Liberalising Airline Competition in India: Relevant Lessons from the Australian Experience

Abstract

As the commercial airline industry developed during the 1940's and 1950's, there was universal acceptance of the need to control entry, to regulate fares and to encourage airlines to cross-subsidise unprofitable services. By 1978, however, practitioners and academics in the USA mounted a forceful case that the nation's consumers would be better off in a deregulated environment and many other countries have followed suit since then. India is one of a number of Asian countries that have become recent converts to liberalism, but in formulating policies there are problems in translating the experiences of the USA. India's airline market is relatively undeveloped and air transport plays a vital role in supporting national objectives. This paper examines the parallels between Australia and India because, like India, Australia deregulated when it had two national carriers. Australia's domestic airline market is concentrated on a small number of routes and the remainder of the network lacks the density of traffic to promote competition, but airline services are regarded as a vital part of the infrastructure to support the tourism sector. The paper evaluates the experiences in Australia in terms of their relevance to India as it continues to develop its policies and as the carriers seek to develop viable strategies.