Opposition to Relaxing 5/20 Rule Could Impact Vistara's International Flights

Strategic Insights -

The government's proposed relaxation of the 5/20 rule, which permits domestic airlines with at least five years' experience and 20 aircraft to fly abroad, has faced opposition from some lawmakers and industry experts. The move, aimed at allowing new airlines to fly internationally before completing five years of local operations, could impact Tata Sons' new airline Vistara, which has been eager to begin international flights. The opposition comes as the civil aviation ministry has proposed a draft civil aviation policy that restricts new foreign airlines' flights to six major metros and pushes local airlines to fly internationally.

Key Takeaways:

  • The 5/20 rule, which has been in place since 2006, states that domestic airlines with at least five years' experience and 20 aircraft can fly abroad.
  • Opposition to relaxing the rule comes from lawmakers like former civil aviation minister Praful Patel, who wants the aviation ministry to continue its current policies, including waiving certain rights in favor of foreign airlines.
  • Patel suggests opening the skies further to foreign airlines and wants Air India to add more aircraft to its fleet, despite criticism from the government's auditor CAG.
  • Industry experts, like Jitendra Bhargava, a former Air India executive director, agree that the 5/20 rule should be phased out, but not immediately, as it would favor new airlines over existing carriers.
  • Air India faces challenges in the domestic market, with a 18% market share in 2014, down from nearly half at the start of the decade, and needs to add capacity to remain competitive.

Statistics:

  • Foreign airlines control nearly 65% of international traffic to and from India.
  • Air India's domestic market share has fallen to 18% in 2014 from nearly half at the start of the decade.
  • The market is projected to grow at 14% while Air India's capacity addition is "absolutely flat".
  • Vistara launched operations this month, but is yet to begin international flights due to the 5/20 rule.

Sources:

  • Former civil aviation minister Praful Patel's interview with PTI
  • Jitendra Bhargava's statement to MINT
  • Government's auditor CAG report, 2011
  • Tata Sons' Vistara airline's launch press release
  • Civil Aviation Ministry's draft civil aviation policy