New Delhi, Sept. 3: The Union cabinet today approved the controversial air pact with Abu Dhabi that permits airlines of both the countries to sell 50,000 seats per week, a more than three-fold jump from the current entitlements.
The increase in the number of seats will be over three years — in 2013 the entitlement will go up by 13,700 seats per week from 11,000 now; in 2014 it will go up by 12,800 seats and in 2015, another 12,870. The entitlement means Indian carriers can offer 50,000 seats per week, while their Abu Dhabi counterpart can also offer the same.
The agreement is expected to help Abu Dhabi-based Etihad Airways increase its services to India at a time it seeks to purchase a 24 per cent stake in Jet Airways.
The deal, which is yet to be cleared by the regulators, will be the first FDI in aviation since foreign airlines were allowed to buy up to 49 per cent in domestic carriers in September last year.
The cabinet decided to review the agreement after the deal was criticised as a give-away by aviation experts and politicians.
The MPs had questioned the rationale behind the massive enhancement in the number of seats.
Following the objections, the Prime Minister had asked the civil aviation ministry on June 13 to revise the cabinet note on the matter by making modifications to address the concerns of politicians.
The ministry was also asked to detail the sequence of events leading to India and Abu Dhabi to sign the agreement in April after a gap of several years.
Kapil Kaul, head of the Centre for Asia Pacific Aviation India, said, “It (the agreement) would have an impact on our airports… excess of international traffic out of India would shift out of Indian hubs.”
In July, the Prime Minister’s Office released copies of confidential communications to ministries on the agreement. Among other things, the communications indicated that the department of economic affairs and several domestic airlines had reservations.
It also pointed out that private airport operators were unlikely to support the deal as it could hurt their ambition to turn into global aviation hubs. A bilateral air services agreement between two countries allows their designated airlines to operate and later increase or decrease the number of flights operating between them, the number of seats to be flown per week and even the aircraft type.