The ministry of external affairs (MEA) has threatened to stop all services of Swiss International Airlines (Swiss) to and from India. As a designated airline of its country, Swiss has allegedly violated the substantial ownership and effective control (SOEC) clause mandated under the bilateral air services agreement between the two countries.
Under the SOEC clause, the government has the right to designate one or more airlines. However, its substantial ownership and effective control should be vested in the party designating the airline (in this case, the Swiss government) or its citizens (the Swiss people).
According to the civil aviation ministry, this clause was violated after German carrier Lufthansa bought a majority equity stake in the airline. A top ministry official confirmed the MEA had written the letter, and said the Swiss government had responded. “They have said the airline is controlled by a trust that has representatives from the country of Switzerland. We are examining this answer”.
The official said the ministry had advised MEA to send a similar communication to Austrian, in which, too, Lufthansa has bought a majority stake. Austrian has not met the SOEC clause either.
While Swiss operates 14 flights a week, Austrian operates 11 flights a week from Delhi and Mumbai. The two are developing new hubs for Indian travellers flying to the US and other European countries. As much as 63 per cent passengers of Swiss and 86 per cent of Austrian fly under the sixth freedom carriage to and from India (they transit from these countries to other foreign destinations).
A Swiss International Airlines spokesperson, responding to the government communication, said: “Bilateral air services agreements are with the regulatory administrations of each country. The terms and conditions set in such agreements are subject to those administrations. Swiss International Airlines Ltd is a stockholder company established under the laws of the Swiss Confederation with its legal domicile in Switzerland. The airline operates under an operating permit and air operator certificate of the Swiss federal office for civil aviation (Foca). Foca has the regulatory oversight authority over the airline. It is a designated Swiss carrier under existing bilateral agreements between Switzerland and third countries, including India, and exercises respective traffic rights.”
The ministry, in its communication with the Swiss government, has contended that under a memorandum of understanding signed between the two countries on June 21, 2010, it was agreed while India would not disrupt the operations of the designated airline of Switzerland if the criterion of ownership control was not met, the allowance would be subject to a final decision.
It has asked the Swiss government to communicate what action it is taking to meet the clause, failing which the airline will no longer be entitled to operate the services agreed. The contentious issue with Lufthansa had come to the fore after Air India said Swiss was allowed to continue operations after it was bought over by Lufthansa only because of the German carrier's expected support to Air India for joining the Star Alliance. Air India’s entry was shelved after the alliance board said the carrier was not ready.