Like all other sectors, aviation is also witnessing an intense battle between the haves and the have-nots, but with one difference: the West is powerless here, with airlines based out of Gulf countries ruling the skies.
With their wide-ranging choices and unbeatable bargains, airlines such as Etihad and Emirates are becoming the Indian traveller’s first choice to fly to Europe and beyond.
Gulf-based carriers have also made full use of bilateral agreements with India by operating multiple flights. Conversely, Indian operators have underutilised their bilaterals.
According to a report by aviation consultancy CAPA, as a result of the expanded bilateral agreements that India has signed with Dubai and Abu Dhabi over the past 12 months, weekly entitlements for UAE carriers will increase to over 135,000 seats by 2015-16.
This represents a massive increase from the 10,400 seats available to six cities in 2003-04. And it dwarfs the access offered to any other single country — it is almost as much as all European countries combined.
Further boost
The Civil Aviation Ministry’s latest proposal on international routes will tilt the scales further in favour of the Gulf carriers.
The existing policy, called the 5/20 rule, had made it mandatory for all domestic airlines to complete a minimum five years of domestic operations and have at least 20 aircraft in their fleet to become eligible to fly international routes.
Under the new proposal, domestic airlines need to accumulate 300 domestic flying credits (DFCs), instead of 200, for flying international routes.
This means that an airline will now need another two years — and in some cases up to four — before it can qualify with a fleet of five to six aircraft. It doesn’t end there. A new airline will also need to undergo stringent security and safety audit after one year of operations and even a minor issue can derail its plans to fly international routes.
Besides, to fly short-haul international routes of less than six hours (read West Asia), an airline needs to accumulate 600 DFCs.
“The new proposal effectively shuts out airlines like Vistara as well as AirAsia India, which are perfectly capable of flying international routes because of their experience,” says Ashvani Kumar Sachdev, former chief operating officer of GoAir.
“This will be advantageous to Emirates (Dubai-based), Etihad (Abu Dhabi) and Qatar Airways (Doha).”
Even European and US-based carriers are facing the heat from their Gulf rivals. They have accused Gulf-based airlines of unfair competition and claim that they received subsidies worth $42 billion since 2004.
Subsidy allegations
Western carriers claim that by doling out subsidies, and in some cases writing off the entire loans, Gulf countries are violating bilateral agreements, and putting their airlines at an advantage, allowing them to offer extremely low fares.
For instance, a return economy-class ticket between Bengaluru and Frankfurt on Lufthansa sometimes costs nearly twice that of Emirates.
Lufthansa’s Chief Strategy Officer, Sadiq Gillani, fears that over the next five-10 years, East-bound flights will disappear for most European carriers. “The volume of capacity by 2020 will double for Gulf carriers, which means it is growing way beyond their local demand,” says Gillani.
He points out that Australia’s Qantas has already cut back on European flights and the same will happen to Asian carriers as well. According to him, lower taxes, virtually free infrastructure and a non-unionised environment give Gulf carriers a 25 per cent advantage in costs over the rest.
Therefore, to compete on an even scale, Lufthansa plans to introduce long-haul low-cost Eurowings to Asian markets and the first destination it plans to touch will be Dubai. Gillani says Eurowings will have a completely different cost structure with new labour contracts for its employees. At the same time, Lufthansa will be positioned as an upmarket five-star offering.
But Gulf airlines deny the accusations. In a statement, Emirates told BusinessLine that foreign airlines have launched a protectionist campaign against Gulf carriers. “We are state-owned but do not receive government hand-outs and we categorically deny any allegation by the US carriers in respect of subsidy. We are transparent in our business practices and have published annual financial reports audited by PricewaterhouseCoopers for over 20 years,” the statement said.
Sir Tim Clark, president of Emirates, told a press conference in Washington in March that several of the new orders from Emirates were for Boeing aircraft as well as Airbus, indicating that the airline was responsible for creation of thousands of jobs across these two continents. “I struggle with the allegation of market share and damaging the market when they don’t fly to the points we fly to. I cannot see how manifestly we damage their financial position,” he said.
But Lufthansa’s Gillani disagrees. He points out that without fair competition rules, foreign carriers will shrink in size. Teaming up with Gulf carriers was not a possibility at all as American and European airlines have non-stop flights to cities in the East.
Some of the Gulf carriers are not stopping at mopping up market shares across the globe. They are also buying up stakes in some of the European carriers. For example, Etihad has a 75 per cent stake in Italy’s Alitalia and wants to increase its interest in Air Berlin.
It hasn’t left India out of its ambit either. It has a 24 per cent stake in Jet Airways and there are indications that IndiGo might offer some of its own to either Qatar Airways or Emirates.
- Hindu
With their wide-ranging choices and unbeatable bargains, airlines such as Etihad and Emirates are becoming the Indian traveller’s first choice to fly to Europe and beyond.
Gulf-based carriers have also made full use of bilateral agreements with India by operating multiple flights. Conversely, Indian operators have underutilised their bilaterals.
According to a report by aviation consultancy CAPA, as a result of the expanded bilateral agreements that India has signed with Dubai and Abu Dhabi over the past 12 months, weekly entitlements for UAE carriers will increase to over 135,000 seats by 2015-16.
This represents a massive increase from the 10,400 seats available to six cities in 2003-04. And it dwarfs the access offered to any other single country — it is almost as much as all European countries combined.
Further boost
The Civil Aviation Ministry’s latest proposal on international routes will tilt the scales further in favour of the Gulf carriers.
The existing policy, called the 5/20 rule, had made it mandatory for all domestic airlines to complete a minimum five years of domestic operations and have at least 20 aircraft in their fleet to become eligible to fly international routes.
Under the new proposal, domestic airlines need to accumulate 300 domestic flying credits (DFCs), instead of 200, for flying international routes.
This means that an airline will now need another two years — and in some cases up to four — before it can qualify with a fleet of five to six aircraft. It doesn’t end there. A new airline will also need to undergo stringent security and safety audit after one year of operations and even a minor issue can derail its plans to fly international routes.
Besides, to fly short-haul international routes of less than six hours (read West Asia), an airline needs to accumulate 600 DFCs.
“The new proposal effectively shuts out airlines like Vistara as well as AirAsia India, which are perfectly capable of flying international routes because of their experience,” says Ashvani Kumar Sachdev, former chief operating officer of GoAir.
“This will be advantageous to Emirates (Dubai-based), Etihad (Abu Dhabi) and Qatar Airways (Doha).”
Even European and US-based carriers are facing the heat from their Gulf rivals. They have accused Gulf-based airlines of unfair competition and claim that they received subsidies worth $42 billion since 2004.
Subsidy allegations
Western carriers claim that by doling out subsidies, and in some cases writing off the entire loans, Gulf countries are violating bilateral agreements, and putting their airlines at an advantage, allowing them to offer extremely low fares.
For instance, a return economy-class ticket between Bengaluru and Frankfurt on Lufthansa sometimes costs nearly twice that of Emirates.
Lufthansa’s Chief Strategy Officer, Sadiq Gillani, fears that over the next five-10 years, East-bound flights will disappear for most European carriers. “The volume of capacity by 2020 will double for Gulf carriers, which means it is growing way beyond their local demand,” says Gillani.
He points out that Australia’s Qantas has already cut back on European flights and the same will happen to Asian carriers as well. According to him, lower taxes, virtually free infrastructure and a non-unionised environment give Gulf carriers a 25 per cent advantage in costs over the rest.
Therefore, to compete on an even scale, Lufthansa plans to introduce long-haul low-cost Eurowings to Asian markets and the first destination it plans to touch will be Dubai. Gillani says Eurowings will have a completely different cost structure with new labour contracts for its employees. At the same time, Lufthansa will be positioned as an upmarket five-star offering.
But Gulf airlines deny the accusations. In a statement, Emirates told BusinessLine that foreign airlines have launched a protectionist campaign against Gulf carriers. “We are state-owned but do not receive government hand-outs and we categorically deny any allegation by the US carriers in respect of subsidy. We are transparent in our business practices and have published annual financial reports audited by PricewaterhouseCoopers for over 20 years,” the statement said.
Sir Tim Clark, president of Emirates, told a press conference in Washington in March that several of the new orders from Emirates were for Boeing aircraft as well as Airbus, indicating that the airline was responsible for creation of thousands of jobs across these two continents. “I struggle with the allegation of market share and damaging the market when they don’t fly to the points we fly to. I cannot see how manifestly we damage their financial position,” he said.
But Lufthansa’s Gillani disagrees. He points out that without fair competition rules, foreign carriers will shrink in size. Teaming up with Gulf carriers was not a possibility at all as American and European airlines have non-stop flights to cities in the East.
Some of the Gulf carriers are not stopping at mopping up market shares across the globe. They are also buying up stakes in some of the European carriers. For example, Etihad has a 75 per cent stake in Italy’s Alitalia and wants to increase its interest in Air Berlin.
It hasn’t left India out of its ambit either. It has a 24 per cent stake in Jet Airways and there are indications that IndiGo might offer some of its own to either Qatar Airways or Emirates.
- Hindu
