 "Domestic airlines to add 50 planes in FY17")
Amid hectic lobbying, the Cabinet on Wednesday gave its approval for partial abolition of the 5/20 rule, which will enable new carriers like Vistara and Air Asia to start international operations sooner.
According to the Civil Aviation Policy, released by the ministry on Wednesday, the government has decided to scrap a requirement that mandated arlines to have five years of domestic oeprations to be eligible to fly overseas. However, an airline will have to allocate 20 aircraft or 20% of their total fleet of aircraft, whichever is higher, to the domestic sector if they wish to fly overseas. This effectively means a carrier must have a minimum 20 aircraft in its domestic fleet.
“This is to ensure that any new airlines starting business in India should essentially serve the remote parts of the country,” a ministry official said.
In an earlier interview to Business Standard, Mahesh Sharma, Minister of State for Civil Aviation, had hinted at this proposal. “In place of 5/20, we can make it 3/10 or 3/12. We have also looked at options like 0/10 and 0/20,” he had said.
While proposing to liberalise India’s skies, the government had earlier kept proposed three different options to replace the rule: continuing the present norms, complete abolition from immediate effect and a credit-based system to replace it. At present, an airline requires five years of operations and 20 aircrafts in its fleet to go on international routes.
Since then, the aviation industry has been sharply divided with older airlines such as IndiGo, Spice Jet, Go Air and Jet Airways crying foul over the decision to abolish the 5/20 rule. Top executives of IndiGo, Jet and GoAir and Jet Airways had repeatedly said that they were unhappy with the ministry's continuing refusal to allow them to present their views about an important policy.
Rahul Bhatia, chairman of Federation of Indian Airlines (FIA), had told Business Standard that a legal recourse would be a possible option. “We don't want legal battles but if the ministry is not ready to listen to us, what is the option? We just want a level-playing field," he said.
Similarly, Vistara and Air Asia had repeatedly said that the 5/20 rule, in its present form, hurts the interest of the aviation sector as it stifles the growth prospects of any new airline.
In February, Tata Group Chairman Emeritus Ratan Tata had accused older carriers of lobbying and using “monopolistic pressures” to retain preferential treatment under the 5/20 rule which sparked a war of words between the older and new airlines.
Currently, Vistara and Air Asia have 11 and six aircrafts, respectively.
However, experts feel that it will not be easy to meet the condition of 20 aircraft immediately. “There's an extreme shortage of experienced commanders in India. Given the likely fleet expansion by Indian carriers and the likely attrition, India needs around 1,000-1,200 commanders over the next 4-5 years. For a start-up airline, it will take at least 3-4 years to ramp up to 20 aircraft.
