New aviation policy frees up the skies

Opening up the skies to greater competition, the government on Wednesday scrapped an almost-decade-old restriction that cramped new airlines from flying international, and introduced a scheme to make air travel more affordable on non-metro routes.

The Cabinet approved the revised Civil Aviation Policy, which does away with the so-called ‘5/20’ rule and liberalises existing players’ choice of international destinations, besides imposing a cess to pay for subsidised flights under a Regional Connectivity Scheme.

The 5/20 rule had stipulated that a carrier must have completed five years of domestic operations and have a fleet of 20 aircraft to be eligible to fly abroad. Now, new airlines, including the likes of Vistara and AirAsia India, can fly international, subject to certain caveats to cater to domestic demand.

“All airlines can commence international operations provided they deploy 20 aircraft or 20 per cent of total capacity (in terms of average number of seats on all departures put together), whichever is higher, for domestic operations,” Aviation Secretary RN Choubey said after the Cabinet meeting.

The move had been expected ever since the NDA government took charge in 2014. While the existing players were opposed to scrapping the 5/20 rule, newer players argued that it inhibited competition in the aviation industry.

Reacting to the news, AirAsia’s Group Chief Executive Officer Tony Fernandes tweeted, “Big day for Indian aviation… Of course I think 20 aircraft is too many…almost an end to vested interests…”

The policy also allows the existing carriers to select international destinations in a more liberal manner. An open skies policy will be implemented on a reciprocal basis for SAARC countries and countries beyond 5,000 km from Delhi. Airlines from such countries will have no restriction on flights to India, and Indian carriers can have as many flights as they want to such countries.

The policy also proposes a Regional Connectivity Scheme to make flying more affordable in Tier II and Tier III cities. It proposes to cap airfares at ₹2,500 per flying hour at unserved airports. The scheme envisages revival of airstrips/airports as no-frills airports at an indicative cost of ₹50-100 crore. For this, it prescribes a cess on domestic routes to subsidise regional connectivity. Choubey said: “In 10 days, the scheme will be put in the public domain.” The scheme will come into effect in the second quarter of 2016-17.

The scheme will be executed only in those States that reduce VAT on aviation turbine fuel to 1 per cent. The scheme suggests slashing landing and parking charges to make flying more affordable from and to these no-frills airports.

Of the cess, which will be borne by passengers to finance Regional Connectivity Fund, Choubey said: “It will be a very small levy”.

Mahesh Sharma, Minister of State for Civil Aviation, said that since this is a demand-driven industry, States will need to come forward and make use of the monetary help under the scheme. As many as 50-80 no-frills airports can be developed under this initiative, he added. The aim is to increase the frequency of flying among passengers. “We want domestic ticketing to grow from eight crore in 2015 to 30 crore by 2022,” Choubey said, adding that it is achievable, given that domestic ticketing had grown 22 per cent last year.

All domestic scheduled airline operators, including helicopter operators, will be free to carry out self-handling at all airports. Hiring of employees through manpower suppliers will not be permitted.

COMMENT NOW