Aviation hub-bub, now, bridge the gulf

India has embarked on a much overdue expansion of international air carriage capacity, and is justified in not expanding bilateral agreements with countries in West Asia. Aviation hubs in the region rely on international travel from India. They have benefited from the lack of long-range wide-bodied aircraft operated by Indian airlines. This situation is changing, with Air India and IndiGo placing orders for around 1,000 jetliners with Boeing and Airbus. But deliveries will be spread out, and adequate capacity on international routes will take time to build. It is to be expected that West Asian carriers will seek expanded bilateral agreements and that Indian airlines will oppose the demand. Allowing more inventory would work in favour of Gulf carriers that enjoy a significant fuel price advantage.

The Gulf carriers argue, as some voices have in the ongoing IATA AGM in Delhi, that it may not be in the interest of Indian travellers if their capacities are stranded while Indian airlines build their fleets. They have a point in that supply constraints could affect market growth. The fare dynamics, however, do not call for government intervention. Indian airlines have soaked up most of the aircraft available on lease while they wait for deliveries. They need to match Gulf carriers on price, volume and service quality. Gaining market share on the West Asia route is vital to India's ambition of having its own aviation hub. It's pitting the rising number of Indian passengers - expected to drive international air travel growth in the coming decade - against West Asia's, which serves as an obvious transit point among Asia, Europe and Africa.

Capacity addition across India's aviation value chain has been remarkably rapid in recent years. While most of it is directed at increasing domestic air travel, market dynamics also require a strong international presence as well. The country is correcting its chronic overdependence on foreign airlines to ferry Indian passengers and needn't heed the resultant heartburn.