Tit for tat: US suspends self-handling rights of Indian airlines

By: and |
Published: May 17, 2019 7:18:46 AM

The US has ordered the suspension of self-handling rights of Indian carriers at American airports, retaliating under a bilateral air services agreement against denial of similar concession to US passenger airlines here, sources told FE.

For its part, India has asked the US to refrain from implementing the order. For its part, India has asked the US to refrain from implementing the order.

The US has ordered the suspension of self-handling rights of Indian carriers at American airports, retaliating under a bilateral air services agreement against denial of similar concession to US passenger airlines here, sources told FE.

Analysts say, for the time being, the US move is unlikely to hurt Air India, the only Indian carrier operating direct flights to key cities like Washington, New York and Chicago, as it has already outsourced its ground handling work to different agencies at American airports. However, if the problem persists, the US may choose to retaliate in some other way or raise red tape for the Indian carrier, they fear. As for the American airlines, while United is the only carrier to operate flights to India currently, Delta Air Lines has also announced plans to launch a flight from December.

For its part, India has asked the US to refrain from implementing the order. To diffuse the situation, New Delhi has proposed to allow self-handling by the US carriers but with a security oversight by Indian agencies and said costs of such oversight will be borne by the US side, according to the sources.

The US Department of Transportation has also ordered that Indian carriers report their ground handling arrangements at American airports, while a separate directive mandated Indian airlines to submit their operating schedules, according to the sources. The US is learnt to have conveyed to the Indian side that these orders will remain effective until a solution is found.

In his talks with US commerce secretary Wilbur Ross earlier this month, commerce, industry and civil aviation minister Suresh Prabhu is understood to have flagged the issue.

The latest American move comes at a time when bilateral commercial relations are under stress and the US has already announced withdrawal of export incentives for India worth $190 million a year under its so-called Generalised System of Preferences scheme. Washington has voiced concerns over India’s e-commerce policy and data localisation norms, while continuing to place the country on its priority watch, alleging violations of intellectual property rights.

However, India has postponed its plan time and again to impose retaliatory tariff worth close to $235 million on 29 American products, in response to the Trump administration’s extra levy on supplies of steel and aluminium.

“The two countries are engaged in talks to sort out the (ground handling) matter at the earliest. India had taken the step in view of increasing security threats. A positive outcome to the talks is expected soon,” said one of the sources.

Experts say since ground-handling activities require specialisation, it is convenient for airlines to outsource such things, instead of doing it themselves.

“It doesn’t make sense for airlines to manage their own ground-handling work when they have limited flights at an airport. There would be no economies of scale for the carriers,” said Murali Ramachandran, CEO (India) at Çelebi Aviation Services.

India had disallowed foreign airlines in 2007 from undertaking self-handling on the airside, including the security functions stipulated by the Bureau of Civil Aviation Security (BCAS). In 2009, the BCAS classified certain ground-handling functions as security functions. In 2016, the BCAS issued a clarification, categorically stressing that foreign airlines had no role in security functions.

Subsequently, the US objected to the new norms, saying they violated provisions of the India-US Air Transport Agreement of 2005 and demanded that US carriers get the permission to do ground handling on their own. Washington also invoked the right to consultations under the bilateral agreement, which took place in July 2018 here.

In October 2018, the civil aviation ministry issued revised ground-handling norms, which retained the position with regard to foreign passenger airlines, but allowed foreign cargo airlines to do their own handling at cargo terminals (except security functions).

Washington still expressed its dissatisfaction and sought another round of consultations, which was held in December 2018. That, too, didn’t solve the matter.

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