Air­lines set to face cap on air­port slots

Govt pro­poses move to curb mo­nop­o­lis­tic growth of air­lines


The gov­ern­ment has pro­posed to cap the num­ber of take-off and land­ing slots an air­line can hold in con­gested air­ports. The move, which could turn out to be con­tro­ver­sial, is meant to check mo­nop­o­lis­tic growth of air­lines. This comes after ri­val car­ri­ers ac­cused IndiGo — the largest In­dian air­line by mar­ket share — of us­ing its dom­i­nant po­si­tion to con­trol pric­ing in the mar­ket.

Ac­cord­ing to the plan, an up­per limit cap will be set for the per­cent­age of slots an in­di­vid­ual air­line can hold in any con­gested air­port. If the thresh­old is reached, the par­tic­u­lar air­line will be the last in pref­er­ence for new slots and will be el­i­gi­ble only if other car­ri­ers re­ject it. The num­ber of slots an air­line can hold has not been de­ter­mined and the gov­ern­ment has asked for sug­ges­tions on it from air­lines and air­ports.

At present, slots in In­dia are al­lo­cated by the slot co­or­di­na­tion com­mit­tee of air­port op­er­a­tors, ac­cord­ing to the World­wide Slot Guide­lines drawn up by the In­ter­na­tional Air Trans­port As­so­ci­a­tion. Ac­cord­ing to these norms, an air­line can keep a given slot from the pre­vi­ous sea­son as long as it has used the slot 80 per cent of the time. Also, 50 per cent of slots freed up un­der this “use it or lose it” pol­icy is pro­vided to new air­lines and the rest to legacy car­ri­ers.

This pol­icy has of­ten been crit­i­cised for favour­ing larger in­cum­bent air­lines and cre­at­ing an en­try bar­rier for new, smaller air­lines. This is be­cause in­cum­bent car­ri­ers are un­will­ing to sur­ren­der peak hour slots at metro air­ports.

New air­lines such as Vis­tara and AirAsia In­dia have been vo­cal about the is­sue, point­ing out that the con­straint of slots has im­pacted their growth plans. “A for­mula can be reached, so that ev­ery­one gets a fair share. New air­lines need slots to grow or else there will be a du­op­oly or mo­nop­oly,” San­jiv Kapoor, chief strat­egy of­fi­cer at Vis­tara, had said in an in­ter­view ear­lier.

With such a for­mula, cus­tomers will get an op­por­tu­nity to ex­pe­ri­ence new ser­vices, while fares can be kept in check, ac­cord­ing to Kapoor.

The sit­u­a­tion has turned com­plex, with scarce growth in run­way ca­pac­ity at ma­jor air­ports, even as air­lines are in­duct­ing new planes at a fast pace. In the cur­rent back­drop, it’s im­pos­si­ble for air­lines to add new flights with­out scrap­ping an ex­ist­ing route. For in­stance, dur­ing the on­go­ing win­ter sea­son, air­lines haven’t been able to add any new flights in the peak 7 am to 10 am slot at Delhi air­port.

In­dus­try sources said the gov­ern­ment move fol­lows con­cerns ex­pressed by SpiceJet, Vis­tara, and Jet Air­ways over IndiGo us­ing its size to un­der­cut fares and bleed ri­vals. The ri­val air­lines fear that the fi­nan­cial stress of Jet Air­ways, which has forced it to cut ca­pac­ity, will fur­ther lead to con­sol­i­da­tion by IndiGo.

IndiGo, by virtue of its size and ag­gres­sive in­duc­tion of planes, has suc­cess­fully ob­tained a higher share of slots at most metro air­ports. In 2018, In­dian air­lines added 120 planes, of which 55 were from IndiGo alone.

IndiGo, on its part, has rub­bished claims of mo­nop­o­lis­tic move or any at­tempt to un­der­cut ri­vals. “At IndiGo, it is never our prac­tice to take the lead in dis­count­ing fares,” the com­pany’s co-founder and in­terim Chief Ex­ec­u­tive Of­fi­cer Rahul Bha­tia told an­a­lysts, when quizzed about the busi­ness strat­egy. When, due to the cur­rent in­dus­try en­vi­ron­ment, other air­lines, des­per­ate to raise cash, were drop­ping fares, IndiGo had no choice but to match them, Bha­tia said.

Ex­perts are di­vided over the gov­ern­ment’s at­tempt to in­ter­vene in a sec­tor which has gained from lib­er­al­i­sa­tion. “The gov­ern­ment should ide­ally con­cen­trate on build­ing in­fra­struc­ture rather than pun­ish­ing a healthy com­pany for its own fail­ure, a lawyer rep­re­sent­ing ma­jor pri­vate air­lines ar­gued. Tak­ing away slots from a player, which has shown ded­i­ca­tion to the lo­cal mar­ket, as ri­vals are un­able to com­pete, is not le­gally ten­able,” the lawyer said.

How­ever, there are oth­ers back­ing the gov­ern­ment move, say­ing the step would en­cour­age com­pe­ti­tion. Lalit Bhasin, manag­ing part­ner at Bhasin and Co, said, “I would call it a pro-mar­ket move, which will en­cour­age com­pe­ti­tion, mak­ing it eas­ier for new air­lines to do busi­ness and ul­ti­mately ben­e­fit­ting the pas­sen­ger.”

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