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27 Nov, 2006

EU-India Aviation Summit to Yield Flights Bonanza

India and the European Union last week signed a Joint Declaration to pave the way for more bilateral flights and open up business opportunities for European companies in India’s massive civil aviation infrastructure requirements.

The declaration was signed by the EU’s Vice President and Commissioner for Transport Jacques Barrot and India’s Minister for Civil Aviation Mr. Praful Patel on November 22 at the India-EU Aviation summit in New Delhi, which attracted more than 300 executives of the Indian and the European Union aviation sectors.

According to a EU report, India is one of the world’s fastest growing aviation markets and is of increasing strategic importance to the EU and its aerospace/aviation industry.

The report says that the number of seats available on scheduled non-stop flights between the EU and India has increased from 2.6 million in 1990 to 4.4 million in 2004 (+70%). Even faster growth is projected in future as new traffic rights are allocated.

A total of 17 city pair routes are now operated between India and the EU. New routes have been opened to destinations such as Bangalore, Hyderabad, Amritsar, Chennai and Cochin.

Seven EU carriers fly to India on scheduled routes while two Indian carriers (Air India and Jet Airways) fly to Europe. In addition, two US carriers carry passengers via Europe to India and back. The largest share of the non-stop scheduled traffic between the EU and India is with Germany with 32% of the total traffic followed by the UK (31%), France (18%) and The Netherlands (9%).

In its 2004-2023 Global Market Forecast, Airbus forecast an average annual growth rate of 6.5% in the Western Europe-Indian Sub-continent market over the next two decades.

The new “joint declaration” covers two parts, one covering aeropolitical traffic rights, and the other technical issues.

On aeropolitical issues, a “significant first step” paves the way for the two sides to restore legal certainty to all the bilateral air services agreements between India and EU Member States. A “horizontal agreement” is to be finalised as a matter of priority with the two sides meeting in early 2007 to start formal negotiations.

Twenty-two of the 25 EU Member States have bilateral air services agreements with India (all except the three Baltic states), most of which allow only the designated carriers registered in that particular state to operate on routes to India. Traffic rights allowed under the bilateral agreements are also limited, hence restricting the scope for competition.

As a result of the “open skies” judgments of the European Court of Justice on 5 November 2002, existing bilateral air services agreements based on national designation urgently need to be amended to include clauses permitting designation of any Community air carrier established in a Member State, thus giving all European airlines “non-discriminatory access” to global markets.

As a result, the EU is renegotiating its aviation agreements on a worldwide basis. According to the EU report, more than 250 bilateral agreements have already been made compatible with Community law.

The report says, “India in recent bilateral negotiations with Member States has not been able to immediately accept Community designation, but the two sides have held exploratory talks to see how it can best be managed.”

The report notes, “The provisions of existing bilateral air services relating to the number of airlines that may be designated and any frequency, capacity or other traffic right restrictions will remain unaffected by the proposed amendment.

“While the number of airlines which an EU Member State may consider for designation will increase, the number of airlines which can be designated, provided that they are established, will remain subject to the provisions of existing bilateral Agreements.

“There will be no effect on the balance of air traffic rights, previously agreed between a partner State and an individual EU Member State, and existing bilateral Air Services Agreements will remain in force after amendment.”

Effectively, this means that while the bilateral agreements will give airlines based anywhere in the EU the right to fly to India, the actually exercising of those rights will remain subject to bilateral negotiations.

In the second part of the joint EU-India declaration on technical and technological co-operation, the two sides will prepare a Joint Action Plan “as a matter of priority” in the fields of aviation safety, security, airport infrastructure, air traffic management, environmental policy, economic regulation, training and industrial co-operation.

European companies see golden opportunities to provide equipment that can address the “serious bottlenecks” in the Indian aviation infrastructure in terms of airports and aircrafts available, as well inadequate runway capacity, parking space and terminal capacities.

They also want to invest in Indian airports which, according to the Indian Ministry of Civil Aviation, will require nearly €8bn for expansion and upgrades in the next few years.

The EU has laid the groundwork for this growth by co-financing a “EU-India Civil Aviation Co-operation Project” which started in 2001 and will end this year with a total EU grant of € 18 million in Community funding.

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