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Govt should avoid being over prescriptive, let market forces prevail: Vistara CEO

New Delhi: As the Government dithers over abolishing the archaic 5/20 rule which puts Indian airlines at a distinct disadvantage over their foreign counterparts, here is one of the more sensible reactions by a stakeholder.

Vistara CEO Phee Teik Yeoh says removing 5/20 is a step in the right direction and even though what 5/20 may be replaced with is complicated, waiting time for new airlines still stands shortened to two to three years from five years earlier.

The 5/20 rule bars Indian airlines from flying overseas unless they first complete five years of domestic flying and have a fleet of 20 aircraft. This rule is now up for review but the airline industry is divided right down the middle over its removal. Incumbents like IndiGo, Jet AIrways, SpiceJet and Air India say the rule should stay whereas new airlines Vistara and AirAsia India obviously want it removed.

The Ministry of Civil Aviation has proposed a complicated formula replacing 5/20, where domestic flying credits would still be needed for new airlines to fly overseas. This is what Yeoh is referring to when he says time needed to become eligible for flying abroad shortened from the earlier five years but through a complicated process.

 Govt should avoid being over prescriptive, let market forces prevail: Vistara CEO

A Vistara aircraft.

The domestic credit system has another pitfall: according to the proposal, new airlines can fly to long haul destinations beyond six hours from India once they accumulate 300 DFCs. They will still be barred from flying to nearby populous destinations like Hong Kong, Dubai, Singapore etc unless they accumulated 600 such credits.

On this added complication about within and beyond six hour flights, Phee Teik Yeoh says "If you were to look at the details, the scheme that has been proposed and being debated is a bit more complicated than what we had hoped for. But the waiting time has been shortened. Once can achieve the prerequisite credits in two to three years".

To a question on the distinction being proposed for within six hours and beyond six hour international flights, Yeoh says "Government should let market force prevail and avoid being over prescriptive. For any hub to grow, we need a combination of short haul and long haul so the formula (replacing 5/20) should be simple. Let airlines decide how and where to fly and then let passengers decide which airline to fly with".

According to sources, the minister of state for civil aviation Mahesh Sharma has now asked for a review of the proposal which was floated earlier to replace 5/20. An airline source said he may be examining a suggestion to tweak the 300 and 600 DFC criteria for new airlines to 200 and 300 DFCs respectively. This means new airlines may have to accumulate 200 DFCs before being allowed to fly to over  six hour overseas destinations instead of 300 DFCs proposed earlier. And they may be asked to accumulate only 300 DFCs to become eligible for all overseas flights instead of the proposed 600 DFCs.

That India has put its own airlines at a huge disadvantage over foreign carriers for years with the 5/20 restriction is obvious. Take the case of  the airlines from the Gulf - Emirates, Etihad, Qatar - which together fly more people to and from India than India's own airlines. In reply to a written question last week, Minister Sharma acknowledged that Gulf airlines together carry more Indians than our own airlines. While answering another question, he replied in the affirmative when asked whether foreign carriers offer 4,32,456 seats a week for Indian passengers compared to 2,42,365 seats offered by Indian carriers. In other words, Indian airlines offer roughly half the seats that deep pocketed foreign airlines are able to offer for Indians wanting to fly abroad.

Minister Sharma also noted that in the winter schedule 2014-15, Indian carriers were not using bilateral entitlements with about 80 out of 109 countries falling under bilateral tie-ups. There are many reasons why Indian airlines continue to suffer even as Gulf carriers rake in the moolah. A most obvious one is continuing 5/20 restrictions. Airlines from other countries do not have to operate under these restrictions. Minister Sharma said the government is in the process of reviewing eligibility criterion of scheduled carriers for operation on international rules in consultation with stakeholders. "The same is on formative stage and is not possible to give any details at this stage".

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Updated Date: May 04, 2015 13:22:47 IST