January 25, 2017 TnH Global

Government asks Qatar to start airline in India

The request to Qatar was made during bilateral negotiations between the two countries for increased number of flights recently.

The civil aviation ministry has asked the Qatar government, which runs Qatar Airways, to start an airline in India and participate in the country’s growth story. The request to Qatar was made during bilateral negotiations between the two countries for increased number of flights recently, said a person familiar with the subject who did not wish to be named.

“They were looking at a regional airline, full fledged national airline or investment in an existing Indian airline,” this person said, referring to the aviation ministry.

India’s domestic aviation market reached nearly 100 million passengers in 2016 and is set to displace UK as the third-largest aviation market by 2026. Middle Eastern airlines have been investing in airlines across the world.

In India, Dubai-based Etihad has bought a 24% stake in Naresh Goyal’s Jet Airways. Sovereign wealth fund-backed Istithmar PJSC has held a stake in SpiceJet in the past.

Civil aviation secretary Rajiv Nayan Choubey confirmed that the aviation ministry has written to the government of Qatar to start an airline in India.

“That’s what we have suggested to them. Look we have a fantastic market—its 100% FDI. Come fly your planes, there is money here (to be made),” Choubey said recalling what he told them in an interview.

The message was also communicated to Qatar Airways’s CEO Akbar Al Baker when he visited the ministry in recent months. Baker often visits India and is on good terms with IndiGo promoter Rahul Bhatia and SpiceJet promoter Ajay Singh. Qatar Airways did not respond to an email seeking comments for the story. The move reflects a change in government strategy.

From 2004, the ministry allocated thousands of seats to Middle Eastern airlines, allowing them to become dominant international carriers. Dubai, for example, went from an allocation of just 10,400 seats a week to India in 2003-04 to just six cities to 54,200 seats a week and 14 cities by 2008-09 during then civil aviation minister Praful Patel’s tenure.

Financially weak Indian carriers, which have now gained some scale, were not able to use the Indian side of entitlements then. This windfall in grant of seats stopped around 2011 after a damming report by government auditor Comptroller and Auditor General (CAG) which slammed the aviation ministry for failing to protect Indian interests during talks with those governments.

Despite mounting pressure, the new government has decided not to yield. For example, even during the visit of Abu Dhabi crown Prince Sheikh Mohamed bin Zayed Al Nahyan as a chief guest during Republic Day on Thursday no additional seats are being signed as was the practice during state visits in the past. Choubey said while no bilateral rights are being given during this visit the government was negotiating to secure better terms for requests from Middle Eastern countries including Kuwait. “We are also seeing how best we can negotiate with them,” Choubey said.

In its talks with Dubai, which backs Emirates, the ministry is sticking to the point that they want better slots for Indian carriers at Dubai airports, he said. Former Jet Airways chief executive Steve Forte said the government was right in seeking investments in existing Indian airlines.

“I am a strong believer that reciprocity should rule any and all agreements between two parties, particularly when one of them is foreign. This goes for operating rights, airport charges, slots, etc,” he said.

New York-based Forte said the Indian market was critical for Doha. “As we look at the two countries, India has a whole sub continent to offer, dozens of great destinations and thousands of prospective passengers. What does Qatar have to offer? Doha? Granted it is a hub with multiple destinations, but is it a fair comparison? Hardly so,” Forte said.