5/20: Vistara and AirAsia not to gain immediately

The controversial 5/20 rule required an airline to have five years of domestic operations and 20 aircraft in its fleet to be able to fly abroad

In spite of the government's attempts to open up India's skies by tinkering with the 5/20 rule it will not allow new carriers to fly abroad immediately. This experts feel is due to the scale of investment, pilots shortage and slots constraints in airports.

The government has decided to scrap the five-year requirement but has decided an airline must deploy 20 aircraft or 20 per cent of its capacity, whichever is higher, on local routes if it wishes to fly abroad. "This is to ensure new airlines should serve remote parts of the country," an official said.

"For a start-up airline, it will take at least 3-4 years to ramp up to 20 aircraft. So effectively the 5/20 Rule is being replaced by a 3/20 Rule. Ideally the illogical, discriminatory and anti-competition 5/20 rule should have been long abolished.," said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.

Vistara and Air Asia the two new Indian carriers which will be benefitted from the relaxation of the rule said that they will keep lobbying for complete abolition of the controversial rule.

 

Vistara Chief Executive Officer Phee Teik Yeoh said, "We would ideally want an unconditional removal of the 5/20 rule." Amar Abrol, chief executive officer, AirAsia, said the airline would continue to lobby for complete abolition of the rule. Older airlines like IndiGo, SpiceJet, GoAir and Jet Airways want the original regulations to be retained. Executives of these airlines are miffed with the ministry's refusal to allow them to present their views on the matter.

"We have kept certain criteria to protect Indian carriers," said Civil Aviation Minister Ashok Gajapathi Raju.

Vistara and AirAsia maintain the 5/20 rule stifles the prospects of new airlines. In February, Tata Group Chairman Emeritus Ratan Tata had accused older airlines of using "monopolistic pressures" to retain preferential treatment under the 5/20 rule. Vistara and AirAsia have 11 and six aircraft, respectively. Experts feel the new airlines will not find it easy to meet the condition of a 20-aircraft fleet immediately. "If 5 goes out and 20 remains, it wouldn't be that helpful really as getting to that scale takes a lot of investment, infrastructure, and licensed professionals such as pilots and engineers. SpiceJet and IndiGo had 20 aircraft when they became five years old," said aviation consultant Anurag Jain.