India's global aviation hub dream demands a powerful post-sale Air India
Abu Dhabi, Dubai, Doha and Singapore have developed into global aviation hubs as they have strong airlines with huge fleets
There is a lot at stake in Air India's successful divestment. Not only will a new owner for the Maharaja mean that the government will earn much-needed money, the future of the cash-starved and debt-ridden national carrier may also face an upswing. At the same time, its successful divestment will also provide a push to the development of a global airport hub in India as a strong carrier is needed for such a hub to take off.
Take Abu Dhabi, Dubai, Doha or Singapore. The airports in these cities have developed into global aviation hubs as they have strong airlines with huge fleets. Dubai-based Emirates and flydubai together have a fleet of over 300 aircraft with Emirates flying to over 150 destinations. Doha-based Qatar Airways has a fleet of over 200 aircraft. In pre-Covid times, it connected over 170 destinations; it currently connects over 130 destinations across the globe.
These aircraft pick up passengers from across the world and get them to the airlines' home bases before connecting them to their final destinations. Hence, it is not uncommon for a passenger from Mumbai or Delhi to first reach Dubai on an Emirates or flydubai flight and connect to Sao Paulo from there.
India has modern airports in the major metros and some other cities where some amount of transfer traffic takes place but the numbers are nothing compared to Dubai, Singapore or Doha. Before the Covid pandemic, Air India used the Delhi airport to transfer traffic from some South Asian countries to Europe and the US while IndiGo used its flights to China to connect passengers to other South Asian countries.
The lack of an airport hub in India leads to an important question: Has the absence of a strong national carrier affected the growth of the airport sector in the country?
Emirates planes at the Dubai airport. Image courtesy: Wikimedia Commons/Raihan SR Bakhsh
VP Agarwal, Former Chairman, Airports Authority of India (AAI) agrees. "Airports were able to catch up a bit when the government went into the public-private mode. Probably the story would have been very different if Air India had been in private hands earlier. Then both airports and the national carrier could have seen better growth prospects," Agarwal says.
Satyendra Pandey, Managing Partner, AT-TV, Asset Protection and Advisory, also agrees but cautions that "blindly copying and force-fitting models when the fundamentals are different is a recipe for disaster". He adds that while it is okay to want to be like the next Singapore, Dubai or London, it is also necessary to have a world-class airport for which India needs the same kind of traveller base as these airports which it does not have. "Then you need an anchor carrier like say, British Airways in London or Emirates in Dubai," he says.
Pandey maintains that India's open sky policy and liberal exchange of air service bilaterals have meant that the Middle East has grown at India's cost. Bilateral air service agreements exchanged post-2004 also played a role in the Indian aviation hub shifting to the Middle East and hurt the development of airports in the country.
Air service agreements between two countries stipulate how many flights a week and to which cities in both the countries their respective airlines can fly. India has exchanged air service agreements with the UAE, Dubai and Qatar which saw their national carriers being allowed to operate over 400 weekly departures from India. Not all the passengers these airlines carry were bound for the Middle East with many connecting onwards to the US, Canada, Europe, South America and Africa.
This resulted in a situation where it is estimated that only 36% of international air traffic to India goes to Indian carriers, while over 60% of the revenue generated on these routes goes into foreign hands.
Rémi Maillard, President, Airbus India and Managing Director of the South Asia region, told Moneycontrol recently that there was no other country in the world where you had this (kind of) dominance of foreign carriers in international traffic. "It is unique to India. If you take China, the US, Europe or all the big markets, you have a more balanced market share between local and international carriers," he said.
There is near unanimity that India needs a strong anchor carrier for it to develop as an aviation hub. Says Pandey, "Not only does India not have one (anchor carrier) but after Jet Airways collapsed there has a been a large void in international flow from India. Effectively now, it is only Air India."
Lewis Burroughs, Head of Aviation, India, ICF Consulting India Private Ltd, also agrees that having a strong carrier whose business model is focused on facilitating international transfers could benefit India, which is overly reliant on foreign carriers for international services.
Further, the aviation sector in India follows a pattern different from the rest of the world in which the low-cost carriers (LCCs) dominate. According to Pandey, a majority of the passengers flown abroad by low-cost airlines like IndiGo and SpiceJet are largely labourers, who are very price-sensitive.
A Singapore Airlines Boeing 787-10 at the Singapore Changi Airport. Image courtesy: Wikimedia Commons/1.02 editor
Burroughs points out that Singapore, Dubai and Abu Dhabi do not have the same-sized local market like India which means that Indian carriers have to develop a more global strategy to grow. "For Indian carriers, the domestic market has been growing at such a rate that airlines don't need to look that far afield to grow. As the market matures, and as Indian demand for international travel grows, airlines will start expanding their international networks," Burroughs adds.
Nripendra Singh, Industry Principal, Aerospace and Defense Practice, Frost and Sullivan, gives another perspective when he says that for an airport to become a global hub, the country's vision has to align with that of domestic airlines and airports. He believes that the Indian market does not have the aviation dynamics of Dubai, Abu Dhabi, Doha or Singapore. "Not only are they smaller locations, but they are also ideally located to become global hubs," he says, adding that India's geographical position does not suit its becoming a global aviation hub.
According to Singh, India's location leads to inherent geographical restrictions. Hence, Indian carriers can only hope to capture air traffic to Australia and the SAARC region. He points out that LCCs are less likely to focus on the long-haul demand of the outbound market in the next five years.
An airline manager with over 30 years of experience says that given India's large geographical area, it is necessary that not one but several large airports become global hubs.
"It is a bit of a chicken and egg situation... airports, airlines and policy all go together and one cannot come before the other," he says.
(Cover image courtesy Wikimedia Commons/Bill Larkins)