Turbulence in the Air: IATA and Others Shows Concern over India’s Protectionist Aviation Policies

 Speaking at the Annual General Meeting of the International Air Transport Association (IATA) in Dubai, Clark highlighted the potential negative impact of these restrictions on the Indian economy. Emirates, the largest foreign airline operating in India, is particularly affected by these measures. The National Democratic Alliance (NDA), expected to retain power after the elections, has frozen the expansion rights of foreign airlines, especially those from the Middle East. This strategy is designed to encourage Indian carriers to operate wide-body aircraft and establish direct connectivity to North America and Europe.

I understand that the Indian government is looking at this policy with a view to protect their own carriers, particularly giving some space to Air India, which has been privatized. But I can tell it will not work in the long run. It will be detrimental to your own economy. Tim Clark, President, Emirates

Travel data analytics firm OAG reports that the Delhi-Dubai route is one of the busiest globally. Clark emphasized the necessity of expanding capacity to meet the growing demand, warning that restricting options would be harmful.

The government’s protectionist stance has garnered support from Air India, which aims to boost its routes to North America and Europe. Following its takeover by the Tata group, Air India ordered 470 aircraft from Airbus and Boeing in 2023, including 70 wide-body planes suitable for long-haul travel. Additionally, India’s largest domestic carrier, IndiGo, has ordered 30 Airbus A350 aircraft to expand into long-haul routes.

Clark argued against the protectionist approach, citing the strong demand in and out of India. He gave the example of IndiGo’s growth trajectory on the back of growing demand in India.  Indian airports are also concerned about the policy’s implications. With significant investments in expansion projects, they fear that unused capacity could result in business losses. “Airports like Hyderabad and Bengaluru have invested in huge capitals and expanded their terminals. Indian carriers except Air India are yet not prepared to launch more international flights. The government should look at granting ad-hoc bilateral rights to foreign airlines till the time Indian airlines are ready,” said an executive of a private airport, warning about a loss in airport business.

In parallel news, India is set to host the IATA’s Annual General Meeting in 2025, for the first time in 42 years. The event will see global aviation leaders gather in Delhi to discuss the industry’s future. IndiGo, India’s largest airline by market share, will host the event.

IATA Director General Willie Walsh expressed optimism about India’s aviation market, citing record aircraft orders and world-class infrastructure developments. “With record aircraft orders, impressive growth, and world-class infrastructure developments, India is firmly on the trajectory to become the world’s third-largest aviation market within this decade. With such bright prospects, it’s the perfect time for the IATA AGM to return to India and witness these exciting developments first-hand,” Walsh said.

Despite the promising outlook, the complexity of India’s tax system poses a challenge. The Directorate General of GST Intelligence has targeted foreign airlines for alleged tax evasion on services provided by their headquarters to local offices. IATA has opposed these measures, arguing that such costs should not be subject to GST. . While the intention is to build stronger national airlines, the restrictions on foreign carriers could limit choices and stifle economic growth. The aviation sector’s future in India will depend on balancing these protectionist measures with the need to meet growing international demand and address tax complexities