Indian airlines to surrender unused foreign flying rights – Will this move damage IndiGo?

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By admin February 18, 2015 20:39

Indian airlines to surrender unused foreign flying rights – Will this move damage IndiGo?

The Indian Ministry of Civil Aviation has stated that it will ask all Indian airlines not utilising their full quota of foreign flying rights to surrender them within the next six months. Currently a domestic airline must operate for five years and have a fleet of 20 aircraft before it can start overseas flights. The so-called 5/20 rule has held back Indian traffic growth for many years now. At the moment only Air India, Jet Airways, SpiceJet and IndiGo are permitted to fly international routes but combined they are only utilizing about 35% of their allocations. The Indian government states that this underutilisation is holding back potential growth of domestic carriers. The Indian government has cited that in particular the unused pairs to the Middle East must be handed back and re-allocated to airlines that will use them. Traditionally, unutilised rights are reviewed after three years and airlines can roll them over for a further three years through assurances that the routes will eventually be utilized, but the government is now changing the status quo at speed to open-up the international market.

This is both a problem and welcome news for the long term plans of IndiGo, and Jet Airways/Etihad. Air India would in all reality receive rights as and when it lobbied government for the same so it would be wise to remove them from the thought process at this point. However the real target is SpiceJet, which is sitting on quite a few allocations – the airline will be stripped of these in the coming weeks it seems. IndiGo has been crying out for more Middle East connections of late and it appears that its wish will be granted soon, but IndiGo will have to use those allocations within the next nine months to keep them.

This news presents an opportunity to both AirAsia and Vistara. They can now move to take-up international route allocations and expand at speed. This was not part of their original business model and it may cause more problems than it is worth but all the same an opportunity has arisen. It will be interesting to see who wants the route allocations. As for all other international airlines, the queue is already forming.

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By admin February 18, 2015 20:39