In search of open skies
Bilateral airline seat quotas have their origin in the Chicago Convention of 1944, held towards the end of World War II. With leading nations trying to rebuild their economies, protectionist policies were incorporated, under which no scheduled international air service could be operated over or in the territory of a contracting state without its permission. Seven decades later, one needs to question the relevance of these quotas. In the globalised world of 2014, most countries, beset with sluggish economies and rising unemployment, are wooing leading airlines. Aviation and tourism have a significant multiplier effect — both for the economy and employment, especially for semi-skilled and unskilled people.
India is no stranger to the concept of an open skies policy. In 2005, India signed an open skies agreement with the US, resulting in unlimited seat quotas between the two countries. This replaced the Indo-US agreement of 1956, which had placed restrictions on destinations, aircraft, pricing etc. The 2005 agreement also provided for seamless code-sharing between Indian and US carriers. Contrary to fears, it did not lead to a complete domination of the Indo-US routes by US carriers.
Unfortunately, we do not have open skies agreements with other countries. Every time a foreign airline reaches its quota limit and wants to enhance frequency, the knives come out. Increasing quotas for one country while not increasing them for another creates further controversy.
Seven decades of protectionism has not helped Indian aviation. We lack a strong, dominant national carrier. Our airports, despite a large population, handle just a fraction of the traffic that the world’s leading airports deal with. Our aviation turbine fuel is one of the costliest in the world. Our aerospace manufacturing, aviation training facilities etc need strengthening. Foreign tourist arrivals in India are an abysmal seven million per year. The only way out is rapid globalisation, a level playing field and transparent policies. We need disruptive strategies — the incremental “case by case” approach will not work.
The ministry of civil aviation should consider implementing the open skies policy, say, for a five-year period, extendable by another five years. If the worst happens, we can always roll back the policy — it is India’s sovereign right. Global airlines will be hurt, but after a few angry statements, they will simply move their fleet elsewhere. The experience with the US proves that most of our fears are unfounded.
There is a genuine apprehension that certain global carriers enjoy sovereign support, subsidised fuel, low airport charges and non-unionised staff, that they may offer dirt-cheap fares and kill the interests of Indian carriers. There are adequate regulatory provisions in India to prevent such anti-competition tactics. We can block the quotas of foreign carriers in the name of protecting domestic airlines. We can wait till private Indian carriers build a large fleet of wide-body aircraft and exhaust the Indian part of the bilateral quotas. But that may take years to achieve.
Sectors that were opened up have seen quality standards improve and prices fall. Indian companies in sectors like telecom, banking, hospitality, automobiles have become world class. Many of them are now acquiring global brands like JLR, Novelis, Tetley, Zain, Orient Express, Ssangyong. Ironically, we applaud when an Indian company acquires a global brand, but feel very threatened when a global competitor enters our backyard. We need to believe in our innate strengths.
The open skies policy will lead to an increase in flights operated by global airlines to and from India. Since these airlines will have to fill up their aircraft during lean seasons, they will run joint promotion campaigns with the Indian government, like Singapore Airlines promoting Australia. Global carriers may snatch some traffic from Indian competitors, but they will also bring global traffic to India. Many foreign tourists skip India in favour of destinations in the ASEAN because of India’s poor air connectivity with the rest of the world.
Indian carriers will retain the competitive advantage of having non-stop flights to their global destinations. This is something that global carriers cannot provide, since they are required to have a stopover in their country of origin. Since global carriers may serve only the largest airports in India, flights to smaller locations will be handed over to their Indian partners through code sharing. All parties gain.
Allowing open skies also lets our trade negotiators achieve greater access in global markets for Indian products, services and professionals. India has the potential to be the third-largest aviation market by 2020 and may even have a shot at the top slot by 2030. Provided we focus on experimentation, self-belief and bold thinking. Today
The Meddling Regulator
Devesh Agarwal
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Aviation regulator DGCA has no business to be in the airline business
The job of aviation regulators worldwide has evolved to oversee commercial air lines, private operators, airports and air traffic control to ensure utmost safety and optimum utilisation of a limited re source such as airspace. They also set and implement broad policies aimed at pro tecting the interests of customers. What they don't take upon themselves is to mi cro-manage the businesses of airlines.The Indian aviation regulator, Direc torate General of Civil Aviation (DGCA), is following a decades-old rulebook. In stead of acting as a regulator, it seem ingly revels in the role of a commercial meddler, hell-bent on telling airlines in India how to run their businesses.
The latest case of intrusion has been directed at AirAsia India, which took off on Thursday. The DGCA has told the air line to be “reasonable“ with its charges for value-added ancillary services such as less-cramped seats, meals, checked bags etc. Specifically, the DGCA has countermanded the policy of the airline to not provide a free check-in baggage allowance to passengers. AirAsia, in ef fect, must “offer at least 15 kg check-in baggage free for every passenger with an additional charge of only `300 for the next 15 kg of baggage“. The DGCA diktat contradicts its own circular dated June 27, 2013, which allowed the unbundling of ancillary services.
What is reasonable? More important ly, who decides what is “reasonable“?
It is -should be -the customers. If we find charges are high, we simply will not buy.
Last week, I flew from Penang in Malaysia to Singapore, a 1.15-hour flight. While shopping for a ticket, I found that after adding the cost of a 20 kg check-in baggage, a meal, and a pre-assigned seat, an AirAsia ticket cost `5,700, only `300 cheaper than a Sin `300 cheaper than a Singapore Airlines ticket.
But the difference was that Singapore Airlines included all these additional services within the price of its ticket. In addition, as a frequent flier, I received an additional check-in bag allowance, free lounge access, priority boarding, and mileage accrual. No prizes for guessing the airline I chose. Had I been a day-tripper who returns in the evening with no check-in baggage, I would have picked AirAsia and saved the `900 check-in bag fee.
This a-la-carte pricing of paying for only the services used is the backbone of the low-cost airline business model. This model was recognised by the DGCA to justify its allowing the unbundling of ancillary services, including check-in baggage. The DGCA is now contradicting itself by demanding a free baggage allowance. This forces a large section of passengers to pay for a service they are not using (not travelling with check-in baggage), effectively sub sidising passengers who do (travel ling with check-in baggage) and raising airfares for all.
The Global Lessons For profitability, airlines global ly have become increasingly reliant on ancillary reve nue, of which baggage fees are an important component. Some airlines like Spirit even charge for carry-on baggage. The Federal Aviation Admini stration (FAA), the DGCA's counterpart in the US, does not dictate to airlines their baggage policy.
The FAA instead focuses on the safety of its trav elling public by regulating its air traffic control, its airports and not only USflagged airlines, but also all airlines flying to the US. Had the DGCA focussed on its core responsibility, India would not have suffered the embarrassment of a safety downgrade by the FAA.
The DGCA can help by requiring airlines to supply us better information, and empowering us with passengerfriendly policies. It can facilitate a safe, fair, well-informed, and competitive environment. It can force airlines to clearly display in the timetable the type of aircraft used and require them to disclose the average on-time performance of each flight based on the preceding two months' data, which will enable us to make a more informed choice when booking flights. Airlines have this data but are miserly with disclosure.
The DGCA can protect us where it is truly required. It can shut excuses such as airport congestion, technical failures, and weather, which airlines routinely fall back on to escape their ethical responsibilities when flights are delayed or cancelled. It can introduce legislations like the European Union's regulation 261/2004, which requires mandatory food, lodging, and compensation.
The DGCA can push airlines to be fair.
If flights are delayed due to airport or ATC congestion, or technical faults, airlines do not compensate passengers. Why then should passengers who get stuck in a traffic jam or suffer a tyre puncture and reach the airport late lose all the money?
It can end this wrong by introducing the “tyre puncture rule“ -i.e if a passenger reaches the airport late, but within two hours of the flight's departure, he will be put on the waiting list of the next flight free of charge. He will get a seat on the basis of availability.
The DGCA's micro-management is not without precedent. Its parent, the aviation ministry, has ruined Air India, which survives on bailouts. That should be proof enough for the DGCA that it has no business to be in the airline business.
The latest case of intrusion has been directed at AirAsia India, which took off on Thursday. The DGCA has told the air line to be “reasonable“ with its charges for value-added ancillary services such as less-cramped seats, meals, checked bags etc. Specifically, the DGCA has countermanded the policy of the airline to not provide a free check-in baggage allowance to passengers. AirAsia, in ef fect, must “offer at least 15 kg check-in baggage free for every passenger with an additional charge of only `300 for the next 15 kg of baggage“. The DGCA diktat contradicts its own circular dated June 27, 2013, which allowed the unbundling of ancillary services.
What is reasonable? More important ly, who decides what is “reasonable“?
It is -should be -the customers. If we find charges are high, we simply will not buy.
Last week, I flew from Penang in Malaysia to Singapore, a 1.15-hour flight. While shopping for a ticket, I found that after adding the cost of a 20 kg check-in baggage, a meal, and a pre-assigned seat, an AirAsia ticket cost `5,700, only `300 cheaper than a Sin `300 cheaper than a Singapore Airlines ticket.
But the difference was that Singapore Airlines included all these additional services within the price of its ticket. In addition, as a frequent flier, I received an additional check-in bag allowance, free lounge access, priority boarding, and mileage accrual. No prizes for guessing the airline I chose. Had I been a day-tripper who returns in the evening with no check-in baggage, I would have picked AirAsia and saved the `900 check-in bag fee.
This a-la-carte pricing of paying for only the services used is the backbone of the low-cost airline business model. This model was recognised by the DGCA to justify its allowing the unbundling of ancillary services, including check-in baggage. The DGCA is now contradicting itself by demanding a free baggage allowance. This forces a large section of passengers to pay for a service they are not using (not travelling with check-in baggage), effectively sub sidising passengers who do (travel ling with check-in baggage) and raising airfares for all.
The Global Lessons For profitability, airlines global ly have become increasingly reliant on ancillary reve nue, of which baggage fees are an important component. Some airlines like Spirit even charge for carry-on baggage. The Federal Aviation Admini stration (FAA), the DGCA's counterpart in the US, does not dictate to airlines their baggage policy.
The FAA instead focuses on the safety of its trav elling public by regulating its air traffic control, its airports and not only USflagged airlines, but also all airlines flying to the US. Had the DGCA focussed on its core responsibility, India would not have suffered the embarrassment of a safety downgrade by the FAA.
The DGCA can help by requiring airlines to supply us better information, and empowering us with passengerfriendly policies. It can facilitate a safe, fair, well-informed, and competitive environment. It can force airlines to clearly display in the timetable the type of aircraft used and require them to disclose the average on-time performance of each flight based on the preceding two months' data, which will enable us to make a more informed choice when booking flights. Airlines have this data but are miserly with disclosure.
The DGCA can protect us where it is truly required. It can shut excuses such as airport congestion, technical failures, and weather, which airlines routinely fall back on to escape their ethical responsibilities when flights are delayed or cancelled. It can introduce legislations like the European Union's regulation 261/2004, which requires mandatory food, lodging, and compensation.
The DGCA can push airlines to be fair.
If flights are delayed due to airport or ATC congestion, or technical faults, airlines do not compensate passengers. Why then should passengers who get stuck in a traffic jam or suffer a tyre puncture and reach the airport late lose all the money?
It can end this wrong by introducing the “tyre puncture rule“ -i.e if a passenger reaches the airport late, but within two hours of the flight's departure, he will be put on the waiting list of the next flight free of charge. He will get a seat on the basis of availability.
The DGCA's micro-management is not without precedent. Its parent, the aviation ministry, has ruined Air India, which survives on bailouts. That should be proof enough for the DGCA that it has no business to be in the airline business.
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