Airlines in the Gulf attracted customers from India, used their home base as their hubs and offered non-stop flights to Europe, the US and other far off places and compete with the established airlines in Europe. In this, they found the large Indian air travel population an extremely attractive target for custom. The sloppy performance of India’s cash-starved national carrier Air India coincided with the surge in air travel from India, and these became great opportunities for the Gulf carriers. Through hubs like Dubai, Abu Dhabi, and Doha, these Gulf airlines offered convenient and often shorter duration flights to the US. Etihad Airlines went one step further in establishing the US immigration and customs department at Abu Dhabi. This helps complete formalities of immigration and customs in the transit time and enable passengers to arrive at US airports as domestic travellers.

The traditional hubs in Europe, Frankfurt for Lufthansa, Heathrow for British Airways or Charles de Gaulle for Air France, have been rapidly losing custom to these airports in the Gulf. These Gulf airlines also offer airfares at extremely competitive rates. Thus, the boom enjoyed earlier by the European airlines has substantially declined giving space to these airlines from the Gulf.

In India, a corresponding change is not taking place at an equal pace. Air India continues to operate international flights from the Mumbai and Delhi hubs. This means passengers from other cities are aggregated in these two hubs. For long, there has been a demand for Air India offering direct flights from the south, but it has not taken place. Two decades ago, Lufthansa started offering direct flights from Chennai, then extended these from Bengaluru and Hyderabad to Frankfurt and then to dozens of destinations in America, Europe, Africa and elsewhere. Private airlines like Jet Airways and later Kingfisher held promise of expanding its destinations to Europe, the US and other places. Again these were constrained by their resources needed for large-scale acquisition of aircraft and for maintaining and improving the services. Kingfisher crashed out.

Jet Airways joined hands with Etihad as an equity partner and has been able to increase its custom for foreign travel. IndiGo and SpiceJet thrive on local custom.  Tatas entered with a lot of promise, simultaneously setting up two airlines – one a joint venture collaboration with Singapore Airlines and the other with the budget airline AirAsia of Malaysia. These are in the process of getting licenses to fly abroad after the recent amendment to the 5/20 rule, which stipulated a minimum of five years’ experience in operation and at least 20 aircrafts.

Indian companies need much larger resources to benefit from the massive increase in the number of air travellers.

The new aviation policy provides exciting prospects to trigger entry of more operators in the Indian aviation sector.

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