A recent news report indicating that the government may revisit bilateral air-service agreements has kicked up a storm in the aviation circles. It is a bold move and as expected has generated much debate. There are opinions and agendas on both sides of the argument. 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. Strangely, all sides have some element of truth to it.
Role of Bilateral Air-service Agreements
An air-service bilateral is a treaty between two nations, which governs the commercial air transport and carriage of passengers and goods between the two countries. Most bilaterals have evolved after World War II when 54 nations convened in Chicago and agreed on a set of rules. These rules are now often referred to as the Chicago Convention. And these have largely formed the guidelines for the air transport policy framework.
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. Present day bilaterals include the number of seats that can be flown, the frequency and also which agreements an airline can enter.
In the case of India, the oldest bilaterals were with the UK and South East Asian nations, namely Thailand, Hong Kong, Singapore and Japan. Then came a period where additional bilaterals were negotiated. The most curious of these were bilateral agreements with the United Arab Emirates.
The Curious Case of Air-service Bilateral with UAE
Following convention, the United Arab Emirates (UAE), which comprises seven Emirates or states, should have a single bilateral. Yet in contravention of norms, bilateral agreements were negotiated with four of the Emirates separately as opposed to with the UAE as a single country. These generous allocations allowed airlines in the Middle East to come and access the sought-after traveller base in India and connect them via airports in their own countries. And the proof was in the numbers. An increasing number of travellers started flying out to the Gulf and connect onwards to Europe and beyond. The brunt was felt by India’s airlines and India’s airports and wider consequences were felt by the economy.
Bilaterals directly impact connectivity and thus impact jobs, growth and security. Within aviation, effects of air-service bilaterals are not limited to airlines. They affect airports, and other stakeholders in the value chain, such as ground handling firms, fuel providers, maintenance providers, etc. And thus these are much sought-after by countries. However, for a bilateral to be fair and equitable, items of equal value need to be included. And herein lies the point of contention.
Because, while India has a rich traveller base, UAE has no domestic market to offer. Additionally, both economies are in different phases of the growth cycle and thus in many ways the current bilaterals don’t quite make for a level-playing field.
Bilaterals are Strategic Assets, India is Finally Asserting Itself
For any nation, bilateral flying rights are strategic assets. Because the way these are structured have a direct impact on jobs. Indeed, nations such as the USA, Germany and Canada have guarded their domestic markets with measures that are strict and that benefit their own populace.
The argument against generous bilateral agreements with Emirates like Dubai and Abu Dhabi is that they are unequal. Because the markets are dissimilar. And, because they were negotiated in a manner that poses several questions.
A grant of bilateral that is tilted to one side effectively limits the ability of Indian airports and airlines to grow and compete effectively, consequently impacting the entire aviation value chain and the local and national economy. Yet, this also has to be balanced with the fact that the Indian traveller base demands better services, better fares and greater access which have to be considered.
The UAE case is without precedent and by revisiting it India is finally asserting itself. To be sure, while bilaterals do have a dispute resolution mechanism, the grant of these is a sovereign decision. And multilateral organizations have not quite shown decisiveness or impact—whether it be the closure of airspace following Qatar diplomatic crisis or more complex issues such as the UN Convention on the Law of the Sea and the dispute between Philippines and China. In all the cases, the sovereign has reigned supreme.
Looking ahead, as labour and capital mobility increases, an increasing number of travellers will take to air travel. While the current economic forecast is muted, in the long term, India is well on its way to becoming one of the top three air travel markets. Accordingly, bilaterals in the coming years will become even more important to India.
Bilateral rights are strategic sovereign assets and by revisiting bi-lateral air-service agreements India is finally asserting itself on the world stage.
Satyendra Pandey is the Managing Partner at aviation services firm AT-TV. The views expressed in this article are those of the author and do not represent the stand of this publication.