Indigo and Emirates CEOs battle it out over India’s ‘Dubai dilemma’

India is shooting itself in its foot, said Emirates Airlines President Tim Clark in New Delhi this week. “India’s approach is fair and balanced,” shot back Indigo Airlines CEO Pieter Elbers.

“Just because one side is making more and more noise doesn’t mean it is more and more right,” Elbers added.

The ‘Dubai dilemma’ has seen the two airline CEOs battling over perhaps the biggest prize in Indian aviation – its sizeable, lucrative and fast growing market of passengers flying abroad.

The matter is quite simple – Emirates, by virtue of it being one of the biggest airline companies in the world and one that exclusively connects international destinations, wants to fly more flights into and out of India.

The problem? Indian authorities have not renewed or increased its bilaterals in over 10 years.

Bilaterals are air service agreements decided upon between two countries that govern commercial air transport between the two territories. Unlike in most other global businesses where free market principles dictate who gets to do business or not, passenger airlines are governed by bilateral agreements between two countries which decide how many flights (or to be more precise, how many number of seats) both country’s airline(s) get to operate between each other.

Emirates, the flag carrier of Dubai (which is an emirate in the UAE), has been one of the most prolific operators of international flights from India, carrying hundreds of thousands of Indians either to the dream desert destination, or to their eventual destinations across the world – thanks to its global network.

For years, this has been the case, with Emirates becoming the biggest international airline operating in India. And neither Indian authorities, or India’s travellers minded transiting through Dubai and experiencing equally its duty free attractions as well as Emirates’ top-notch in-flight services.

But now, increasingly, it has become an issue due to two reasons.

First, with more and more Indians travelling internationally, Emirates would like to carry even more of this ever growing segment. But it can’t, as the India-UAE bilateral rights give each countries just 66,504 seats in either direction every week – and Emirates has already maxed out its share of it across the 334 weekly flights it operates in Indian airports in Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and Thiruvananthapuram. It has been making its case for the need to increase this, but Indian authorities have not paid heed.

And that’s precisely because of the transformation in Indian aviation in the last decade. In the 2000s and 2010s, while Emirates was garnering a sizeable chunk of India’s outbound traffic, it didn’t matter much as India’s private airlines were fledgling at best (or trying to survive in most cases), with national carrier Air India in no shape to even use its share of the bilateral seats.

But now, with a privatised Air India and the airline-on-steroids Indigo both having global ambitions, matters have changed. The Indian authorities also now have veered around to the viewpoint that it is time India itself became a global hub for international travel, and that there is no need to provide Indian travellers as fodder to other international airline hubs like Dubai or Doha.

But on the flip side, the freeze on increasing capacity has meant that fares on the India to Gulf routes often tend to be inordinately high for flights that are just three to four hours generally – impacting many Indian blue-collar workers who work in the region who have to fork out previous foreign exchange for a cherished vacation back home.

But on the business side, for any airline, international traffic offers more profits, since the per passenger yields tend to be higher, while domestic routes are not only tightly fought, but the flexibility in increasing prices is also limited. And Indigo and Air India have major plans to ramp up their global operations, intending to offer direct point-to-point services from India to major destinations across the world eventually, instead of offering just a few major cities (like Air India has been doing) and then depending on codeshare partners to take care of the last mile connectivity.

While it was interesting that Indigo CEO Pieter Elbers tore into Emirates’ pitch that aviation is a catalyst for economic growth and that India was shooting itself in the foot by not increasing bilateral share of seats by defending the Indian government’s position (as it only benefits domestic operators like Air India and Indigo), the battle lines seem to be clearly drawn. A day after the Emirates outburst, fellow UAE airline Etihad also came out in support of expanding seats between India and the UAE. Etihad CEO Antonoaldo Neves told a business daily that India’s stand is ‘silly’.