Skift Take

Air India has been upgrading its fleet and investing heavily in new planes. An increase in grants under bilateral agreements to Middle East carriers threatens Indian carriers' share in carrying passengers to long-haul destinations, leading to a lower return on investment.

Indian full-service carrier Air India has said its plans to invest in new aircraft will depend on the government’s policy on bilateral agreements and the seat capacity being granted, CEO Campbell Wilson said this week at an aviation event in India. 

Last year, the airline placed an order for 470 new aircraft with Boeing and Airbus. It is also upgrading its fleet, set to retrofit more than 100 planes, of which 40 are wide-body aircraft. It has also ordered around 25,000 seats as part of its fleet revamp, investing $400 million in this upgrade.

Wilson was quoted as saying, “Indian carriers recently ordered more than 1,000 aircraft. We are committing to that on the basis that there would be an economic return to that investment, which, if you add it all, is well over $100 billion.” 

However, if more bilateral rights are granted to hubs in other countries, it would impact Indian airlines’ ability to fill seats on those aircraft, Wilson said.

“If the rug is pulled from under us, if we can’t fill the aircraft, we will not take them,” he said, referring to taking wide-body aircraft.

He further stated that granting more bilateral rights would feed the economies of those countries instead of India’s as they would take traffic from India and transfer about 80-90% of it to other parts of the world.

Call for Increased Bilateral Rights

Carriers in the Middle East such as Emirates and Qatar Airways have been seeking grants of more rights so that they can operate an increased number of flights to and from India. Apart from this, Singapore, Indonesia, Malaysia, and Turkey are also seeking more flying rights to and from India. 

Earlier this week, Emirates President Tim Clark said that India is restricting its access in order to give time to Air India and the Tata group amid its merger with Vistara. 

“India is clearly protecting the merger of Air India and Vistara. I know from years of experience that protecting your national carriers to the detriment of the economy of the particular country is not such a smart move,” he said.

This is leading to the country compromising the strength of its economy by allowing fewer choices to air passengers on international routes. 

In March this year, Clark urged India to sign an open skies accord with the United Arab Emirates to allow airlines in the two countries greater access to each other’s market, according to a report by Bloomberg.

What Other Carriers Say

Budget airline SpiceJet too agrees that the focus needs to be on development of hubs within India so that all domestic carriers can benefit. 

In an earlier interview with Skift, IndiGo CEO Pieter Elbers said that the open skies agreement between the U.S. and Europe took years to be established. “Both these markets had grown to a certain stage and airlines on both sides were ready to take the next step in development. So, when open skies was announced, it was helpful to start creating stronger alliances and joint ventures,” he said. 

This would evolve over time for India depending on the time and markets, he said. “In general, one would try to create a regulatory framework serving the needs of the customers and the airlines.”

He also said that if an open skies agreement offers opportunities for both sides, it would make sense to take it. “But when that’s not so, you’d probably need a more tailor made and fine-tuned approach.”

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Tags: air india, airline, airline news, airline operations, airlines, asia monthly, aviation, aviation industry, aviation news, campbell wilson, india, india travel, indian airlines, international air traffic, open skies, Open Skies agreements

Photo credit: Last year, the airline placed an order for 470 new aircraft with Boeing and Airbus. (Image: Air India CEO Campbell Wilson at Skift India Summit 2024) Skift

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