18 September 2011

India's Comptroller and Auditor General Examines Air India

The Comptroller and Auditor General of India has recently released a Performance Audit of Civil Aviation in India. The audit commenced in September 2009 and the report was tabled in Parliament on 8 September 2011.

For me the most interesting part of the report was Chapter 5 which looks at India's bilateral air services arrangements during a period of fundamental change in India's international air transport policy. Of particular concern to the auditors was the extent of sixth freedom carriage by many of the foreign airlines serving India, notably from small city states. Sixth freedom carriage in this context involves a foreign international airline is carrying traffic between India and a third country via its home country. Seeking to limit such carriage is a traditional approach to air rights exchanges dating back to the 1946 Bermuda 1 arrangements between the UK and the USA (see previous post).

What I had not expected to see was the extent to which European carriers serving India have as high a proportion of sixth freedom carriage as airlines from the Gulf. An 18 September 2011 article in the Business Standard reports on the data.

The auditors also focus in particular on the failure of the Indian Ministry of Civil Aviation to secure Dubai's agreement to a "change of gauge" provision. If this was considered important surely the Indian negotiators would have made it the price for agreeing to capacity increases for Emirates?

A 10 September 2011 report in the Indian Express covers the reaction to the report from the Ministry of Civil Aviation.

It would seem that India has no intention of seeking to wind back existing air services arrangements but one has to wonder what impact this report will have on future negotiations, particularly as there was a change of Civil Aviation Minister in India from Praful Patel to Vyalar Ravi in January 2011.

Air India recently had its application to join the Star alliance suspended (see 31 July 2011 media release) and there is now some doubt about its large order for new Boeing aircraft, including the B787.

In the 1960s Air India was one of the great airlines of the world with its wonderful Maharaja character. However, past failures to agree to replace older airliners has left the airline with a relatively old fleet.

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