U.S., India open skies agreement to help outsourcing

An open skies agreement between the U.S. and India is expected to lower costs and improve efficiency for Indian outsourcing companies and U.S. companies with offshore software development in India, according to industry sources. The agreement gives U.S. airlines access to more Indian cities.

The open skies agreement will remove current flight availability constraints, as more airlines are likely to establish routes between U.S. and Indian cities, according to Marc Hebert, executive vice president of Sierra Atlantic Inc., a Fremont, California-based provider of outsourced IT services, which has an offshore software development center in Hyderabad in south India.

Currently, traveling to Hyderabad from San Francisco often requires passengers to stop over in Singapore and then travel to Chennai in India, and take a domestic flight to Hyderabad, Hebert said. "A whole day is spent on getting from Singapore to Hyderabad," he added.

A formal open skies agreement between the U.S. and India is expected to be signed this month during a visit to India by U.S. Transportation Secretary Norman Mineta. Mineta announced in January that the U.S. and India had initiated an open skies aviation agreement that will lead to more flights, lower fares and stronger economic ties between the two countries.

The existing aviation agreement between the U.S. and India restricts the number of airlines that can fly between the two countries, cities that can be served and the frequency of service and pricing, according to a statement in January from the U.S. Department of Transportation. Open skies agreements permit unrestricted service by the airlines of each side to, from and beyond the other's territory, without restrictions on how often carriers fly, the kind of aircraft they use and the prices they charge, the statement added.

Sierra Atlantic spends about US$1 million on international travel each year, with about 80 percent of that in travel between India and the U.S., according to Hebert. If the new open skies agreement between the U.S. and India is effective in increasing the supply of flights, fares are also likely to come down by 20 percent, according to Hebert.

Indian software development and services outsourcing companies also expect an improvement in productivity, and quicker response time to customer requirements as a result of the open skies policy. The U.S. is the largest market for Indian software development and services outsourcers. In the fiscal year to March 31, 2004, about 70 percent of the revenues of these companies came from the U.S., according to the National Association of Software and Service Companies in Delhi.

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