Either way, experts say with the moratorium on private sector domestic airlines flying to Gulf set to expire in the next 18 months—and increasing demands by NRIs to implement open-skies policy on this route—the domestic carriers will have to tighten their belts to face this increasing competition.

A major problem Indian carriers face is the propensity of the government to go on signing bilaterals with countries without giving the national carriers a free run in decisions regarding fleet augmentation to take benefit of these agreements.

India’s initial bilaterals in Gulf were with UAE, Bahrain, Qatar and Oman, which owned Gulf Air. The frequency and the seats allowed ensured that Indian carriers were not overawed by the foreign carriers.

However, the problem started when the government decided to sign bilaterals which each of these countries. The trend started with the government signing individual bilaterals with Qatar and Oman and then signing bilaterals with the airlines of UAE principalities like Dubai, Sharjah and Abu Dhabi.

Signing such bilaterals means increased seats on these routes, which translates into customer convenience. But that also raises the question whether India’s national carriers have the muscle to serve these routes and take full advantage of the bilaterals. As capacity is greater than demand, these airlines have been able to drop fares, which is hurting Indian carriers.

The Gulf-based carriers are taking advantage of the bilaterals to create areas like Dubai and Abu Dhabi as hubs for funnelling traffic to destinations like US and Europe.

Traditionally, bilateral rights envisage the airlines starting operations connecting two points between the two countries. However, the Gulf airlines are using such bilaterals to turn the Gulf into a hub for Indian travellers to travel to the US and the UK.

... contd.