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AIR INDIA BLAMES BI-LATERAL AGREEMENTS WITH FOREIGN CARRIERS FOR ITS MISFORTUNES

Dino D'Amore
By Dino D'Amore Aug 11, 2011 2 mins read
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AIR INDIA BLAMES BI-LATERAL AGREEMENTS WITH FOREIGN CARRIERS FOR ITS MISFORTUNES

It has been reported that Air India has defaulted on interest payments and has been forced to delay salaries. Indian newspaper Mint, reports that the airline has blamed its current financial difficulties on the government’s liberal grant of traffic rights to foreign airlines between January 2004 and March 2010, which was a period when Indian airlines could not take advantage in the increase in capacity entitlements.

Air India is claimed to have written in a note to the government: “Since the foreign carriers operate much more than the Indian carriers and also pre-empt the Indian carriers from expanding in various markets, the utilization of entitlements by the Indian carriers appears to be low,” reports Mint.

Air India had debt of Rs.42, 570 crore and accumulated losses of Rs.22, 000 crore as of 31 March. The carrier has asked for Rs.6, 600 crore as an immediate equity infusion from the government to stay afloat. It wants a total equity support of Rs.42, 920 crore till fiscal 2021.

Industry commentators have rightly reaction with dismay to the accusation made by Air India, as it indicates the airline may not have a real understand of the intrinsic weaknesses of its business. Liberal traffic rights may have had some effect on the airline’s fortunes but its merger with Indian Airlines and its large aircraft purchase strategy was perhaps more to blame.

Air India has also placed blame on its domestic competitors Jet Airways and Kingfisher Airlines for failing to open up new markets. A lack of equipment, Air India, claims was the reason behind it not being able to launch new routes. It has recommended the government withdraw access to some destinations from foreign carriers, a freeze on bilaterals for five years and not allowing Indian private carriers to operate on sectors served by Air India. The latter demand is more likely to be in retaliation for being barred entry into Star Alliance last week.

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