Rarely have bilateral air services agreements between India and another country led to the kind of controversy that has been generated post last week’s India-UAE pact.
Last Wednesday, New Delhi signed a bilateral air services agreement (ASA) with the United Arab Emirates, taking the number of seats that airlines from the two countries can fly to destinations in each other’s countries to 36,000 a week over three years. At the moment, the bilateral is pegged at 13,000 seats a week.
Routinely, India exchanges ASAs with various countries. Generally, an ASA is negotiated when the existing agreement for the number of flights that airlines from the two countries can operate to destinations in each other’s countries has been fully utilised and there is pent-up passenger demand.
The last time New Delhi signed a bilateral leading to a significant increase in the number of seats was in 2008 when it signed an ASA with Dubai. The bilateral allowed airlines from Dubai and India to operate 54,200 seats a week, an increase of 23,000 seats .
Monetary factors
There are two reasons why the latest ASA with Abu Dhabi (UAE) is different.
First, it has to do with the Gulf region being important for India for a variety of reasons, including the fact that around 6.5 million Indians, who are a significant source of foreign remittances, live there.
According to the Ministry of External Affairs, the largest number of Indians in the region is in Saudi Arabia at about 2.45 million, followed by the UAE at about 1.8 million.
A. R. Ghanashyam, Joint Secretary, Ministry of External Affairs, says that in 2012 the World Bank estimated that $70 billion came into the country as remittances by Indians living abroad. A significant portion of this came from the Gulf region. “Of this $70 billion, maybe $50-60 billion actually came from these people,” he says.
The Government also wants to project its pro-liberalisation face and favours getting Foreign Direct Investment in the civil aviation sector. The second reason why the latest ASA is different is its timing — it coincided with the Jet Airways-Etihad deal. Last Wednesday, Etihad Airways made a “strategic investment” of $600 million in Jet Airways.
Etihad is the official carrier of Abu Dhabi and it is looking at this acquisition to further growth. Jet is the fifth airline in which Etihad is acquiring a stake since the UAE carrier started operations in 2008.
It already has a 40 per cent stake in Air Seychelles, apart from 29.21 per cent in Airberlin.
The Abu Dhabi carrier also has a nine per cent stake in Virgin Australia and close to three per cent in Aer Lingus.
intentions
Many are looking at the bilateral with Abu Dhabi as a win-win for Jet Airways. Jet has already made clear its intention to operate from 23 cities to Abu Dhabi and then onwards to different parts of the world. Jet has asked for over 40,000 additional seats to Abu Dhabi. The Government is yet to decide on the number that will be given to Jet Airways and other Indian carriers.
The additional seats will also help firm up the new partnership between Etihad and Jet, as the two airlines will get an opportunity to fly from India on one or the other carrier and then continue onward journeys again with either.
Little wonder that the latest move by the Government has got the industry agitated. Officials from different airlines point out that though the earlier bilateral between India and Abu Dhabi was not fully utilised yet, the two sides have decided to increase the number of seats airlines can operate.
Ministry officials say that Indian carriers were using about 65 per cent, while the UAE side was utilising about 85 per cent of the 13,000 seats available under the earlier bilateral.
They also drop veiled hints that the decision to enhance the bilateral with Abu Dhabi was taken at a much higher, political level. Jet, however, is disputing the contention that the earlier bilateral was not being fully utilised.
Airport and airline officials also point to the fact that New Delhi’s policy is helping create airport hubs outside the country (Jet is calling Abu Dhabi its gateway, which will be used to carry flyers from India to Abu Dhabi and beyond). They are questioning the wisdom of this move, given that the airports in Delhi and Mumbai were privatised keeping in mind the fact that they would eventually be used as hubs by Indian carriers.
However, for the moment, the deal is done and sealed. Now, one will have to wait and watch how other carriers, both domestic and international, react. After all, India is one of the few global markets that is seeing an increase in the number of people travelling abroad. And each of these passengers is a potential revenue stream for airlines.
http://www.thehindubusinessline.com/todays-paper/tp-logistics/a-winwin-situation-for-jet/article4664158.ece
Last Wednesday, New Delhi signed a bilateral air services agreement (ASA) with the United Arab Emirates, taking the number of seats that airlines from the two countries can fly to destinations in each other’s countries to 36,000 a week over three years. At the moment, the bilateral is pegged at 13,000 seats a week.
Routinely, India exchanges ASAs with various countries. Generally, an ASA is negotiated when the existing agreement for the number of flights that airlines from the two countries can operate to destinations in each other’s countries has been fully utilised and there is pent-up passenger demand.
The last time New Delhi signed a bilateral leading to a significant increase in the number of seats was in 2008 when it signed an ASA with Dubai. The bilateral allowed airlines from Dubai and India to operate 54,200 seats a week, an increase of 23,000 seats .
Monetary factors
There are two reasons why the latest ASA with Abu Dhabi (UAE) is different.
First, it has to do with the Gulf region being important for India for a variety of reasons, including the fact that around 6.5 million Indians, who are a significant source of foreign remittances, live there.
According to the Ministry of External Affairs, the largest number of Indians in the region is in Saudi Arabia at about 2.45 million, followed by the UAE at about 1.8 million.
A. R. Ghanashyam, Joint Secretary, Ministry of External Affairs, says that in 2012 the World Bank estimated that $70 billion came into the country as remittances by Indians living abroad. A significant portion of this came from the Gulf region. “Of this $70 billion, maybe $50-60 billion actually came from these people,” he says.
The Government also wants to project its pro-liberalisation face and favours getting Foreign Direct Investment in the civil aviation sector. The second reason why the latest ASA is different is its timing — it coincided with the Jet Airways-Etihad deal. Last Wednesday, Etihad Airways made a “strategic investment” of $600 million in Jet Airways.
Etihad is the official carrier of Abu Dhabi and it is looking at this acquisition to further growth. Jet is the fifth airline in which Etihad is acquiring a stake since the UAE carrier started operations in 2008.
It already has a 40 per cent stake in Air Seychelles, apart from 29.21 per cent in Airberlin.
The Abu Dhabi carrier also has a nine per cent stake in Virgin Australia and close to three per cent in Aer Lingus.
intentions
Many are looking at the bilateral with Abu Dhabi as a win-win for Jet Airways. Jet has already made clear its intention to operate from 23 cities to Abu Dhabi and then onwards to different parts of the world. Jet has asked for over 40,000 additional seats to Abu Dhabi. The Government is yet to decide on the number that will be given to Jet Airways and other Indian carriers.
The additional seats will also help firm up the new partnership between Etihad and Jet, as the two airlines will get an opportunity to fly from India on one or the other carrier and then continue onward journeys again with either.
Little wonder that the latest move by the Government has got the industry agitated. Officials from different airlines point out that though the earlier bilateral between India and Abu Dhabi was not fully utilised yet, the two sides have decided to increase the number of seats airlines can operate.
Ministry officials say that Indian carriers were using about 65 per cent, while the UAE side was utilising about 85 per cent of the 13,000 seats available under the earlier bilateral.
They also drop veiled hints that the decision to enhance the bilateral with Abu Dhabi was taken at a much higher, political level. Jet, however, is disputing the contention that the earlier bilateral was not being fully utilised.
Airport and airline officials also point to the fact that New Delhi’s policy is helping create airport hubs outside the country (Jet is calling Abu Dhabi its gateway, which will be used to carry flyers from India to Abu Dhabi and beyond). They are questioning the wisdom of this move, given that the airports in Delhi and Mumbai were privatised keeping in mind the fact that they would eventually be used as hubs by Indian carriers.
However, for the moment, the deal is done and sealed. Now, one will have to wait and watch how other carriers, both domestic and international, react. After all, India is one of the few global markets that is seeing an increase in the number of people travelling abroad. And each of these passengers is a potential revenue stream for airlines.
http://www.thehindubusinessline.com/todays-paper/tp-logistics/a-winwin-situation-for-jet/article4664158.ece
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