Combined Skies: Unlocking the Benefits of UAE-India Aviation Liberalisation for Indian Travellers

Executive Summary

This report analyses the benefits that Indian travellers can derive from UAE-India air services liberalisation. This is part of a broader study that explores all aspects of a potential UAE-India bilateral air services agreement revision. The broader study will comprehensively capture the economic benefits of aviation, including tourism impact, job creation, and related sectors. It will entail a cost-benefit analysis; feasibility analysis of expansion; and an exploration of the regulatory requirements for facilitating liberalisation.

 

Introduction

The UAE and India stand at the cusp of an aviation boom—if they choose to seize it. Demand for air travel between the two countries is skyrocketing, yet current bilateral limits constrain growth. Without urgent action to expand aviation ties, both nations risk losing out on immense economic opportunities. Now is the time for a strategic push to liberalise air services and unlock mutual benefits.

 

• • Booming Demand: India’s aviation market is one of the fastest-growing globally (expected to double by 2030) and India–UAE routes already served 19 million passengers in 2023, about 30 percent of India’s international traffic. Flights are running near full capacity under the current regulatory arrangements, underscoring the urgent need for expansion.
    
    
  • Major Trade Ties: The UAE is India’s third-largest trading partner with bilateral trade of US$84 billion in 2023. Improved air connectivity will facilitate business travel and cargo, further boosting trade, investment, and economic integration.

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• • Tourism and Jobs: UAE travellers are a key segment for Indian tourism (including fast-growing medical and business travel), and easier connectivity will spur two-way tourism growth. More flights also mean job creation in aviation and hospitality—from airports and airlines in both countries to local tourism operators—supporting post-pandemic economic recovery.
    
    

Objective of the Study

This report analyses the impact of increased passenger flow between the UAE and India using monthly and quarterly flight data from OAG Aviation Group. Econometric modelling is used to estimate the fare elasticity of demand at both the macro level and individually, for high-density routes. It also calculates the net present value (NPV) of consumer benefits to be generated from a hypothetical liberalisation of the bilateral air services agreement.

 

Key Findings from the Study

 

• • More Flights = Lower Fares: The analysis shows a clear payoff to liberalisation: each 1-percent increase in passenger volume from India to the UAE leads to roughly a 0.2-percent drop in average airfares. In other words, adding capacity and competition will make tickets cheaper for travellers, stimulating even more demand. This virtuous cycle can expand the market while reducing costs for consumers.
    
    

• • Heterogeneity in directions and other factors: UAE-to-India flight fares will be less responsive to liberalisation than India-to-UAE flights. Long-haul traffic reduces fares by 0.044 percent due to hub efficiencies and increased demand.

 

• • Significant Consumer Savings: Liberalising air services would generate substantial welfare gains for Indian travellers. A phased 5-percent annual increase in bilateral seat capacity is projected to add over US$152 million in consumer surplus by 2028 (directly adding to Indian travellers’ savings). A more ambitious doubling of capacity over five years could yield an economic benefit exceeding US$1.05 billion to Indian consumers. Thus, phased liberalisation up to 100 percent can generate savings for Indian consumers exceeding US$1.05 billion.
    
    

Figure 1: Total Projected Benefits for Indian Travellers from UAE-India Air Liberalisation

 

• • Route-Specific Opportunities: Not all routes respond equally to added capacity. High-density city pairs (e.g., Delhi–Dubai, Mumbai–Dubai) are nearing saturation, showing smaller fare reductions with more flights, whereas certain routes (especially to smaller Indian cities) are highly price-sensitive—additional flights there can significantly lower fares and unleash pent-up demand. The study recommends targeting expansion on price-responsive routes, implementing reforms on supply-constrained routes (where demand far exceeds current supply), and closely monitoring stable routes that show minimal fare changes.

 

High Elasticity	Unresponsive	Saturated
Route		India to UAE	UAE to India
Dubai-Bombay		0.076	0.045
Dubai-Delhi		0.129	0.135
Dubai-Cochin		-0.201	0.195
Dubai-Kozhikode		0.225	0.170
Dubai-Chennai		0.001	0.144
Dubai-Hyderabad		-0.086	0.266
Dubai-Bangalore		-0.131	-0.031
Abu Dhabi-Bombay		-0.343	-0.042
Abu Dhabi-Delhi		0.413	-0.311
Dubai-Ahmedabad		-0.078	0.032
Dubai-Trivandrum		-0.100	0.216
Dubai-Lucknow		-0.038	-0.604
Dubai-Kolkata		-0.331	-0.243

Economic Benefits of Liberalisation

Expanding India–UAE air links is not just about cheaper tickets; it is a catalyst for broader economic growth:

 

• • Job Creation: A liberalised approach to aviation will create thousands of jobs in both countries. From pilots and cabin crew to ground handlers, airport staff, and tourism workers, increased flight operations stimulate employment across the aviation value chain. Supporting industries like hotels, restaurants, and retail will also benefit from higher passenger traffic.

 

• • Trade Expansion: Better connectivity strengthens trade and investment. More flight options and cargo capacity mean faster business travel and shipping, helping companies on both sides deepen partnerships. With UAE–India trade already at US$84 billion (including oil), liberalised air services can accelerate progress toward the US$100-billion (non-oil) trade target and beyond by making business interactions more convenient.

 

• • Tourism Growth: Easing travel barriers will boost tourist flows in both directions. Indian tourists are among the top visitors to the UAE, and UAE travellers (from holidaymakers to medical tourists) contribute significantly to India’s tourism revenue. Affordable, frequent flights will encourage greater tourism exchange, regional connectivity, and cultural ties, translating to higher spending in local economies and improved people-to-people links.

 

Strategic Policy Recommendations

To capture these gains, the report urges a strategic, phased liberalisation of India–UAE air services. Key policy measures include:

 

• • Phased Capacity Expansion: Given India’s robust growth trajectory, UAE-India flight capacity can be doubled over five years, with annually phased liberalisation of 20 percent. This steady expansion will meet rising demand while avoiding market shocks, leading to a 20-percent reduction in airfares. A controlled pace prevents sudden overcapacity and guards against traffic diversion to third-country hubs, ensuring sustainable growth for airlines in both countries. Even a gradual increase in bilateral seat entitlements by ~5 percent per year over the next four years, with a dynamic allocation mechanism to adjust based on demand, can lead to a 3.5-percent reduction in airfares.

 

• • Strengthen Hubs and Regional Connectivity: Invest in and enhance major Indian airports (Delhi, Mumbai, Bengaluru) as efficient international hubs in partnership with UAE carriers. Synchronise flight schedules to improve connections. Simultaneously, phase in UAE airline access to tier-2 and tier-3 Indian cities (e.g., Jaipur, Lucknow, Coimbatore) in a calibrated manner. This approach boosts connectivity for smaller cities while allowing Indian domestic carriers to partner (through codeshare/interlining) for last-mile connectivity, so regional airports grow alongside major hubs.

 

• • Skill Development and Training Collaboration: Launch a Bilateral Aviation Training Programme covering various aspects from pilot training to air traffic control and ground operations. Joint training and knowledge exchange will build capacity to support the expanded air services. By investing in human capital together, the UAE and India can ensure a skilled workforce ready to handle advanced aircraft, larger passenger volumes, and modern safety standards.

 

• • Sustainable Aviation Partnership: Make aviation growth green and future-ready. Collaborate on sustainable aviation fuels (SAF) research and production, and promote carbon-neutral airport operations. This includes sharing best practices on energy-efficient terminals, electric ground vehicles, and improved air traffic management. A sustainability focus will help both nations lead in climate-friendly aviation, aligning expansion with environmental responsibility.

 

• • Facilitate Travel and Tourism: Simplify and harmonise policies to make travel smoother. Expand visa-on-arrival privileges and offer long-term multiple-entry visas to frequent flyers, while streamlining digital visa processes. Implement fast-track immigration at major airports for pre-approved travellers (e.g., business executives and medical tourists) to reduce bottlenecks. Additionally, encourage dynamic scheduling (flexible flight slots during peak seasons or holidays) so airlines can better match capacity to surges in demand. These steps will improve the traveller experience and maximise tourism and business trips.

 

• • ‘Combined Sky’ Vision: Move toward an integrated airspace framework. The two countries should work towards a ‘Combined Sky’ agreement, harmonising air traffic management, safety standards, and regulatory procedures. As a first step, creating an India–UAE Virtual Aviation Corridor can streamline approvals, seamless slot allocation, and real-time airspace coordination between the two nations. Such integration will dramatically improve operational efficiency and position the India–UAE corridor as a model of cooperative airspace management.

 

Call to Action: Unlock the Opportunity Now

The evidence is clear: a well-planned expansion of India–UAE air services will drive economic growth, create jobs, boost trade and tourism, and strengthen bilateral ties. Policymakers in New Delhi and Abu Dhabi should seize this moment to implement a phased liberalisation roadmap. By acting now and coordinating closely, the UAE and India can usher in a new era of shared prosperity and connectivity. The recommendation is unequivocal: adopt a strategic, phased approach to open up the skies, and do so with urgency. This will ensure that both countries stay ahead of demand, capitalise on mutual opportunities, and jointly secure their position as global aviation leaders. The time to act is now.