India's national auditor yesterday launched a scathing attack on Emirates Airline, recommending it and other Gulf airlines should be forced to reduce services to the subcontinent.
The comptroller and auditor general of India said in a report to parliament that Air India's business was being damaged by the freedom of Gulf carriers and that liberalisation in 2004 of air entitlements to foreign carriers "left much to be desired".
"Clearly, the Gulf sector was [Air India's] most profitable international segment before the liberalised policy on entitlements," the report said.
The Indian recommendation is the latest in a long line of disputes between the UAE and other countries over the dominance of Emirates and Etihad Airways.
Both Air Canada and Lufthansa have sought to restrict landing rights of UAE carriers in the past year. The Canadian dispute escalated into a full-blown diplomatic spat.
India is one of the largest markets for the UAE's carriers, helping to feed traffic into the long-haul networks of Emirates and Etihad as well as direct travel for the budget carriers flydubai, Air Arabia and RAK Airways.
James Hogan, the chief executive of Etihad, said India was an important market for the airline. "We have been operating their since 2004," he said. "Today we operate services to eight destinations in the country providing a vital route for travellers between India and our global network. We look forward to serving this market in the short, medium and long term."
India embarked on a deregulation process of the aviation market in 2004, which produced an average annual growth of 27 per cent until 2008, according to the Directorate General of Civil Aviation in India.
But the national auditor said yesterday the ministry of civil aviation had ignored "the interest of the Indian carriers including that of Air India" after allowing Middle East airlines to add flights.
The auditor said that until India had its own "effective and efficient" hubs and Air India and other carriers were able to "exploit them effectively", services for Gulf airlines should be restricted.
Emirates Airline declined to comment.
The Indian auditor's report said Air India had "repeatedly expressed strong reservations" to the aviation ministry against the proposals and requests from Gulf countries for an increase in seat entitlements, as well as additional points of call at interior locations in India.
The state-controlled carrier is losing 6 billion rupees (Dh477 million) a month, Vayalar Ravi, the minister for civil aviation, said last month.
The report added that freedom of access for foreign airlines, predominantly Emirates Airline, had led many to tap the vast Indian market and funnel traffic over hubs such as Dubai to various destinations in the US, the UK and elsewhere in Europe.
It may not be possible to cut Middle East carriers' rights because of diplomatic issues, the auditor conceded.
Carriers from Dubai provide more than double the amount of seats per week on routes between the emirate and India than Indian carriers.
Emirates flies 185 weekly flights to 10 destinations in India.
Both Ghaith Al Ghaith, the chief executive of flydubai, and Adel Ali, the chief executive of Air Arabia, recently made clear that the subcontinent was a key pillar of growth for their short-haul strategies.
Indian airlines that operate services into the UAE include Jet Airways, Air India, Air India Express and Kingfisher.