New Delhi: The Civil Aviation Ministry had granted "massive increases" in bilateral air traffic rights to Gulf nations in 2004-05 despite Air India's "strong reservations" as this was its most profitable international sector, a government audit body has said.
It has also said that as a result of liberalisation of the bilateral rights, Indian carriers did not get any increase in the number of destinations in the Gulf countries while airlines from that region got the right to operate to 14 destinations in India, four more than before.
In its report tabled in Parliament on Thursday, the Comptroller and Auditor General (CAG) said the Dubai sector saw a massive increase in the number of seats per week between May 2007 to March 2010 -- from 18,400 seats to 54,200.
The CAG took the Civil Aviation Ministry to task for liberalising bilateral rights with these countries in a manner which "did not provide a level-playing field to Air India (and to a lesser extent to other Indian private airlines)".
"These agreements, besides not affording adequate time to Air India/Indian Airlines to set their houses in order and gear up for a highly competitive environment, very evidently worked to the detriment of the national and Indian private carriers", the public audit body said.
It said, "Clearly, the Gulf sector was AI/IA's most profitable international segment before the liberalised policy on bilateral entitlements.
"AI repeatedly expressed strong reservations to the Ministry against the proposals/requests from Gulf countries for increase in seat entitlements as well as additional points of call at interior locations in India", the report said, adding that the grant of bilaterals demonstrated "the one- sided nature of benefits to Emirates/Dubai".
The report said that whatever changes Air India had of increasing market share through increased capacity (or putting more planes on a sector) were "severely hampered by the Ministry's decision to liberalise bilateral entitlements from 2005 onwards", benefitting foreign airlines and countries.
The CAG also pointed out that most of Air India's routes-- like those to North America, UK and Southeast Asia, were incurring losses, it was "only the Gulf/Middleast and Far East Asia routes" which made profits till 2005-06.
After the 'open sky' policy to liberalise bilaterals came into being, it said, "By 2009 10, all routes were loss-making".
In a major recommendation, the CAG asked the government to "strictly freeze" granting of bilateral rights to the Gulf and Southeast Asian nations and their airlines.
"Till India has its own effective and efficient hubs and AI and other Indian carriers are able to exploit them effectively, entitlements for airlines/countries ....., notably Dubai, Bahrain and other Gulf countries, should be strictly frozen by the Ministry", the CAG said.
"At this stage, Indian carriers (including Air India) will have to tackle renewed and serious challenges to compete effectively with established international 'mega carriers'".
It also said that a considerable amount of route rationalisation has already taken place, especially in terms of reducing loss-making routes since 2008-09.
The CAG said that the Civil Aviation Ministry had "very obligingly bowed to ostensible pressures" from its External Affairs, Commerce and Tourism counterparts, "ignoring the interests of the Indian carriers including AI".