India, United Kingdom Sign Air Agreement

India and the United Kingdom on Sept. 17 announced they negotiated a new bilateral agreement that more than doubles weekly flights from 19 to 42—the first significant increase in air services in nearly two decades between the two countries. With each country given 21 weekly flights, a war for rights could brew between airlines clamoring to fly to and from India, a hotbed of economic activity.

Outbound travel from India has been growing at 8 percent annually since 1999. The booming software sector alone exports 80,000 professionals every year to the United States, and European carriers, including British Airways and Lufthansa, carry a large amount of through traffic. The agreement substantially will increase direct flights, facilitate tourism, trade and investment flows, officials said.

British carriers also now will be permitted to operate directly to the southern cities of Hyderabad, Bangalore and Kochi, in addition to Delhi, Mumbai (Bombay), Chennai (Madras) and Kolkata (Calcutta), to which flights already are allowed.

BA has been operating from the United Kingdom to India since 1929. "We have said for a long time that the Indian market is underserved," said general manager of South Asia Andy Stern. "It will offer our passengers greater flexibility to fly direct to and from London and will further improve business links between the U.K. and India. We will now work with the U.K. government to develop our plans for expansion in a phased manner."

Meanwhile, Virgin Atlantic has been trying to break into the Indian market beyond its thrice-weekly services to Delhi through a codeshare agreement with Air India, which will come to a natural end as Air India uses the new agreement to increase its own frequencies. Virgin said it plans to operate at least one daily flight between London and both Delhi and Mumbai.

"As BA already operates 19 services to and from India—all of the U.K.'s current allocation—we would expect that Virgin Atlantic would be awarded the rights to operate the majority of these new services," Virgin chairman Richard Branson said. "For a long time, India has needed the benefits that additional air services bring. Half of the people flying from London to Delhi and Mumbai each year are forced to do so via third countries. This can extend their journey times by up to five hours."

Another competitor to Virgin and British Airways could be BMI, which is keen to expand outside of Europe.

In India, government-owned Air India has a monopoly on international flights, though private carriers could benefit if the government allows such domestic private airlines as Jet Airways and Air Sahara to fly west. Sources said London could emerge as the first destination in Europe following the recent bilateral agreement with the United Kingdom.