Govt may review bilaterals as international airfares defy gravity

NEW DELHI: Skyrocketing international airfares may lead govt to review its unstated policy of not enhancing flying rights of foreign airlines, in a bid to come to the rescue of the public.

Indian carriers' operating costs are going through the roof due to the sharp spike in aviation turbine fuel (ATF) prices, and the rupee crashing to new lows on a daily basis - along with a drop in the supply of seats offered by Gulf carriers - means international airfares are likely to remain high in the foreseeable future.

Against this backdrop, industry sources say there may be a revision in bilaterals of some countries that have remained largely frozen for nearly a decade to increase supply to and from India and help douse the fares on fire.

Places that have been seeking an upward revision include Dubai, Qatar and Abu Dhabi.

Since 2014, the Narendra Modi govt has focused on strengthening Indian carriers through a virtual freeze on bilaterals. That has borne fruit in terms of IndiGo becoming a giant; Air India group's ghar wapsi to founder Tata Sons and now being flush with funds and fleet orders; and new carriers like Akasa, Star Air and Fly91 taking to the skies. Last year, Indian carriers added 80 additional aircraft to their fleet.

"While we continue to bat for rationalising both the base pricing of ATF and the state (VAT) and central (excise) levies on it, there is a thinking now to consider reviewing bilaterals that haven't been revised for a long time despite the increase in demand. (Except on ATF pricing) Indian carriers have got support in the last one decade. Now the time may have come to help lower fares by considering enhancement of foreign airlines' capacity and increasing supply," said an industry executive.

With India getting a new airport in Navi Mumbai and the hugely delayed one in Noida likely to open this summer, some airport operators, including Adani Group, have been seeking a revision in bilaterals.

The freeze in bilaterals means that new capacity can't be added to places like Dubai, which was the biggest international destination for Indian globetrotters before the Israel-Iran war. Akasa, for instance, hasn't been able to fly there as the bilaterals have been fully utilised by airlines of both sides.

Indian airlines get cheaper ATF and higher yields for international flights. "Domestic airfares have been capped since the IndiGo crisis last Dec. But our operating cost has skyrocketed. To cap fares, cap costs too. This is what we have told govt," said an official.

On its part, the aviation ministry is trying to reason with the oil ministry to ensure rational ATF pricing as part of the crack spread - the difference between a barrel of crude oil and refined products like petrol, diesel and ATF produced from the same. Globally, ATF accounts for 20%-25% of airlines' operating cost. In India, that percentage is in the range of 40%-45%. The ministry has asked states like Delhi and Maharashtra to lower VAT for close to two decades now. A revision at 11% excise has been requested too.

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