Syed Tamjeed Ahmad

| @ | June 4,2019

THE recent cessation of operations by Jet Airways has reignited the hot topic of slot allocation/grant of access to foreign flying rights in India. There are some stake holders in the industry alleging that the Government is trying to shift the fulcrum in favour of a particular airline. This impression/apprehension proved to be somewhat true when last month Vistara, Air Asia and Jet Airways opposed the manner in which the latter’s slots were being allocated.

These airlines alleged that the manner/procedure that was adopted for redistribution of Jet’s slots, was tailor-made to benefit a particular low cost carrier in India, operating the same aircraft type of narrow body jet engine aircraft as Jet Airways.

 

Under-utilised slots

 

A slot or airport slot is a right, which allows an airline to operate at an airport (take off and land) at a particular time. Values of slots can vary from a few thousand dollars to even few million dollars, depending upon the slot time and the airport. It is worth mentioning that every airline prefers to have a prime slot, which, in turn, can generate more customers for the airline.

As per the World Slot Guidelines of IATA, slots have to be allotted by an independent coordinator. Also, if an airline has utilised 80% of its slots in the previous year, only then does it have the right to continue with those slots. This right that is termed as a “grandfather right” has become a major legal issue for the DGCA, while redistributing Jet’s slots.

Jet Airways, though in the red for a long time, had utilised the minimum required slot allocation for the exercise of grandfather rights before it suspended operations on April 17, 2019. It created a unique situation for the regulators, wherein an airline had utilised its slots in the previous year and thus had a right to continue with those slots, but the management had decided to temporarily halt the airlines operations, which meant that the slots would go to Jet but would not be utilised.

 

Schism in the industry

 

The regulators cannot snatch these slots from Jet (see IATA World Slot Guidelines), but they also need to ensure optimal utilisation of the airport slots, which they are bound to do in public interest. However, industry experts feel that the decisions of the Ministry of Civil Aviation have created a schism in the industry.

Firstly, it was decided by the Ministry that slots of Jet would be allocated only to those airlines, which deployed new aircraft. This indirectly meant that the biggest beneficiary from this would have been the certain other Boeing 737 and Q400 operator in India – as it was the one, which was the only one deploying new aircraft. Understandably, this did not go down well with other airlines, who saw this as an unjustified advantage for that one particular airline.

Secondly, according to the AIC (Aeronautical Information Circular) 03 of 2017, which is the primary regulation governing foreign flying rights for Indian carriers, the first access over any foreign flying right shall be of Air India (See rule 3.6 of the AIC). Thereafter, it would be allocated in the ratio of “Available Seat Kilometre” (ASK) deployed domestically by the eligible applicants. This means the airline with the largest share in the domestic market shall take the biggest pie (See rule 3.2 of the AIC). This in turn meant that the potential beneficiaries of Jet’s foreign flying rights would be Air India and Indigo (maximum market share).

 

No level playing field

 

Other players like Vistara, Air Asia and SpiceJet have taken serious exception to this rule. These airlines allege that the rules as contained in the AIC do not provide a level playing field. If things go as they are, Indigo (after Air India) will get the maximum international routes of Jet, and the most coveted among them is the Middle East sector. This peculiar situation that has arisen after Jet’s demise gave Indigo an upper hand.

In the coming weeks, we will be wiser as to the stand which the Government takes i.e. whether to bow down to the pressure of other airlines and amend the AIC or to continue as is. Chances are that if the AIC is not amended or the apprehensions of other airlines are not allayed, we may see litigation flooding the courts of law, all pertaining to access to foreign flying rights.

 

Jet employees oppose slot allocation

 

Lastly, the union of Jet Airways employees has been vehemently opposing the idea of granting Jet’s slots/foreign flying rights to other competitors. They fear that once these rights/slots are lost (although the Government has been firm in saying that the grant is only temporary), it could potentially mean the permanent demise of Jet Airways from the Indian aviation market.

A writ petition has already been filed before the Hon’ble Supreme Court by the National Aviators Guild seeking direction to preserve the assets/slots of Jet pending its revival.  In all probability, the case will come up after the apex court’s summer vacations.

 

 

With special thanks to Nitin Sarin, Partner, Sarin & Co. 

[Syed Tamjeed Ahmad (syed.tamjeed@sarins.org) is an advocate working as an associate with Sarin & Co. He holds an advanced LLM degree in Air & Space Law from Leiden University.]

Leave a Reply

avatar
  Subscribe  
Notify of