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Scan on bias in aviation deals

“We will look into the bilaterals given out earlier. We will be reviewing all the major decisions taken by the previous government”
Ashok Gajapathi Raju, Civil aviation minister

New Delhi, June 1: The civil aviation ministry plans to take a relook at the bilateral air services agreements to find out whether some countries and airlines are getting undue advantage at the cost of domestic carriers.

“We will look into the bilaterals given out earlier. We will be reviewing all the major decisions taken by the previous government. I am not questioning anyone, neither will I persecute anyone or protect anyone,” newly appointed civil aviation minister Ashok Gajapathi Raju said.

A bilateral air service agreement is a contract to liberalise aviation services, usually commercial, between two countries. Such a pact allows the airlines of the two countries to launch flights to fly both passengers and cargoes.

Sources said the minister had asked ministry officials to make presentations on why West Asian countries were given a huge number of seats in the bilateral pacts.

According to officials, the poor management of bilateral negotiations has diminished the possibility of making Delhi, Mumbai and other metros aviation hubs.

Except Air India, other local players such as Jet Airways, IndiGo and SpiceJet have been reduced to “feeder services” for airlines based in Dubai, Abu Dhabi and Southeast Asia.

Last year, the then civil aviation minister Ajit Singh agreed to expand the number of seats available on weekly flights between India and the United Arab Emirates (UAE) nearly four-fold to 50,000 for the designated carriers of each country. The minister was advised against such a move by domestic carriers as well as political parties.

Deal controversy

The memorandum of understanding (MoU) on air services between India and the UAE following a two-day negotiation in Abu Dhabi effectively sweetened Jet Airways’ stake sale deal with Abu-Dhabi based Etihad Airways.

Under the new MoU, both sides agreed to allocate an additional 36,670 seats per week over three years. In 2013, the allotment was for 11,000 seats per week; in 2014, it will go up by 12,800 seats; and in 2015, another 12,870.

Before the air services pacts, the designated carriers on both sides were entitled to 13,330 seats with the flexibility to add another 2 per cent, taking the total to 13,600 seats per week with eleven points of call available to Abu Dhabi.

Air India along with other domestic airlines opposed the revision of traffic rights as it would only help Abu Dhabi to be yet another hub after Dubai and its national carrier Etihad. However, the protests fell on deaf ears.

Minister Singh defended the government’s decision, saying the move was for the sake of passengers. The minister said international passenger traffic from India is expected to increase to 45 lakh in 5 years from 28 lakh. “It is a win-win deal, good for the flyers. It provides more competition and more connectivity and better efficiency,” he said.

According to the Centre for Asia Pacific Aviation, India is unique in having separate bilaterals with the different emirates of the UAE. Agreements are in place with Dubai, Abu Dhabi, Sharjah and Ras al-Khaimah.

“As a result of the expanded bilateral agreements that India had with Dubai and Abu Dhabi over the past twelve months, weekly entitlements for UAE carriers will increase to over 135,000 seats by 2015-16. Including the points of call available to Indian carriers from which Jet Airways will be able to operate to Abu Dhabi, hubs in the UAE can be fed from 26 points in India,” it said in its recent report.

This represents a massive increase from the 10,400 seats in 2003-04. “It dwarfs the access offered to any other single country; it is almost as much as all European countries combined, which have just over 160,000 seats available to them,” it said.

In addition, the majority of the Indian bilateral entitlements to Abu Dhabi are expected to be utilised by Jet Airways operating a co-ordinated network and schedule with Etihad. Hence, the number of weekly seats feeding hubs in the UAE is likely to be closer to 170,000-175,000.

Air India grouse

The careless distribution of bilaterals affected Air India the most. The national carrier’s downfall was brought about by a mix of unbalanced merger, a shopping spree for aircraft and a spate of forced “route rationalisation”.

The merger was done without the management working out solutions to possible integration problems.

In 2008, under a new routing policy as many as 32 profitable routes, including flights to the Gulf, were given to international carriers such as Emirates.

Ministry officials said Raju would work on the revival of Air India, which has a massive cumulative loss and debt burden of about Rs 67, 270 crore. Before its merger with domestic arm Indian Airlines in 2007, Air India was making profits.

Raju hinted at reviewing the need to buy aircraft, including the 27 Boeing 787s for Air India.

“Aircraft have been bought and sold. We need to see why they were bought and sold,” he said.

Air India jacked up its total order for Boeing and Airbus aircraft to around 111 planes from an earlier estimate of 78 aircraft.

Analysts said the move meant taking on almost 50 per cent more debt than what was planned. The carrier had ordered 27 of the costliest aircraft — the Dreamliners — from Boeing at a cost of around Rs 20,000 crore.

WATCH ON WEST ASIAn BILATERALS

  • What’s wrong with the bilaterals
  • UAE carriers enjoy greater flying rights to India
  • Delhi, Mumbai and other metros are losing out to West Asian countries in creating aviation hubs
  • Local players such as Jet, IndiGo and SpiceJet are reduced to “feeder services” for UAE carriers
  • Bilateral with Abu Dhabi to majorly benefit Jet-Etihad combine
  • Cash-strapped Air India had to give away profitable routes to the Gulf to global carriers
  • India has separate pacts with Dubai, Abu Dhabi, Sharjah and Ras al-Khaimah — all belonging to the UAE
  • Previous minister Ajit Singh said pacts to benefit flyers as international traffic from India set to rise to 45 lakh in 5 years
 
 
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