India must eject out of airline seat quotas

Jul 02 2014, 01:52 IST
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SummaryThe only way out is rapid globalisation and disruptive strategies. The govt should consider implementing an open skies policy for an experimental five-year period

How did the quota raj start?

The bilateral seat quotas have their origin in the Chicago Convention of 1944, held towards the end of World War II. Many feel that it was done to prevent the US, the new superpower, from riding roughshod over the European states that were rebuilding their shattered economies.

Today, seven decades later, seat quotas have completely lost their relevance. Most leading countries, beset with sluggish economies and rising unemployment, are wooing global airlines to enhance services to their airports.

Falling margins have forced many airlines to shut down or merge with a larger player. Flag carriers of countries like Austria, the Netherlands, Switzerland, etc, are being controlled by other airlines. Etihad has bought stakes in Air Berlin, Air Seychelles, Aer Lingus, Virgin Australia, Air Serbia, Jet Airways and Alitalia (in process). The barriers are crumbling, and rightly so.

What is the open skies policy?

Airlines are no more a ‘holy cow’. Foreign ownership in airlines is now welcomed the same way as in the rest of the aviation value chain—airports, aerospace manufacturing, air-cargo operations, helicopter services, training and MRO. Mature nations are avoiding pumping of taxpayers’ money in loss-making flag carriers in the name of ‘national pride’.

The US has been advocating an open skies policy since the late 1980s and has succeeded in doing with several countries; for example, the Netherlands (1992), Singapore and New Zealand (2001) and the EU (2007). The open skies between the US and the EU highlight the irrelevance of protectionist policies enshrined in the Chicago Convention.

In 2009, ten countries in the ASEAN bloc agreed to have open skies. The Schengen Visa allows tourists to move seamlessly across 26 European countries. More barriers have crumbled.

Has the open sky policy hurt India?

Nearly a decade ago, in 2005, India signed an open skies agreement with the US, resulting in unlimited seat quota between the two countries. Contrary to fears, it did not lead to a decimation of Indian carriers on the Indo-US routes. Air India and Jet Airways run regular flights to the US and have code shares with other US carriers.

India also has a universal open skies in air cargo. That too has not hurt India.

Have bilateral quotas helped India?

Seven decades of protectionism has not helped Indian aviation. We lack a strong, globally-reputed national carrier. Our airports, despite a large middle class population, handle traffic which is a tiny fraction of what leading global airports handle. Foreign

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