Turbulent path of 5/20 rule

• There is a controversy on the removal of 5/20 rule in aviation sector between older Airlines and newly entrants like AirAsia India and Vistara.
• Older airlines believed that removal of the so called 5/20 rule is tantamount to discrimination against the old players and would, in turn, overtly favour new airlines.
• Scrapping the 5/20 rule was one of the three options suggested in the draft policy released last year. After several rounds of discussion, the Centre is close to finalising the new civil aviation policy, which lists out the option of scrapping, retaining or relaxing the 5/20 rule, with the stated objective of increasing FDI in airlines and auctioning unused bilateral rights.

About 5/20 rule:

This rule requires a domestic airline to have a fleet of 20 aircraft and operational experience of five years to start international operations.
Analysis:

• Older airlines wanted that any review of the 5/20 rule cannot be done in isolation and needs to be done in conjunction with another set of rules — the Route Dispersal Guidelines (RDG). Because by scrapping the 5/20 rule without removing the RDG, which requires domestic carriers to operate a portion of their flights on economically unviable routes, would create an unfair playing field to the advantage of new players.
• The Draft NCAP (National Civil Aviation Policy) creates an unfair playing field by asking existing airlines to continue to maintain the same level of regional and remote area deployment under the RDG, while allowing new entrants to build less encumbered and more cost-competitive networks as a result of the Draft NCAP’s proposals to remove/dilute the 5/20 rule and prevent incumbents from redeploying capacity away from remote area routes (North-East, J&K, Andaman and Lakshadweep).
• The larger objective of 5/20 rule along with this Route Dispersal Guidelines was that they would ensure connectivity to regional areas. The principle was that you first serve the country and then you get what are clearly lucrative rights, profitable rights to fly internationally is done by older airlines.
• While newer airlines accused that established carriers are using “monopolistic pressures” to retain “preferential treatment” under the 5/20 rule.
• The lobbying for discriminating policies between old and new airlines is reminiscent of protectionist and monopolistic pressures by vested interests’ entities who seem to fear competition, as in a variety of other sectors over the year
• One hopes when the new policy is introduced it will be free of discrimination and protectionism, so that Indian aviation can grow for the benefit of consumer and the common man — not to serve the interests of select beneficiaries of protectionism
• New policy is mainly centered around giving way to the new entrants, which are foreign controlled, better access into India. This is not only against the old principles of international aviation, but would also result in traffic moving out from India into the surrounding hubs.
   

By: Vishal