Trends of Slot Allocation and Exorbitant Airport Charges

Looming on the Indian Horizon

By :Bhawna Bakshi

4th yearBBA,LLB (Hons)

USLLS, GGSIP UniversityDelhi

Expansion of Wings to Competitive World

A gust of Private Airlines have entered Indian Aviation Industry after it underwent liberalization in late nineties.With the passing of the Air Corporation Act 1994, the aviation sector was opened up and private carriers were permitted to operate scheduled services.India has experienced transformation from the regime of regulated economic development to competitive regime since liberalization of 1991.

Crisis in the wings A multi-faceted crisis has taken hold that threatens to tweak

any progress in the highly competitive and burgeoning aviation industry crippled by high costs, exorbitant airport charges, taxes etc.

Slot allocation- heart of the hub

According to the Route Dispersal Guidelines formulated in 1994 by the DGCA, all routes were divided into three categories viz. Category I, II and III. It was obligatory on the part of scheduled airlines to deploy on Category – II, IIA and III routes, a specified percentage of capacity deployed in Category – I.

Airport coordination is mostly done at Level III airports according to the Guidelines where demand for airport infrastructure significantly exceeds the airport’s capacity, necessitating slot allocation process.

Slots- a permission given by a coordinator for a planned flight operation to use the full range of airport infrastructure necessary to arrive or depart at an airport on a specific date and time.

Grandfather Rights Grandfather Rights permit airlines to use those slots in the

future which they have already used in the past. Airlines lose Grandfather Rights if they do not operate them for at least 80% of the time of the respective flight period (use it or lose it).

Whether grandfathering rights have any adverse effects on competition depends largely on the degree to which an airport is congested.

Although grandfather rights and the ‘use-it-or-lose it’ rule create the advantage of schedule continuity in successive seasons, these elements are also strong incentives for airlines to hold on slots.

The shortage of slots, ground handling, terminal space and other services acts as barriers to entry for newcomers, especially since allocation is based on grandfather rights. The issue of slots is important for competition since the existent carriers may take advantage of their dominant position.

The objective of encouraging competition and new entry appears to be quite severely constrained by the other objective of more efficient use of airport capacity the process should emphasize “fair competition” as opposed to “free competition”.

Desperation is in the Air

Exorbitant Airport Charges

According to IATA Airport charges need to be cost based in accordance with ICAO policies.

Airport charges could in fact go down as a result of economies of scale and the airport increasing its proportion of non-aeronautical revenue.

At many airports around the world, airport charges have remained stable for many years. This has facilitated air traffic growth and brought benefits to all stakeholders in the industry.

Extinguishing Fire in the Wings and Opening the Skies

The Aviation Policy should expand the slot allocation system to include more market based tools such as; allowing slot trading and auctioning off a fraction of underutilized slots through an independent auction authority. Proceeds of the auction can be used to financially incentivize airports to improve and expand available airport infrastructure.

Supervision should be increased on pricing policy by certain carriers to bring relief to the airline sector.

Our regional airports have an enormous role to play in providing point to point services and a key objective of the Government’s policy going forward must be to look at ways of supporting regional airports, potentially looking at measures to incentivize a broader spread of air travel, where practical throughout India.

“India should not settle for an Bronze Medal in the World of Aviation, It has a pure Gold Potential”- Tony Tytler, IATA’s Director General

Aviation requires bold and pragmatic leadership at this time of crisis, which means that key decisions need to be taken at the level of the Government of India and not just at the Ministry.

Future aviation policies must ensure that India remains competitive within the global economy whilst ensuring that air travel remains accessible for general consumers.

Thank You