The revised India-Vietnam air services agreement replaces frequency-based limits with seat capacity, giving Indian airlines greater room to expand while making future capacity more predictable
The Ministry of Civil Aviation posted on its social media platforms about the signing of the revised Bilateral Air Services Agreement (BASA) between Vietnam and India. The information, first shared by the Ministry of Civil Aviation on [social media], was subsequently also shared by its Vietnamese counterparts.
One of the key changes announced was the conversion of frequencies under the existing BASA into seats under the revised agreement. It was subsequently reported that the quantum of the increase would be 16,000 seats.
The Indian government has, over the years, removed details of BASAs from the public domain, citing the need for confidentiality. However, past reports have indicated that the India-Vietnam BASA was capped at 42 flights a week to metro cities, with open skies to 18 points in India, a standard feature of BASAs with Asean countries. As of today, all 42 flights to the metros have been exhausted by Vietnamese carriers.
With the shift from frequencies to seats, the Ministry has done an excellent job of protecting Indian carriers, especially when Air India is the only Indian carrier operating widebody aircraft.
Frequencies vs seats
Bilateral Air Services Agreements can be complex. At one end of the spectrum are open-skies agreements that allow unlimited frequencies between two countries. At the other end are agreements constrained not just by frequencies or seats, but by both, along with restrictions on where those seats or frequencies can be deployed and how many can be operated.
More from BusinessExamples include the agreement between India and the UK, which has a separate limit on flights to London Heathrow, and the India-Canada agreement, which provides for open skies but restricts the cities that can be served.
Typically, the point of call (PoC) is specified along with a cap on seats, frequencies or both. A good example is the India-UAE arrangement, under which weekly seats are capped, as are the points of call. However, all those seats cannot be deployed to a single city, as there can also be a cap on the number of seats to a particular destination under the BASA.
When a BASA mandates frequencies, airlines operating widebody aircraft have an advantage over those using narrowbody aircraft, since they can deploy more seats with the same number of frequencies.
This is exactly what happened between India and Vietnam. From having no non-stop connectivity until the end of 2019, the market saw a sudden spurt in connectivity. Both VietJet and Vietnam Airlines operated widebody aircraft on certain routes to India during peak travel periods, while Indian carriers IndiGo and Air India deployed narrowbody aircraft.
The shift from frequencies to seats would increase competition, but it would no longer be as variable as it was in the past. Instead, capacity would be more predictable and known, allowing Indian carriers to plan their route networks accordingly.
IndiGo has consolidated its operations at Hanoi after pulling out of Ho Chi Minh City, while Air India has launched flights to Hanoi, giving it a presence in both major points in Vietnam. The increased seat allocation could enable IndiGo to add flights to Ho Chi Minh City. It could also allow Air India to offer services from Mumbai, its second hub, in addition to its existing operations from Delhi. The increased capacity could also allow Akasa Air to increase its frequency to daily from its current four-times-a-week operation.
Not the first time
This is not the first time such a change has happened. India’s BASA with Indonesia was also renegotiated from frequencies to seats.
In the case of Indonesia, the market had seen multiple frequencies being added by Indonesian carriers to India in the pre-Covid period, while Indian carriers were completely absent. As the market evolved, none of the Indonesian carriers remained, while IndiGo and Vistara entered the market.
Today, IndiGo operates to Bali from Bengaluru, Delhi and Mumbai, while Air India operates from Delhi. IndiGo also operates to Jakarta from Mumbai.
Interestingly, when Indonesian carriers operated to India, two of the three carriers, Garuda Indonesia and Indonesia AirAsia X, operated widebody aircraft on the India routes.
Tail note
Indian carriers have been slow to expand to Vietnam, even as Vietnamese carriers have gained from the market. Air India’s flights to Vietnam are timed to offer connectivity to Europe via Delhi, while IndiGo has consolidated its operations at Hanoi and remained a marginal player for most of the period, despite being the first Indian entrant into the market.
India has been very cautious about revising bilateral air rights over the last decade. Capacity increases have come in strategic markets, and the focus appears to be on protecting Indian carriers while continuing to remain accommodative towards the expansion of foreign carriers.
