National carrier Air India is exploring options at signing a codeshare agreement with LATAM Airlines Group, South America's largest airline conglomerate, to connect India to South American hubs like Lima and Santiago from Sydney, while destinations like Rio De Janerio and Sao Paulo could be connected via Air India's European hubs of London and Paris.
The agreement, if finalised, will be Air India's first codeshare agreement with an airline part of the Oneworld Alliance, which the airline is considering as a second option if Star Alliance denies the national carrier a membership. Till now out of 13 codeshare partners of Air India, 9 belong to Star Alliance.
Codeshare agreement is a co-operative agreement between two airlines wherein they sell tickets for seats on the same flight under their individual flight codes. Such agreements are signed to expand networks while saving on operating costs.
According to people close to the development, the agreement could be signed by the end of this month. Later this month, India's external affairs minister Salman Khurshid and vice-president Hamid Ansari are visiting the region and the issue of air connectivity will be the top of the agenda. “The government is keen for Air India to connect India to the region,” said one of the persons tracking the development.
However, an Air India official said that while operating direct flights may not be feasible, a codeshare between the two airlines would be the more cost effective solution.
Trade between India and Latin America is likely to double in the next five years from the current level of $46 billion, with direct shipping, air connectivity, visa on arrival and free trade agreements as some of the steps being taken to boost trade with the region.
“At the rate at which it is growing in about five years, we should be able to double it,” Dammu Ravi, joint secretary (Latin America and Caribbean) in the ministry of external affairs told FE.
So far, the Indian companies have invested $16 billion in the region, while more companies are exploring opportunities in trade, investment and mining. Today, 60% of the current bilateral trade is in oil, hydrocarbons, minerals and agriculture commodities but it is now moving into niche area like pharmaceutical and IT services.
While transportation costs and the lack of familiarity with each other's markets were previously cited as the big impediments, government is planning to improve connectivity to the region, and a direct flight is expected to be launched next year. Currently, while India has bilateral air services agreements with Brazil, Chile and Argentina, there are no direct flights between India and Latin America.
Connectivity is important for doing business with the region. While airlines are looking for code sharing with our national airlines, it is important that Air India should be flying there, Ravi said.
“Indian airlines (read Air India) can perhaps have direct connection to Panama, where we have large Indian community," he said .