Flying high

For the two million passengers who travel between India and the United States—and the number is growing significantly each year—the decision to have an aviation pact between the two countries is good news.

The agreement should ensure a dramatic increase in the number of flights and cities covered. To cite just one instance of how fast traffic is increasing, in December, 2002, Air India flew just 10 flights a week directly to the US, and that, too, to just New York and Chicago.

Today, the number of flights is up to 25, and the city list is up to four. By March, Los Angeles will be added to the itinerary.

Since the pact allows airlines in the two countries to select routes and destinations based on consumer demand, the number of cities that will be served directly is sure to go up even further.

Cities that do not offer enough regular demand may be served through code-sharing agreements between airlines.

The agreement, which is in keeping with the overall government policy of opening up the skies to competition and increasing the availability of flights to different parts of the world, has the potential to reduce fares.

The fact that domestic private airlines have also been allowed to fly abroad will only add to the pricing pressure. But more than what it does for the flying public, the pact underscores the rising confidence India has in the ability of its airlines, both public and private, to compete with their global counterparts.

One of the reasons for not having open skies in the past has been the fear that big global airlines will knock out the local players.

As a result of this, the premium on flying into and out of India was high and airlines like Air India benefited significantly from it.

If India is to make the most of this pact, other related issues need to be tackled. One relates to airport infrastructure—which is poor by global standards.

Another is the excessively high sales and other taxes on aviation fuel. These ensure that Indian airlines pay 30–40 per cent more than foreign carriers for tanking up.

Given the importance of fuel prices in airline economics, Indian carriers are at a significant disadvantage vis-a-vis their global competitors.

Something needs to be done to level the field. In the case of Air India, similarly, plans to acquire new aircraft have been doing the rounds for close to a decade, but nothing has materialised.

In the meanwhile, the airline has tried to plug the gaps by going in for leased aircraft since 2000. Currently, half its fleet of 35 planes is leased.

This has, no doubt, pushed up costs. Unless these policies are fixed, the open skies policy will remain a limited skies one in practice.