Is an open skies policy—or the easing of air traffic restrictions—between the UAE and India the only solution to reducing airfares?
Despite continuous advocacy from UAE airlines such as Emirates, flydubai, and Air Arabia for over a decade, bilateral seat entitlements for Dubai (66,000) and Abu Dhabi (50,000) have remained unchanged since 2014-2015.
A recent report titled “Combined Skies: Unlocking the Benefits of UAE-India Aviation Liberalisation for Indian Travellers”, published by the Observer Research Foundation in collaboration with the UAE Embassy in India, strongly supports the liberalisation of air service agreements between the two nations. The study reveals that even a modest 1% increase in passenger traffic from India to the UAE corresponds to an estimated 0.2% reduction in average airfare.
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During peak travel seasons, such as summer, round-trip airfares between the UAE and India can surge by up to 100% compared to off-peak periods, making last-minute travel unaffordable for the average passenger.
Additionally, the impact of liberalisation will vary by route. High-traffic corridors like Delhi-Dubai and Mumbai-Dubai, which are already operating at full capacity, may not experience significant fare reductions. However, flights to smaller, price-sensitive Indian cities could see substantial drops in airfare, according to the report.
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“Liberalising air service agreements between the UAE and India could create over $1 billion in consumer savings for Indian travellers and significantly enhance bilateral trade,” stated UAE Ambassador to India, Abdulnasser Jamal Alshaali, in an interview with CNBC-TV18.
He further noted, “Increasing connectivity would facilitate easier travel across India for tourists, driving economic growth and boosting consumer spending.”
Advantages of an Open Air Corridor
A gradual 5% annual increase in bilateral seat capacity is expected to generate over $152 million in consumer savings by 2028, directly benefiting Indian travelers, according to the report.
It further states, “A more ambitious plan to double capacity over five years could result in economic benefits surpassing $1.05 billion for Indian consumers. Therefore, a phased expansion of up to 100% could lead to savings exceeding $1.05 billion.”
With all the advantages highlighted in the report, why have the two countries yet to finalize an agreement? This remains the case despite the Comprehensive Economic Partnership Agreement (CEPA) driving a trade surge and approaching the $100 billion milestone.
The UAE has consistently shown interest in establishing an Open Skies Agreement with India. However, the reluctance appears to be on the Indian side.
According to the report, “While India’s aviation sector has grown, financial stability remains a concern. Several airlines have struggled with bankruptcy or financial difficulties, including Kingfisher Airlines, which ceased operations in 2012, and Go First, which suspended services in 2023.”
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While airlines like Emirates, Etihad, Air Arabia, and flydubai operate well-developed hub-and-spoke networks, Indian carriers are still in the process of building competitive international hubs in Delhi, Mumbai, and Bengaluru.
At an aviation summit last year, Air India CEO Campbell Wilson highlighted, “Indian carriers have recently placed orders for over 1,000 aircraft. This investment, amounting to more than $100 billion, is based on expected economic returns.”
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However, he warned that granting additional bilateral rights to foreign hubs could affect Indian airlines’ ability to maintain high occupancy on these newly acquired aircraft.
Solution
The report proposes a phased strategy, recommending the gradual increase of flight capacity over five years to accommodate growing demand while minimizing market disruptions. It also advocates for investments in key Indian airports, transforming them into international hubs, alongside expanding UAE airline access to Tier-2 Indian cities. Additionally, it suggests that both nations initiate a collaborative program to train professionals and work together on sustainable aviation fuels and carbon-neutral airport operations.
“The UAE and India are on the brink of an aviation boom—if they decide to capitalize on it. The demand for air travel between the two nations is surging, but current bilateral restrictions are limiting growth,” the report highlighted. In 2023, passenger traffic on these routes reached 19 million, making up nearly 30 percent of India’s international air traffic.
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India must act swiftly, as UAE airlines are shifting their focus to other markets. At ITB Berlin earlier this year, Emirates Airline President Tim Clark expressed frustration over India’s limited traffic rights, making the country less crucial for the airline as it expands globally.
“We’ve been increasing capacity since 2015,” Clark shared with Aviation Week. “For 10 years, we couldn’t expand capacity to India, so it’s become less of a priority for us.”
Clark further remarked that Emirates is profiting from its overall expansion, adding, “It’s a loss for India that Emirates can’t expand its operations there.”
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