The government is taking the first steps towards opening of the Gulf region to private airlines -- by setting a high-level committee under the aegis of the aviation ministry -- to examine the contentious issue.
At present, the Gulf region is reserved for national carriers Air-India and Indian Airlines for a period of three years which expires in 2008. If government allows private carriers to fly to this region, Jet Airways and Air Sahara -- which have been lobbying for opening it up -- would be the main beneficiaries.
Union Civil Aviation Minister Praful Patel told Business Standard: "We have not taken any decision as of now. The proposed high level committee will take a decision on this regard." He also declined to divulge details on whether the 2008 deadline for the national carriers will be extended till 2010.
Sources said the aviation policy which would be out by February would have a specific mention on opening up of the Gulf sector.
Jet Airways has already announced their plans to fly to Gulf sector. Jet Airways Chief Executive Officer Wolfgang Prock-Schauer said: "We will be able to fly to Gulf destinations by early 2008."
However, allowing private carriers will adversely affect national carriers. "Air-India accounts for one-third of capacity deployed in Gulf sector. The income for Gulf sector constitutes 33 per cent of Air-India's total income. Gulf sector revenues constitutes 25 per cent of the Indian Airlines' revenue," industry analysts pointed out.
"Giving away permission to private carriers to fly Gulf sector will take sheen off the proposed initial public offer of the merged entity of Air-India and Indian Airlines," they said.
Patel, however, confirmed that the proposed IPO of Air-India and Indian Airlines will hit capital market after merger which will complete by March 2007.
"Already the Gulf sector is over saturated with several Gulf-based low cost carriers starting their services to India. Allowing more carriers will virtually kill the so called cash cow Gulf sector," an executive of national airline said.
