NEW DELHI: With international airfares continuing to surge, the government may review its informal policy of not expanding flying rights for foreign airlines in order to ease the burden on travellers.
Industry sources said the move is being considered as airlines grapple with sharply rising operating costs. A steep increase in aviation turbine fuel (ATF) prices, the rupee weakening to record lows, and reduced seat capacity from Gulf carriers have all contributed to persistently high international fares, which are expected to remain elevated in the near future.
Against this backdrop, officials are examining the possibility of revising bilateral air service agreements with some countries. Many of these agreements have remained largely unchanged for nearly a decade, and increasing seat capacity could help bring down fares by boosting supply.
Among the destinations seeking higher flying rights are Dubai, Qatar and Abu Dhabi.
Since 2014, the government led by Narendra Modi has largely frozen bilateral expansions to strengthen domestic airlines. The policy helped Indian carriers expand significantly, with IndiGo emerging as a major global player and the Air India group returning to its founder Tata Sons and placing large aircraft orders. New airlines such as Akasa Air, Star Air and Fly91 have also entered the market.
Last year alone, Indian carriers added about 80 aircraft to their fleets.
“While we continue to push for rationalisation of ATF base prices and both state VAT and central excise duties, there is now some thinking around reviewing bilateral agreements that have not been updated for years despite rising demand,” an industry executive said. “Indian airlines have received policy support over the past decade. The time may now have come to consider increasing foreign airlines’ capacity to help bring down fares.”
The issue has also gained attention with new airport capacity coming up. The upcoming Navi Mumbai International Airport and the long-delayed Noida International Airport, expected to open this summer, have prompted airport operators including the Adani Group to advocate revisiting bilateral agreements.
Because bilateral limits are fully utilised, additional flights cannot currently be added on some busy routes, including to Dubai, which had been the most popular overseas destination for Indian travellers before the recent regional conflict. For instance, Akasa Air has been unable to launch services to Dubai due to the capacity cap under the bilateral agreement.
Airlines also point out that while international routes provide higher yields and relatively cheaper ATF compared to domestic operations, costs remain a major challenge. “Domestic airfares have been capped since the IndiGo crisis last December, but our operating costs have surged. If fares are capped, costs should also be controlled,” an airline official said.
Meanwhile, the Ministry of Civil Aviation is in discussions with the Ministry of Petroleum and Natural Gas to address ATF pricing through the “crack spread” mechanism — the difference between the price of crude oil and the refined products derived from it.
Globally, ATF accounts for about 20–25% of airlines’ operating costs, but in India the share is significantly higher at 40–45%. The ministry has also repeatedly urged states such as Delhi and Maharashtra to reduce VAT on ATF and has sought a revision of the 11% central excise duty to bring down costs for airlines.
