CAG report says such arrangements not favourable for Air India, other carriers

Citing diplomatic reasons, the Civil Aviation Ministry has ruled out review of bilateral agreements for air service. These had come in for strong criticism by the Comptroller and Auditor-General (CAG).

The CAG, in its report tabled in the Lok Sabha last week, concluded that one of the main reasons behind Air India's present plight is bilateral air service agreements, mainly with some Gulf countries.

It had said that options for a rollback of excess entitlements granted beyond genuine traffic requirements should be explored by the Ministry. A senior Civil Aviation Ministry official said, “It is impossible to rollback bilateral rights (which have already been awarded), this could lead to a diplomatic row.”

The official added that these bilaterals do not serve only air services but have other dimensions as well. For example, the last bilateral signed was in 2009 for Qatar, after Qatar promised investments in education, hydrocarbons and petrochemicals. The bilateral rights were traded for these investments, he added.

The CAG would like entitlements for airlines/countries predominantly dependent on the Sixth Freedom traffic (notably Dubai, Bahrain and other Gulf countries in the first instance) to be strictly frozen by the Civil Aviation Ministry, if possible, subject to diplomatic and other considerations.

Bilateral agreements for air services provide various types of freedom or flying rights to designated airlines of the two countries.

The Sixth Freedom gives the right to fly from a foreign country to another foreign country while stopping in one's own country.

Pursuing this right, airlines such as Emirates, Qatar, Oman Ethihad, Jazeera and Kuwait carry over half the passengers to and from destinations beyond the Gulf, such as the US and Europe (See chart).

According to CAG, there are clear indications that demand for genuine traffic is low. But, this is also killing the market, not just for Air India but for other Indian carriers, too.

(This article was published on September 13, 2011)
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