Easier Norms For Flying International Instead Of Outright Abolition

Easier Norms For Flying International Instead Of Outright Abolition

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It has taken over 15 years for the government of India to come out with a Draft Civil Aviation Policy which was unveiled by the civil aviation minister Ashok Gajapathi Raju. The draft would be open for consultation with stakeholders which can take another two months to get finalised and might get implemented in January next year. Unfortunately the policy is high on intent and low on details.

In a move that would affect existing airlines, Raju has spoken about reviewing existing norms on domestic airlines flying international routes.Presently, the 5/20 rule which is in place says that an airline needs five years of domestic operations and build a fleet of 20 aircraft before getting permission to fly abroad. Nowhere in the world does such a rule exists and it is good that the government plans to simplify those norms. But the existing players clearly would feel let down as they lost out on time and money in order to adhere to the guidelines.

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The new airlines, all of whom have an international connection, stand to gain as they can now run as feeders to fill the seats of their parent airline. The Jet Airways and Etihad joint venture works on a similar arrangement. In such an arrangement, the parent company (international player) gets the advantage of better availability factor (filling their seats) at the cost of the domestic player. Standalone Indian players like SpiceJet, Indigo, Go Air and Air India will be at the receiving end of this fierce competition.

Indian owned aviation companies have put up a strong case against lifting the 5/20 rule and have asked for dilution by capping restrictions. As international flights are more remunerative on account of lower fuel cost, Indian companies naturally do not want to give away their share of these profitable routes. As compensation, Indian airlines want the new start-up companies to operate in under-served routes which is generally loss making.

Further, there is no clarity on the high cost of fuel due to higher taxes. Raju said that the centre has been requesting the states to lower sales tax. But with prices of aviation fuel touching new lows, state governments are already losing tax revenue. Unless there is a uniform tax code, this issue is unlikely to make any headway.

Similarly, there is little clarity on the functioning of the regulator, Directorate General of Civil Aviation (DGCA), currently under pressure after India’s aviation safety ranking was downgraded because the regulator was under staffed.

The only clarity that comes out of the draft policy is in terms of divestment of state-owned Airports Authority of India (AAI) and national helicopter company Pawan Hans.  AAI is the MOST profitable division under the aviation ministry, though its wings have been clipped after it was made to enter into joint ventures at Mumbai, Delhi, Hyderabad, Bengaluru and Nagpur AIRPORTS in order to upgrade them. AAI divestment will take some time as the entity is not yet a company. No details have been given on the time of divestment and the stake that will be sold. But the move will bring in transparency on the operations of the company which manages 125 airports in the country.

Pawan Hans is the lowest hanging fruit in the aviation ministry which can be divested. The company, a joint venture between Government of India 51 per cent and ONGC (49 per cent) is the largest helicopter charter service provider in Asia and REGISTERED profit of Rs 20.12 crore on revenue of Rs 525.17 crore in FY2014.

However, there seems to be no solution in the short term for the biggest problem of the aviation ministry – Air India. Raju has constituted another expert COMMITTEE to develop the future roadmap of the company. The company will continue to bleed government finances unless drastic measures are taken.

There is nothing much in the draft policy as far as airline passengers are concerned. The minister has ruled out any regulation on fares charged by airlines though he promised to look into allegations of opaque charges by Airlines Such as fuel surcharge.

In short, though the attempt to come out with a draft policy needs to be applauded, the policy seems to be raising MORE questions than providing answers.

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Mohini Porwal [ B Sc]
Trainee News Editor
Indian Aviation News Editor