Lufthansa subsidaries face threat to Indian traffic rights

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India's government is reportedly threatening to withdraw traffic rights for Austrian Airlines and Swiss International Air Lines to pressurise the carriers' parent Lufthansa into granting Air India access to the Star Alliance partnership.

According to Indian news website Firstpost, the aviation ministry in New Delhi has raised questions about the legitimacy of Austrian and Swiss operating flights to India, arguing that the two Alpine airlines are violating company ownership rules set down in bilateral agreements with Austria and Switzerland. These stipulate that substantial ownership and effective control of any airline operating to India must lie with the government of the carrier's base country or its citizens.

Austrian and Swiss became wholly owned subsidiaries of Lufthansa when the German group acquired them in 2009 and 2007, respectively.

Firstpost's report suggests that the control issue has been raised only now - Austrian and Swiss having operated flights to India under Lufthansa ownership for a number of years - as an instrument to facilitate Air India's accession to the Star Alliance.

The Indian flag carrier tried to join the partnership in 2011. During negotiations, Lufthansa was offered expanded traffic rights as an incentive for the Star Alliance founding member to help Air India join. But the state-owned carrier was denied membership in September 2011.

Lufthansa has confirmed the Firstpost report, and says that both Austrian and Swiss operate in accordance with the Indian bilateral agreements as airline units fully registered in their respective base countries.

India's aviation ministry has declined to comment.