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Monday, July 15, 2024

More rights for foreign airlines: The Mint Primer on who will soar above the rest

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In Short:

Recently, bilateral air service agreements have become a focus point with the new government in power. These agreements grant rights to airlines for commercial aviation between two countries. India has bilateral agreements with 116 countries, limiting rights on busy routes like India-Dubai since 2015. Foreign airlines are pushing for increased rights in India, which could potentially reduce fares on high-demand routes. The new government is considering enhancing rights for foreign flights to lucrative markets like Dubai, Qatar, and Singapore, but there is a division within the domestic industry over the potential impact on Indian carriers.


Understanding Bilateral Air Service Agreements

Have you ever wondered what bilateral rights are all about when it comes to air service agreements between countries? Well, let’s dive in and find out more about how these agreements impact airlines and passengers.

What are bilateral rights?

Bilateral rights are like golden tickets for airlines, granting them the privilege to fly into another country’s airspace. These rights dictate the frequency of flights, the number of seats available, and even the type of aircraft that can be used. In India, there are currently 116 countries with whom we have bilateral air service agreements, defining the terms of operation for foreign airlines.

Why isn’t India increasing such rights?

Since 2016, India has been cautious about expanding these bilateral rights, as foreign airlines have been making the most out of their share. Indian airlines have been held back due to older fleets and limited long-haul aircraft, making it challenging to fully utilize their entitlements. The government’s strategy is to wait for domestic airlines to enhance their capabilities before opening up the skies further.

What do foreign airlines have to say?

With a mere 4-5% air travel penetration rate in India, foreign airlines see a vast untapped market for growth. Indian travelers are increasingly opting for international travel over domestic destinations, making airlines like Emirates, Etihad, and Saudia eager to expand their operations in the country.

Will increasing rights bring down fares?

An increase in flight availability on popular routes like India-Dubai can lead to lower fares, even with rising demand. Limited capacity and high demand have kept fares on these routes inflated. Indian airlines have ambitious plans to expand their fleets, but it will take time before these changes materialize.

What is the new government likely to do?

The new government is considering increasing foreign flight quotas to destinations like Dubai, Qatar, and Singapore. New Indian airlines are eyeing these lucrative markets, while existing ones are seeking more flight opportunities. Talks have already begun with industry stakeholders, but the impact on Indian carriers remains a topic of debate within the domestic aviation sector.

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