India Must Not Open Floodgates to Foreign Air Carriers: Air India’s Wilson

Air India CEO warns of the consequences of increasing the bilateral air service agreement caps on the organization and the sector in general. In this article, you can read more on this development and the consequences of increasing the cap set on bilateral air service agreements. This topic is relevant for the IAS exam economy segment.

Increasing the Cap under Bilateral Air Service Agreements

• Opening the floodgates refers to increasing the cap set under bilateral air service agreements, and allowing foreign airlines to enter the Indian aviation market freely without restrictions.
• It could potentially lead to increased competition and a decrease in market share for Indian aviation firms.
• If the floodgate is opened, and if the Indian airline sector is not allowed to grow, then Indian travellers moving to and from India will not receive the non-stop travel option from an Indian airline.

What are Bilateral Air Service Agreements (BASAs)?

• They are agreements between two countries that govern the commercial air services between them. 
• They outline the conditions under which airlines from both countries can operate scheduled flights, including the number of flights, the routes, and the capacity of the aircraft used.

Importance of BASAs to global civil aviation:

• They allow airlines to expand their operations into new markets and offer more flights to passengers.
• They also help to foster economic growth and tourism by making it easier for people to travel between countries.

Present demand:

• Recently some countries requested India to raise the cap included in the bilateral air service agreements.
  • Demand for raising the limit has also arisen from airlines from the UAE and Turkey as they have reached close to these upper limits and wish to raise the cap.

Issues with not raising the limit:

• By restricting capacity, India will constrain its growth.
• If the limit is not increased and capacity is not expanded, people who wish to go to other countries for multiple purposes will be the ultimate losers.
• If India restricted access to its markets, other countries would restrict capacity to their markets as well.

Issues in the present system:

• Many foreign airlines are abusing their rights under bilateral agreements.
  • Many carriers are flying passengers beyond their hubs, which means they are taking advantage of their bilateral agreements to carry passengers to destinations beyond their home country, possibly at the expense of Air India and other local carriers.
  • It would be better for these carriers to focus on carrying passengers to their hubs rather than selling tickets for destinations beyond their hubs.
    • More than half of the passengers of these carriers are not travelling to their hub, but rather to other hubs where Air India can operate a non-stop service if given the opportunity. 

Air India (AI):

• In the past, AI was not able to deliver service as per the demand due to the lack of aircraft or investment. As a result, other airlines have stepped in to fill the gap and are taking a lot of people from India to the US or Europe. 
• But it is in the national interest for Air India to be given the opportunity to develop these markets.
  • AI has been on a reformative path, increased investment and increased fleets.
    • AI has invested $70 billion dollars recently keeping in mind introducing non-stop flights.
  • Since the privatisation of the airlines, steps have been taken to increase its network in the busy routes of the US and Europe and thus capture these markets.
• By increasing the cap provided under the bilateral air service agreements, domestic airlines, that are still not developed, will face fierce competition from well-established foreign airlines.
• And hence it is in the national interest to give AI and other domestic airlines working in the international aviation sector, an opportunity by not increasing the upper limit under BASAs.

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