Local interests to govern new air bilateral deals

Written by Roudra Bhattacharya | New Delhi | Updated: Jun 26 2014, 08:28am hrs
Air CarriersThe civil aviation ministry is developing an entirely new framework for bilateral air services agreements (ASAs) that will focus more on the needs of domestic carriers.
The civil aviation ministry is developing an entirely new framework for bilateral air services agreements (ASAs) that will focus more on the needs of domestic carriers. The ministry has been criticised for granting bilaterals in a manner that causes domestic players like Air India to lose business to foreign competition. Emirates, for instance overtook Air India in 2013 with a 13% market share.

A senior civil aviation ministry official confirmed to FE it was conducting an internal exercise to review the position on bilaterals. The idea is to understand in which areas we are underutilised, whether there is a shortage of aircraft or other bottlenecks, the official said. He explained the new guidelines would pencil in not just the industrys current ability to use the seats but future potential. The primary consideration should be: Whats in it for us There have to be larger

economic benefits for the country, he said, adding that a review of how existing

bilaterals had helped had been initiated.

The timing of the review is significant given the entry of new players such as Tata- Singapore Airlines (Tata-SIA) also since the government is also simultaneously revisiting the 5/20 rule; the rule bars carriers from flying overseas until they complete five years of operations in India and have 20 aircraft.

The new ASA guidelines are expected to benefit not just airlines like Air India and Jet Airways, which operate long-distance international flights, but also likely new entrants such as Tata-SIA, which has said it plans to fly international routes as soon as the 5/20 rule is removed.

The decision to form a new framework comes after the India-Abu Dhabi ASA, signed in April last year, received intense criticism from a parliamentary panel led by CPI(M)s Sitaram Yechury and BJP leader Subramanian Swamy for giving benefits to a single player, Etihad, ostensibly for the airlines R2,000-crore investment in Jet Airways to go through.

The UPA government had increased Indias bilateral traffic rights with Abu Dhabi by 36,670 seats in phases till October 2015, a move that makes Abu Dhabis seat entitlement the same as Dubais current allocation. At the time, Dubai had a 12% share of Indias international traffic, while Abu Dhabi had a 2% share. Countries such as Qatar, Egypt, New Zealand, Singapore and Malaysia that are currently in line for bilaterals would have to wait till the revised guidelines are in place.

The worry is that the business of domestic carriers like Air India, which have significant overseas operations, may go away if too many seats are given under ASAs to other countries, an airline executive said.

More recently, in February this year, India and Dubai also agreed to enhance the bilateral seat entitlements between the two countries by another 11,000 seats per week, from 54,200 seats per week.