Support from aviation industry to scrap 5/20 norm increases

Strong tailwinds are blowing for the scrapping of the restrictive overseas flying rule that does not let Indian carriers with less than five years of operation and 20 aircraft fly on international routes. Apparently, it is being backed by Prime Minister Narendra Modi. Even the civil aviation minister Ashok Gajapathy Raju, who spoke on the sidelines of an Airports Authority of India (AAI) event on Friday in Delhi, batted for doing away with the 5/20 norm, which he feels, was "pulling down Indians".
Kapil Kaul, CEO – South Asia and Middle East (ME), Centre for Asia Pacific Aviation (Capa), has no doubt that 5/20 rule would be removed in the latest National Civil Aviation Policy (NCAP) 2015, which has been in the making for over a year now.
"I believe that 5/20 will go, irrespective of what riders they (those opposed to it) bring in. It will not stand any merit in the Prime Minister's court," he told dna. The aviation minister also forcefully advocated for throwing out the norm. "The 5/20 is pulling down Indians. Do we have to pull and push down Indians? I don't think so," he said.
Further, Gajapathy Raju said he did not see the rule having "any scientific meaning".
"Five years and 20 aircraft doesn't have any scientific meaning," he quipped.
Giam Ming Toh, chief commercial officer (CCO) of Tata SIA Airlines Ltd, which runs Vistara, can sniff it in the aggression of the Federation of Indian Airlines (FIA), which lobbies for legacy carriers. "I know when FIA gets active and aggressive (that something is happening on 5/20). That's a good reading. Right? If they get aggressive, it means that the pendulum has swing towards us," he said.
The draft NCAP, which was prepared more than a year back, has been reviewed several times by various industry stakeholders and the government over the 5/20 rule.
This norm, which was formulated over two decades back, has divided the industry in the middle with incumbent carriers like IndiGo, Jet Airways, Jel Lite, GoAir and SpiceJet, who had to bear its brunt when they began operations, asking for it to stay while new airlines like Vistara and AirAsia India, which are joint ventures of Tata, pitching for its removal.
Both Vistara and AirAsia India have been around for less than two years and own less than 20 aircraft. If the 5/20 goes, then the two carriers and other new domestic airlines can start flying to overseas destinations immediately.
The minister argued that since local airlines were in profit zone for more than a year now, there was a case for the 5/20 to be removed.
"When I was interacting with them (incumbent airlines) and asked them what their concerns was, they said, 'We've had rough years in the past. Our books are not good. If new players come, their books will be clean. So, we are, to that extent, at a disadvantage.' But, take this one-and-half-year since Prime Minister Narendra Modi has come. What has happened is, airlines are flying high. They are making profits," said the minister.
Gajapathy Raju also countered the substantial ownership and effective control (SOEC) concern raised by the FIA, saying it was in the realm of the finance ministry.
In an email dated January 20, addressed to the minister of state (MoS) for civil aviation Mahesh Sharma, the FIA had said, "No major country in the world allows SOEC of its airlines to be with foreign airlines. India has permitted AirAsia and Vistara to operate despite being effectively controlled by their foreign parent".
Further a FIA note on SOEC states, "Pending India addressing the issue of effective control, the 5/20 rule affords some protection".
The minister had a different take on the issue. "Effective control is in the realm of finance department and (relates to) all companies. They decide (finance ministry) how much FDI (foreign direct investment) has to come. How and why should one company have it and one company not have it. This is also economic activity".
Ming Toh of Tata SIA also refuted FIA's claim that his airline's control was not in the hands of the foreign partner Singapore Airlines (SIA).
"(Vistara's) Board composition is two-third (Tatas) and one third (SIA) and chairman has to be appointed by Tata. For us (Vistara), it is very clear cut," he said.
Capa's Kaul believes while India had an effective control issue, in general, he did not see Vistara flouting it.
"In India, effective control is an issue. There are regulators, even right now, in Europe examining regulatory issue with respect to Etihad – whether there is an effective control issue with Air Berlin and Etihad. So, India is not new. But frankly, we have a very old and archaic system on effective control and ownership issue," he said.
And even as the debate on to-scrap-or-not-to-scrap the 5/20 rule rages on, the aviation minister admonished the "press" to step out of the "time warp" and "become modern".
"You (the press) have got into the time warp of the 5/20. The press must come out of the time warp and become modern. One thing I will tell you – There is a difference between governments. Kingfisher crashed under the previous regime. (While under NDA) SpiceJet went through turbulent weather but didn't crash. Please remember that," he said.

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