Cabinet likely to scrap 5/20 rule on Wednesday

Note to scrap the rule already sent to civil aviation ministry

The government is expected to abolish restrictions on domestic airlines to have a minimum fleet of 20 aircraft and five years of operational experience (known as the 5/20 rule) to launch international services.

Sources in the government say that a cabinet note to scrap the 5/20 rule has already been sent by the civil aviation ministry. It is expected to be taken up and cleared in the cabinet meeting on Wednesday.

It would be the last policy change to be effected by the civil aviation ministry before elections are declared later this week.

Under the existing rules, the Indian carriers wanting to fly on international routes need to have a fleet ofat least 20 aircraft and must have operated for at least five years. The move has already come under criticism with Federation of Indian Airlines (FIA) writing to aviation secretary Ashok Lavasa in January :" Considering that all airlines have in the process of fulfilling their obligation incurred substantial losses through domestic operations, it would beunacceptable for the government to now consider revising the policy by theremoval of the 5/20 rule in order to benefit the international airlines' joint ventures which are under consideration and approval.

"Currently, all existing Indian airlines with the exception of GoAir meet the requirements necessary to flyabroad. Wadias-promoted GoAir too has a fleet of 18 aircraft and would be adding another two by the middle of this year, which would enable it to commence international operations.

The move to abolish the 5/20 rule will benefit Tata-SIA and AirAsia, who are both expected to start operations later this year.

A senior government official saidthat the purpose of the government in effecting the policy change is to put inplace an ?enabling structure for the industry in future?.Postthe abolition of the 5/20 rule, airlines would require permission from theDirectorate General of Civil Aviation (DGCA) to start international flights.

The DGCA would give permission depending on the airline's safety record and financial capability. It was in January this year that Civil Aviation Minister Ajit Singh said his ministry was in the process of framing a Cabinet note to seek government approval for  scrapping the regulation within a month.

"The5/20 norm for flying international will be completely abolished. We are preparing a Cabinet note on this. Since everything needs to be completed before February-end (when the code of conduct for the general elections comes intoforce), we will do it before that." Singh had said.

This proposal has already been endorsed by Finance Minister P Chidambaram, who had said in Washington in October 2013 that he would support the move if the civil aviation ministry moved a Cabinet note to amend therules. "5/20 is an anachronistic, discriminatory and anti-competition policy. This rule works against the interest of Indian carriers. Today, a one day old airline registered abroad with a one-aircraft fleet can fly into India, no holdsbarred. It's removal by MoCA will add to the attractiveness of the Indian aviation sector" said Amber Dubey, Partner and Head - Aerospace and Defense at global consultancy KPMG.

Interestingly, the management of both airline ventures announced by Tata Sons last year hasevinced interest in starting international operations from India. Tata Sons,which tied up with Singapore Airline (SIA) in September last year to launch afull-service carrier in India, with an initial investment of $100 million, hassaid it will want to operate international flights from India if it gets a government approval.Tony Fernandes, the chief of AirAsia, another Tata Sons joint ventures, has also been vocal in his criticism of the 5/20 rule.

In a media briefing in New Delhiin July last year, Fernandes had said the rule made no sense and that India was the only country where such a rule existed. "A one-plane operation like AirAsiaMalaysia can fly into India, but an airline with (less than) 20 planes cannotfly out. That's a disadvantage to the (Indian) airline."

AirAsia has evinced interest in developing India as a hub for international travel. "India is strategically located. And we can operate flights from the southern part of the country, within a four-hour circle, to destinations in Africa and on the Gulf routes like Doha, Nairobi, Maldives, Karachi, Bangladesh and some Chinese cities. It is bizarre that the government has a regulation in place,which allows (only) airlines with five years of operations and a fleet of 20 aircraft to fly international. It does not make sense. Probably, Naresh (JetAirways Chairman Goyal) or someone put it down." Fernandes had said.

In a recent report, aviation advisory firm Centre forAsia pacific Aviation (Capa) described the 5/20 rule as "the most damaging and discriminatory". According to Capa, the financial health of Indian airlineswould have been much stronger if they had been allowed to commenceinternational operations earlier. It would have improved domestic carriers aircraft utilisation and permitted them to compete aggressively with foreignairlines, which over the past few years have snared away international traffic.