Long awaited National Civil Aviation Policy (NCAP) was recently approved. Though delayed by more than half a decade (53 years ago Indian government assumed ownership of national carriers and more than two decades ago private airlines were given the permission to operate), but finally the wait is over. Aiming to make India the third civil aviation market by 2022 after USA and China the NCAP is being viewed as one of the biggest achievement for Civil Aviation Sector.
Partial scrapping of contentious ‘5/20’ rule and replacing it with ‘0/20’ is being considered as one of the best features of the policy. This feature is believed to make the environment more conducive for industry players.
‘5/20’ rule required that the Indian civil aviation operators could fly overseas routes only after fulfilling the conditions of have operated in domestic skies for minimum five years and own at least 20 aircrafts in their fleet that is functioning.
As per the new rule under NCAP the five year component has been removed but operators are still required to fulfill the requirement of having at least 20 aircrafts for domestic operations.
While the new rule has been welcomed by the industry many players believe that the 20 aircraft rule should also have been scrapped to make the environment more favourable for them.
Let us first understand why was there a need to have 5/20 rule at all. In December 2004, the need to have this ‘5/20’ rule was felt. Keeping safety aspects in mind UPA government under the tenure of civil aviation minister Praful Patel started this rule.
Major factors that were kept in mind while adding 5/20 rule:
- Safety was the prime concern- the UPA government in 2004 felt that the sudden surge in the number of aviation players there could be a safety risk. The government did not want any Indian operators to meet with any mishap while operating on a global route. So this condition was added to encourage domestic operators to first have a flying experience of five years in domestic skies and build a fleet of minimum 20 before venturing into international skies.
- The 5/20 rule also aimed to encourage aviation operators to build a domestic connectivity. The operators had to first serve within the country for five years before eyeing on lucrative margins and earnings from international routes.
Controversies surrounding ‘5/20’ rule
While there have been very positive aims behind the inception of this rule, the rule has also been surrounded with controversies always.
- In 2004 when this rule was brought into life many industry insiders and analysts debated that the rule was brought in to assist Jet Airways gain profits. An industry official shares, “Actually till that time national carriers had a monopoly over international routes. The UPA government has always been blamed for promoting Jet airways of profitable route and scrapping off national carriers from those routes. Immediately after this rule was brought in major profit making routes were given to Jet airways and Sahara.”
- The second major controversy is surly related to Kingfisher’s downfall. A senior official from an airlines shares, “Kingfisher, after merger with Air Deccan in 2008 launched international flights (at the time of merger Air Deccan fulfilled the requirements to fly internationally while Kingfisher did not). The airline was unable to manage the burden and it collapsed.”
While the older operators lobbied against the total doing away with 5/20 rule, government partially amended the rule by replacing it with 0/20. Which means there is no need to complete 5 years domestic flying but 20 aircrafts in the operating fleet is compulsory. The total abolition of the rule would have made the path comfortable and it would have become a cakewalk for new operators. But the 20 aircrafts mandatory condition is not an uphill task. Air Asia and Vistara airlines seem enthusiastic with this rule. The new rule is definitely going to curb the ad hocism that has plagued the industry for long.
Air Asia CEO Tony Fernandes tweet said, “Almost an end to vested interests. Power to the people. Well done @narendramodi. You kept your words”
He even added that the 20 aircraft requirement is too many.
Currently, Vistara and AirAsia India, both do not satisfy the 20 aircraft rule. While Vistara has 11 aircraft in its fleet, with plans to lease up to 20 soon, AirAsia India has only six aircraft at present.