Skies may not open up for Asean nations

NEW DELHI: The Proposed open skies agreement with Asean countries, scheduled to kick in from ’10, seems to be heading for turbulence even before take-off. The civil aviation ministry has opposed the proposal fearing that such a move could seriously jeopardise the Indian aviation sector by intensifying competition from mega-carriers like Singapore Airlines, Malaysia Airlines and Thai Airways.

“Open skies pact with Asean would result in excessive capacity deployment by these mega-carriers. This would seriously threaten the existence of Indian carriers, which are already incurring huge losses,” highly-placed civil aviation ministry sources said, citing a ministry note on the subject.

Indian carriers are estimated to make losses to the tune of Rs 2,200 crore this year. An open skies regime, which allows unlimited number of airlines to operate limitless flights to any destination in the region, would lead to aviation industry facing further losses.

“Indian private carriers have only recently been allowed to operate internationally. The government feels that they should be given considerable time to stabilise their before opening them to foreign competition,” ministry has said in an internal note on the issue, a copy of which is with ET.

Even the state-owned carriers - Air India and Indian - will be protected from competition from mega carriers of the Asean. According to government sources, India will consider opening up its aviation sector after the expansion plans of these two airlines, which is expected to be over by 2012-13. The government has approved the induction of new aircraft by the national carriers involving an investment of about Rs 45,000 crore.

The move opposing the open skies regime comes close on the heels of civil aviation minister Praful Patel’s recent decision to curb competition in the industry by slowing the process of permitting new carriers to start operations.

Another reason advanced by ministry against such a regime is considerable excess capacity - about 40-80% - which already exists between Indian an Asean routes. While potential of air traffic is significant between India and Asean nations, presence of excess capacity has also lead the civil aviation ministry to oppose the open skies policy, sources said.

The ministry notes that most Asean countries guard their own interest zealously, while granting concessions to Indian carriers through liberalised traffic rights. Civil aviation ministry will also tread cautiously on the path of a liberal regime, sources said.

“A calibrated approach towards liberalisation of capacity entitlements and traffic rights with Asean would be preferred over an open skies arrangement,” the ministry has said. Asean consists of ten countries including Singapore, Thailand, Indonesia, Malaysia and Philippines.