Are 'Flying Abroad' Restrictions Going Away Soon?

It is not a surprise that the national carrier Air India has virtually taken a U-turn on its earlier position of opposing any changes to the 5/20 rules, a stand taken by airlines like Jet Airways, IndiGo, SpiceJet and Go Air. After all, the civil aviation minister and his deputy - Ashok Gajapathy Raju and Mahesh Sharma - have often been quoted as saying that in their personal opinion, the government should do away with the 5/20 rule that pertains to a precedent where domestic carriers are not allowed to fly international routes unless they fly within India for five years and have a fleet of at least 20 aircrafts.

News reports suggest that Air India is of the view that national interest should be the criteria for the government when it decides on either retaining or scrapping the rule to allow Indian carriers to fly overseas. Which means, the national carrier is not opposed to scrapping the rule as was the case till very recently.

This is important because the Union Cabinet is set to deliberate and firm up a national aviation policy soon which includes a decision on whether to carry on the 5/20 rules, scrap it completely so as to allow new entrants like Vistara and Air Asia India to fly abroad or modify the same.

Privately, Air India insiders say they won't oppose if the government decides to scrap the 5/20 rule. Those who have been opposing any changes to the current 5/20 rules include Jet Airways, SpiceJet, IndiGo and Go Air. Lifting restrictions which means more competition from new and well-funded entrants like Vistara and Air Asia India at least on the short-haul international destinations across West and South-East Asia.

U-Turn
Air India’s latest stand on the issue, according to reports, has come under the new Chairman and Managing Director Ashwani Lohani who took over the charge in September from Rohit Nandan. Air India under Nandan had taken the position that status quo should be maintained on the matter. In fact, Air India had opposed any tweaking of the norm on the ground that it would “sound death knell” for the national carrier.

“The sudden withdrawal of the protection of 5/20 rule, might be the proverbial last nail in the national carrier’s coffin without bringing any significant benefit to the nation…In this background, Air India would recommend that the Government while rationalizing the 5/20 rule may adopt a pragmatic, simple but cautious policy, based on a duel criteria of safety and extent of domestic operations,” former Air India CMD Rohit Nandan had written to the Ministry in January last year.

However, government sources said that right from the minister to the PMO are not in favour of any restrictive policies. "There may be some riders that could come with the lifting of 5/20 rules. But with Air India chosing to take a neutral position, the hands of the government will be strengthened on this issue," said a government official on conditions of anonymity.

Expected Beneficiaries
Doing away the 5/20 rule is expected to benefits the likes of Vistara and Air Asia India which are less than 20-month into their operations and have less than half the mandatory fleet size of 20 aircrafts. Vistara commenced operations on 9th January 2015. Currently, Vistara has a fleet size of nine aircrafts. It was founded in 2013 as a joint venture between Tata Sons and Singapore Airlines. Its fleet consists of Airbus A320-200 aircraft which is also used by rival Air Asia India, IndiGo

On November 30, 2015, Phee Teik Yeoh, CEO, Vistara said, “We are delighted to announce the arrival of our ninth aircraft. The new aircraft will allow us to further enhance our capacity on our key routes and allow many more customers to fly a new feeling with Vistara. With this addition, our fleet induction for the year is complete. However, there are many other interesting announcements in the pipeline timed with our anniversary celebrations that will further make our value proposition attractive for our esteemed customers.

AirAsia India, an Indo-Malaysian low cost carrier is a joint venture with Air Asia Berhad holding 49 per cent of the airline, Tata Sons holding 40.06 per cent and Telestra Tradeplace having the remaining 10 per cent in the airline. With a fleet size of six aircrafts currently, it commenced operations on 12th June 2014.

In Opposition
Federation of Indian Airlines (FIA) have opposed any change. FIA comprises four domestic airlines–Jet Airways, IndiGo, SpiceJet and GoAir.

GoAir, a Mumbai-based low cost carrier promoted by the Wadia Group commenced operations in November 2005 using Airbus A320 aircrafts. It has waited for 10 years patiently adding aircrafts and currently is just one short of complying with the rule of 20 fleet size to fly abroad.

Jet Airways, the oldest full-service private operator has completed 23 years of operations. Currently with a fleet size of 116 aircrafts, it flies to 22 international destinations across 19 countries located in Asia, Europe and North America. For its Short-haul destinations, Jet Airways uses Boeing 737 Next Generation. ATR 72-500s are used only on domestic regional routes, while long-haul routes are served using its Airbus A330-200, Airbus A330-300 and Boeing 777-300ER aircraft.

SpiceJet with a fleet size of 34 aircrafts flies to nine international destinations. The airline flies Boeing 737-800 and −900ERs nd Bombardier Dash 8 Q400s.

Both Jet and SpiceJet have been posting profits in the past few quarters showing signs of recovery after facing turbulent financial conditions.

IndiGo, the largest airline in India in terms of passengers flown with market share of 36.5 per cent as of September 2015, has a fleet size of 100 aircrafts. It currently flies to five international destinations. In January 2011 IndiGo received the license to operate international flights after completing five years of operations. IndiGo's first international service was launched between New Delhi and Dubai on 1 September 2011 and in the following weeks, the international services were expanded to serve Bangkok, Singapore, Muscat and Kathmandu from New Delhi and Mumbai. Now international flights are also operated from Bangalore, Chennai, Hyderabad, Kochi, Kolkata, Kozhikode, Thiruvananthapuram and Visakhapatnam. IndiGo is expected to launch of flights between Kolkata and Kunming, China in coming months.

Sources said the final deliberations with the civil aviation ministry and the subsequent putting up of the finalized policy is expected anytime in the next two to four weeks. In November, the draft civil aviation policy framework was announced which among other issues had proposed three options for the stakeholders on the 5/20 rule: Retain it, Scrap it or Modify it. With Air India choosing to stay quiet, chances are that this contentious clause may get modified in such a way that allows everyone a chance to fly abroad.