No clause in pact violated, Swiss airlines to India

Switzerland has responded to a move by the Indian government to stop all services of Swiss International Airlines (Swiss) to and from India, saying that the airlines, held by Air Trust, is incorporated under the laws of of the Western European country and run mostly by its own nationals.

India had threatened to stop Swiss, which, as the designated airline of that country, 'violated' a vital clause called the substantial ownership and effective control, 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).

In the case of Swiss, a majority stake is with Lufthansa.

The Swiss aviation authorities have contended that Swiss met all the ownership requirement of the bilateral pact.

They say they are satisfied with the present structure of the Swiss management and the board of directors, which guarantee that effective control of the airlines is mainly with nationals of Switzerland.

Also, 100 per cent of the shares of Swiss since July 1, 2007, are -- and remain -- to be directly owned by a Air Trust.

India has, for the past four years, accepted the ownership and control of Swiss, they point out, adding it continues to be so on Thursday.

A Swiss International Airlines spokesperson said the bilateral air services agreements were in accordance with the regulatory administrations

of each country.

"The terms and conditions set in such agreements are subject to those administrations," he told Business Standard.

"Swiss International Airlines Ltd is a stockholder company established under the laws of the Swiss Confederation with its legal domicile in Switzerland."

The airline, he said, operates under an operating permit and air operator certificate of the Swiss Foca (Federal Office for Civil Aviation). 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." Business Standard sent a questionnaire to Foca, but that has yet to elicite a response.

The ministry, in its communication with the Swiss government, has contended that 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 about the action it is taking to meet the clause, failing which the airline will no longer be entitled to operate the services.

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.