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There is only one long term solution to the chronic shortage of seats that the Indian travel industry is facing – an open sky policy says Anindita Chattopadhyay

When Prerna Verma (name changed) recently flew to New York, little did she know that she would have to remain stranded there for about a month. Receiving the news of her mother’s death, she rushed to bring her father back to India as she thought the sojourn would act as panacea. However, getting two confirmed bookings out of New York seemed impossible. She could only manage the tickets when the US Government issued an advisory with an Iraq-USA face off looming large on the horizon. “Luckily, some bookings were cancelled,” she exclaims. What was boon to her was actually loss to Indian tourism.

Nabil Sultan

"It puts tremendous financial pressure on any airline to pull out aircraft from one route and deploy it to another. And after that if part of the revenue goes to Air India, why should one go for it?"

Balbir Singh of London came to attend his niece’s marriage in India. His seven-day stay turned into a 21-day long wait as flights to UK were choc-a-bloc.

These are not incidents in isolation. Both Verma and Singh have company as such has been the experience of many who planned to travel to or out of India during the month of December. As Praveen Chugh, chairman, TAFI - North India explains the situation, “The problem is that if passengers are able to get confirmation for inbound, they are not able to get confirmation for outbound or vice versa. Cheaper tickets are normally issued for confirmed bookings on certain routes. Without confirmed bookings passengers have to either increase their budget because seats are available in higher fare categories or wait for cheaper tickets. That is how they get stuck before departure.

Naturally, many potential tourists are changing their travel plans because of expensive fares.”

Tourism held to ransom
The agents and tour operators are fretting and fuming for losing out on business. After being in the red last year, inbound suddenly started looking up since November, only to be hit by the seat crunch. Actually, the events starting from September 11, 2001, the build up on Indo-Pak border followed by adverse travel advisories after the Gujarat carnage forced many airlines to either shut down or prune their operations to India. And this shortage is taking its toll on tourism. “Shortage of flights to India has affected the business of tourism trade to such an extent that now agents in Europe, Canada or America are finding it difficult to promote ad hoc groups or individuals for whom they require seats on short notice. This ad hoc business always acts as butter on the toast as it is more paying. For instance, our operator from Austria, Raiffeisen Reiseburo, was refused seats on Austrian Airlines in the last week of December ’02 where they had 100 people wait listed. This means we lost 100 potential clients who could have travelled to India. And they opted for some other destinations, most probably China as seats to China is not a problem at any given time,” said Sanjeev Joshi, director, TIME.

And he has supporters in the industry. Says Rajeev Kohli, director, marketing, Creative Travel, “The lack of flights is most certainly affecting tourism. This is especially true now. When the travel advisories got lifted, there was a spurt in bookings for inbound travel to India towards the end of the year. And as there was no capacity to bring in the passengers, India lost that business. We ourselves saw a few group tours getting cancelled despite having ready clients. All because the agent was unable to get air seats. It was not so much a fear of getting stuck as it was a basic inability of getting the clients here. No self-respecting travel agent will send their clients to India without confirming both sectors of the ticket.” It is but natural that when international agents find that getting seats to India is a pain and requires a lot of effort, they just stop pushing the destination. After all, they are in the business of making money.

Praveen Chugh

"Non-availability of seats is definitely jeopardising tourism prospects of our country. Only adequate seat availability can ensure free flow of traffic to a destination"

Adds Chugh, “Non-availability of seats is definitely jeopardising tourism prospects of our country. Only adequate seat availability can ensure free flow of traffic to a destination.”

No takers for limited offers
Civil aviation ministry realised this fact a little too late. When the minister for civil aviation, Syed Shahnawaz Hussain, announced an open sky policy for about four months between December 2002 and March 2003 to address the problem, there were hardly any takers. During this period, India would allow airlines from Europe and USA to increase the frequency of flights or capacities to/from the destinations already being served. However, carriers from South-East, East and Middle East Asia have been left out. Significantly, the response was lukewarm to the extent that not a single US airline showed interest in increasing its number of flights. Among their European counterparts, only Lufthansa will be flying three additional flights to Bangalore. Neither Air France, nor British Airways have shown any interest in increasing flights during the period, confirmed ministry officials.

Blaming Indian policy makers for their lackadaisical attitude, Joshi lashes out, “As has been the practice, Indian policy makers always opt for temporary and late measures which in fact are not of any help. They only cut a sorry figure in front of the entire world. This policy when announced was already very late. Hence, no airline has brought or is bringing any flight in addition to their scheduled operation. Austrian Airlines, we definitely know, is running in minus from November ’02 till February ’03. However, they have no plans to get charter flights because on one hand, time given to act was too short and on the other, they are all afraid that any policy in India can be reversed very soon on one pretext or the other.”

Such a scheme works only if airlines get enough lead time. Most airlines plan their schedule well in advance and it is next to impossible for them to bring in more flights when the notice period is too short. As Kohli explains, “An efficient airline operates each plane to its maximum utilisation. They cannot and will not pull out planes with just a few weeks advance notice. They need months of lead time to plan routes and enable them to sell those additional seats. Given enough notice, even the foreign agents can plan better.”

Many, like Chugh, feel the civil aviation ministry’s insistence that the international airlines will have to sign an agreement with Air India is the bone of contention. “The insistence to have a commercial agreement with Air India is acting as an impediment to the introduction of additional flights as it would make such operations more expensive. The government in this scenario should not insist for commercial agreements,” he opines.

Amitabh Kant

"Breaking open the sky is important to achieve a breakthrough in tourism. We are targeting five million tourists but we do not have direct connection with many potential source countries"

Agrees Nabil Sultan, GM, Emirates.”It puts tremendous financial pressure on any airline to pull out aircraft from one route and deploy it to another. And after that if part of the revenue goes to Air India, why should one go for it?” he asks.

Another reason for the lukewarm response is that outbound traffic dips by more than 15 per cent during the winter months, though inbound traffic goes up. Airlines are afraid they may not be able to have full load. “An airline has to have two-way traffic. It cannot just cater to inbound traffic and fly empty planes on the return trip,” points out an industry practitioner.

The ministry might have had a different response had the facility been extended to South-East Asian airlines, according to Chugh. “The civil aviation ministry left out the Middle-East and South-East Asian carriers, who were ready to increase frequency, under the impression that if they get approval they will fly tourists out of the country. However, the reality is Middle-East carriers have network over entire Europe and North America and South-East Asian airlines connect to west coast of USA, Canada, UK, Japan and Korea.”

To open or not to open - that is the question
What irks travel practitioners, tourism officials and experts alike is the fact that the civil aviation ministry is obstructing deregulation to safeguard the interest of Air India. Hence, they have taken the opportunity of all the travel forums to give vent to their concern. “Breaking open the sky is important to achieve a breakthrough in tourism. We are targeting five million tourists but we do not have direct connection with many potential source countries,” remarked Amitabh Kant, Joint Secretary, Tourism at the Aviation Summit 2002. “Forget reciprocity. Let airlines come wherever they want to come,” said NK Sengupta, member of Parliament at the IATO convention. “We are sacrificing the interest of our country for the interest of our airline,” commented T Balakrishnan at the CII organised tourism conference. With several global major airliners awaiting government nod to launch their services to Hyderabad, the Andhra Pradesh Chief Minister, N Chandrababu Naidu also demanded an ‘open sky policy’ that he felt would spur employment and business activity.

However, despite crying hoarse, they failed to impress the civil aviation ministry. In fact, at the Aviation India 2002 held recently in Delhi, K Roy Paul, secretary civil aviation stated, “True, tourism requires connectivity. But we need to liberalise in a way that our national carrier is not sacrificed.”

Akbar Al Bakar

"India’s current bilateral system not only stifles the growth of efficient airlines, but hurts passenger interest and adversely affects economy"

What the ministry fails to realise is that choking up the skies means choking up India’s economic activity. “Added air capacity to any country opens up avenues not only for tourism but also for other businesses. We also gain from the landing charges and various other taxes, which the government can levy if able to offer quality assistance to the airlines. Singapore, Dubai, Hong Kong and recently Kuala Lumpur saw tourism shooting up with an open sky policy. We, being the second largest nation population-wise and 7th largest area-wise, have no such innovative thoughts which can bring us more revenues despite having one of the best locations geographically. The best example is that when business to Sri Lanka got distributed we did nothing to get the same to India,” says Joshi.

Akbar Al Bakar, CEO, Qatar Airways, who was behind the deregulation in Qatar, seconds Joshi’s view. “India’s current bilateral system not only stifles the growth of efficient airlines, but hurts passenger interest and adversely affects economy. With deregulation in Qatar, we witnessed large traffic inflow and immediate employment benefits.”
If India doesn’t open its skies, points out Prem Subramaniam, country manager, BTA, Dubai will soon emerge as a hub for Indian traffic. “The opening of training centres in Hyderabad by GE and HSBC has generated a good outbound/inbound traffic from there. I can foresee UK-bound passengers, instead of travelling to Mumbai, flying to Dubai, which has seven daily flights to UK connecting Heathrow, Gatwick, Birmingham and Manchester,” he argues.
Hub competition is already a reality, agrees Kohli. “Dubai, Singapore and Kuala Lumpur are fast emerging as hubs and India has lost its chance. India has a unique geographical position - in the middle of Europe and the East. So, it could be an ideal hub. But we have such a projectionist attitude that we are willing to lose out for outdated ideologies.” According to him, the government has an unnatural fear of competition. “The ministry of civil aviation can change things a lot by giving full autonomy to Air India. The airline has some very competent people and they can help Air India utilise its capacity better, take better advantage of its bilaterals and bring it back to the level it once commanded. Air India, run by a professional management without government interference, can hold up on its own and give even the best a run for their money. Unfortunately, our leaders do not think of the consumer, only the power.”

Even Joshi believes that Air-India is losing out not because of growing competition, but due to bad management and wrong policies by the government. “The best example is when they withdrew flights from Europe without even giving proper notice to agents who had planned their entire brochure tours on that flight. Today, even if they go back to Europe, we are sure they will never gain tourism business from those agents. Instead of crying that open sky policy will bring down Air-India, one should look for a better management wherein Air India can still survive and produce better results. For instance, Emirates and Singapore Airlines are doing much better despite an open sky policy in their countries.”

Syed Shahnawaz Hussain

"Civil Aviation ministry’s insistence that the international airlines will have to sign an agreement with Air India is the bone of contention"

A close look at USA, which has open sky agreements with more than 50 countries, proves Kohli and Joshi right. US carriers have gained a great deal from unrestricted competition and open markets as they constantly have to keep a tab on service quality, efficiency and pricing. Now, they dwarf most of their foreign competitors in terms of financial resources and fleet size. Their costs are substantially lower. They have highly efficient hub and spoke systems, domestic feed systems and frequent flyer programs that no foreign carrier can duplicate.

Now, cut to India. And it raises the most pertinent question – is India ready for deregulation? Deregulation only works if airport facilities are adequate because ground infrastructure must be able to cope with increased traffic and meet consumer expectation. And here lies the main stumbling block. Indian airports are still largely in the inadequate category according to IFALPA and other pilot unions. High-tech, user-friendly world class airports are still a distant reality as only expressions of intent has so far been prepared for privatisation of the four major airports. A hub and spoke operation for providing seamless connectivity within India is yet to be adopted.

So what’s the best option? “Assuming that open skies is a long time away, allowing our national carrier the freedom to run as a commercial organisation and not as an extension of the government, will in itself bring a sea of change,” comments Kohli. “In such circumstances, a more liberal and unconditional open sky policy needs to be announced,” observes Chugh.

India can go in for open bilaterals with some countries and take steps to ensure that its carrier will actually be able to use the opportunities that become available under open skies. For example, Germany and Chile have strongly insisted that open skies agreements can go into effect only if the US authorises specific alliances between carriers of those countries and carriers of the USA.