Tata-Owned Air India Loses Preferential Bilateral Rights Over International Flights After Privatisation

Tata Group-owned Air India has lost its preferential access to bilateral rights that are needed to operate flights to another country, as per the latest circular issued by the regulator the Directorate General of Civil Aviation (DGCA).

The fresh DGCA circular, which was issued on 19 April, has removed the Clause 3.6 that said, “Due consideration shall be given to the operational plans submitted by Air India before allocation of the traffic rights to other eligible applicants.”

It rather says, “the central government may at its discretion grant or deny allocation of traffic rights to any air transport undertaking having regard to its preparedness to undertake such operations, viability of the operations on a particular route, overall interests of the civil aviation sector etc”.

Air India had preferential access to bilateral rights, which are granted under air services agreements signed between two countries — as it was a government-owned national carrier. The removal of the clause, post Air India’s privatisation, puts it on par with other private airlines for allocation of traffic rights. The Tata Group took over management and control of Air India on 27 January, after successfully winning the bid for the airline on 8 October last year.

Freedoms Of The Air

The sovereignty of a country over the airspace above its territories is recognised by the International Civil Aviation Organisation (ICAO). International commercial aviation rights are usually expressed as “freedom of the air”, which constitute a set of commercial aviation rights granting a country’s airline(s) the privilege to enter and land in another country’s airspace. The Convention on International Civil Aviation of 1944 (Chicago Convention) officially recognises five freedoms.

The first two freedoms viz, the right to fly over a foreign country, without landing there; and the right to refuel or carry out maintenance in a foreign country on the way to another country are covered by the International Air Services Transit Agreement (IASTA).

The third, fourth and fifth freedoms, described below, are negotiated between countries through Air Services Agreements (ASAs) (also referred to as “bilateral agreements”).

In addition to the first five freedoms, several other “freedoms” have been added, although most are not officially recognised under international bilateral treaties.

Bilateral Agreements/Air Service Agreements

A bilateral air service agreement (ASA) or air transport agreement (ATA) is a treaty between two nations, which specifies traffic rights for operation of international air services between the two countries.

Most bilaterals have evolved after the Second World War when 54 nations convened in Chicago and agreed on a set of rules. These rules are now often referred to as the Chicago Convention.

One of the first air services agreements was between the United States and the United Kingdom. Signed in 1946, it was named the Bermuda agreement. The agreement defined trans-Atlantic routes and which airports and seaports flights could be operated from; defined where these flights could stop; and also defined what fares could be charged on these routes. Interestingly, most bilateral air-service agreements to the present day have evolved from the Bermuda agreement.

In the case of India, the oldest bilaterals were with the UK and south east Asian nations, namely Thailand, Hong Kong, Singapore and Japan. India has signed air service agreements with 121 countries.

How Do ASAs Work?

The ASAs are concluded bilaterally, usually on the basis of reciprocity and fair/equal opportunity, and provide the legal framework for scheduled air services between two countries.

Under these ASAs, traffic rights and capacity entitlements are exchanged between the countries on the basis of market requirements. The ASAs clearly specify the “entitlements” of the designated airline(s) of both countries in terms of frequency of operations, number of seats, points of call etc.

Once such an agreement is signed, each country is free to allocate the bilateral rights to its respective airlines. In India, it is the government who owns these entitlements and subsequently allocated them to an airline upon request.

Even after such flying rights are allocated to an airline, it must have slots at both the airports in order to start flight operations. A slot is a date and time at which an airline’s aircraft is permitted to depart or arrive at an airport. The slots are allocated by a committee that consists of the Civil Aviation Ministry and DGCA officials, airport operators and airlines, among others.

Open Skies Policy

In recent times, the concept of ‘open skies policy’ has gained some ground. The policy permits unrestricted air services between countries with minimal government intervention. The European Union – US Open Skies Agreement of March 2007 is a landmark in this direction. However, most other countries have bilateral agreements with regulated air services/entitlements.

The National Civil Aviation Policy (2016) allows the government to enter into an 'open sky' air services agreement on a reciprocal basis with South Asian Association for Regional Cooperation (SAARC) nations as well as countries beyond a 5,000 kilometre radius from New Delhi.

It implies that nations within 5,000 kilometres of distance need to enter into a bilateral agreement and mutually determine the number of flights that their airlines can operate between the two countries.

India has adopted an open sky policy (unlimited frequencies to/from six metro cities in India) for passenger traffic on reciprocal basis with countries beyond 5,000 km. This would encourage our carriers to undertake long-haul operations.

Review Of Air Services Agreement

The government has started to revisit bilateral air-service agreements. It is a bold move and as expected has generated much debate. Some indicate that revising these treaties is a breakdown of trust and may lead to higher airfares while others indicate that these were negotiated in a manner that didn’t quite benefit India.

While the concern needs a case-by-case scrutiny, the move to revisit bi-lateral air-service agreements is necessary to accommodate economic and mobility interests. With India poised to become one of the top three air travel markets, bilaterals will become even more important to the country.