AirAsia India, Vistara's international plans may run into turbulence with new govt policy

New Delhi: The big daddies of Indian aviation industry remain united in opposing any move to remove the 5/20 rule. Jet Airways, IndiGo, SpiceJet and GoAir besides Air India hold firm in their view that new airlines, Vistara and AirAsia India, should also be subject to this rule. The incumbents, under the aegis of Federation of Indian Airlines (FIA), said in a letter to the Ministry of Civil Aviation late this evening that the 5/20 rule need not be abolished since any change in this rule will remove level playing field conditions. Air India is not part of FIA but has been concurring with the view of this lobby group anyway. The ministry has proposed new rules to replace 5/20 rule and sought views from all airlines by Tuesday evening. The 5/20 rule bars domestic airlines from flying anywhere abroad unless they have completed five years of Indian operations and have a fleet of 20 aircraft. It is a rule unique to India and has been responsible for Indian carriers failing to compete with foreign airlines in carrying people to international destinations. No such restrictions are placed by other countries on their respective airlines. After the arrival of two new airlines, Vistara and AirAsia India, the ministry began thinking about removing the obsolete 5/20 rule. But what it proposes to replace the 5/20 with seems not just needlessly complicated, but it also makes a mockery of the entire endeavour of the ministry to ease the environment for airlines to do business in India. [caption id=“attachment_2181955” align=“alignleft” width=“380”] Representational image. [/caption]The ministry’s new proposal links overseas flying rights to increased connectivity to India’s remote regions and also places some restrictions on which international destinations new airlines can fly to initially. The new proposal is a complicated calculation of flying non-lucrative domestic routes, earning flying credits and then using these to seek permission for flying international routes. An abolition of 5/20 would have benefited the two Tata airlines Vistara and AirAsia India. We have already pointed out earlier that the government seems to be protecting the incumbent airlines and at the last meeting of all stakeholders, it quietly inserted a proposal which bars new carriers from international flights of less than six hours initially. This means the lucrative Gulf routes besides Singapore, Hong Kong, Bangkok may be out of the purview of Vistara and AirAsia India initially. When the ministry of civil aviation initially proposed the abolition of the 5/20 rule, it linked overseas flights by new and existing airlines to the number of connections they provide to remote and regional areas. This itself is silly - why should an airline wanting to fly overseas or increase flights overseas be tied down to domestic connectivity? The two issues should have remained separate, as in the past. Then, the ministry proposed a very complicated mechanism to allow airlines overseas flights - a formula based on number of seats being offered to a particular destination (say the North East) and how much of an airline’s total capacity is offered on such routes. The proposal was anyway complicated. It was opposed by existing airlines, all of whom said that since they had to wait five years and expand fleet to 20 aircraft before being allowed to fly overseas, why should new airlines have it any easier? Now, the ministry has introduced further complications by proposing that domestic flying credits (DFCs) which airlines can earn through increased remote area connectivity be based on number of occupied seats on an aircraft instead of total number of seats on such an aircraft. Basically, this makes it harder for both, existing and new airlines to earn these crucial DFCs. So a bad idea to begin with has been made worse. A senior official in the ministry of civil aviation said earlier that new airlines will have to earn double the domestic credits to fly to destinations within six hours. For destinations which require over six hours of flight, they need to earn 300 DFCs while for those less than six hours, they need to earn 600 credits. Not only does this keep lucrative routes out of Vistara and AirAsia’s plans initially, this could also mean the two airlines have to tweak their fleet strategy and buy wide body aircraft to fly to long haul routes in the US, Australia, UK. But the FIA has found fault with this proposal of the ministry too. In its letter sent on Tuesday, it accused the ministry of favouring new airlines by allowing to fly to “lucrative” long haul routes without adequately connecting domestic routes and with minimal fleet strength. A senior ministry official said earlier this week that the 5/20 removal and replacement with new RDG norms is “almost final” and will be sent for inter-ministerial consultations soon. The FIA letter urged the ministry to junk the entire proposal for replacing 5/20 with new norms and rework the Civil Aviation Policy. But from all available indications, the proposal in its present form is likely to be taken up by the Cabinet early next month.