Increased focus on Aviation by Government of India now becoming visible.
The clearing of the New Aviation Policy can be aptly termed as a ‘Historic’ decision.
Flyers’ Interest is the key in New Aviation Policy.
Despite several shortcomings in the past, today India’s civil aviation has become a super power to reckon with. This can be suitably gauged from the fact that both the biggest Airplane manufacturers in the world -Airbus & Boeing- have orders worth billions of USD from airlines of India. The Indian aviation sector has finally emerged helped mainly by factors like low oil prices, rising economy and growing aircraft fleet.
Dr Mahesh Sharma, Minister of State for Civil Aviation, had made it clear that India is the only economy where passenger traffic is growing at 22%. No other country is near us. We have become 9th largest aviation sector and government is trying to get the 3rd position in this sector in the world.
Today, the Airports Authority of India has over 30 inactive airports. People do require a few new airports due to the terrain of such a vast country like India. As it is, till now there being no Aviation Policy, the industry suffered miserably from such inadequate infrastructure support. Even then, the growth of India’s aviation could not cease.
The Civil Aviation Minister Ashok Gajapathi Raju has mentioned earlier in an interview that till now, decisions were taken based on the situations coming in. The previous governments had lacked a clear vision for the aviation sector and how the government will work towards protecting the domestic airlines. There was never an attempt to look at the sector in a totality and bring out a policy.
Keeping in view this ambitious target to become 3rd largest aviation industry in the world the new policy is said to be a must. The draft policy has been in discussion for more than a year now and the Aviation Industry is waiting for the same for quite long time. It is hoping to get clarifications on several issues through the policy.
The Civil Aviation Ministry had sent the proposed Civil Aviation Policy to Union Cabinet for approval on June 3. The Cabinet is likely to take up the much-awaited policy at its meeting on June 15 which may unveil a slew of passenger-friendly measures.
The present NDA government had for the first time unveiled the policy draft in November 2014, subsequently replacing it with another draft in October 2015. Disagreements within the government and outside over certain proposals, as well as hectic lobbying from the industry led to delays in its finalization.
The submission of draft policy to the Cabinet also got delayed. Initially, the policy was expected to be finalised in the last financial year as certain proposals were to be implemented from April 1, 2016.
The Civil Aviation Minister Ashok Gajapathi Raju mentioned that it was for the first time that India has an integrated civil aviation policy that has been crafted after some 450 responses and talks with all stakeholders — airlines, airport operators and informal consultations among ministers. Most of them have conflicting interests. To bring all of them on a common line of thinking is an herculean task. This was one of the reasons why India never had an integrated aviation policy despite several genuine attempts.
Up till now, the Government has been moving back and forth on the matter, mainly to strike a balance between various stakeholders on their differences over certain issues. One such issue was related to the licensing for international operations – The much hyped 5/20 rule.
The 5/20 rule has witnessed extensive debate, with FAI opposing any changes to the rule, while non-FAI frantically demanding its scrapping.
The policy basically seeks to boost India’s domestic aviation sector by tapping its high growth potential with several key points such as :
– Enhance Regional Connectivity through fiscal support and infrastructure development and ease of doing business by simplification of procedures and e-governance.
– Capping airfares at Rs 2,500 for a 1-hour flight,
– Develop No-frills airports and revival of un-served/under-served airstrips
– Increase in FDI in airlines from 49 percent to above 50 percent to be examined if the government decides to go in for open skies for countries lying within 5,000 km radius.
– Auctioning of unilateral traffic rights,
– Tax incentives for airlines, service tax breaks, custom exemptions and easing of visa process for expat professionals.
– Encourage maintenance, repairs and overhaul in India through tax incentives for MRO sector
– 2% levy on all air tickets to fund regional connectivity scheme and
– Providing viability gap funding for airlines to encourage operate on regional routes.
– Recognize the need to facilitate higher ancillary revenue for airlines in order to reduce the base airfare.
Broadly, the long-awaited policy presents the road map to support 300 million air travelers in five years and steps to make air travel affordable and convenient for the masses. It dwells on upgrade of airports, regional connectivity, easing of norms for flying abroad, liberalisation of open skies regime, development of cargo hubs, chopper services, attracting investments in maintenance and ground handling and security.
The Regional Connectivity scheme will kick-off from July 2016. It will bolster tourism, create jobs and stimulate the economy in tier 2-3 cities. The new policy proposes an all-inclusive tariff of Rs 2,500 per ticket for each flying hour to promote regional routes. A new scheme will seek to revive as many as possible as no-frills airports at an investment of Rs 500 million each. Excise duty in such airports will be 2% on fuel. Incentives for airport developers, operators and carriers have also been envisaged. The new policy seeks to create a system that will lead to an increase in air travel through more regional connectivity wherein the masses can be involved. Airlines will get more incentives to fly to smaller cities.
The 5/20 rule in Aviation Policy has often been dubbed as “archaic”. Even Prime Minister Narendra Modi is known to be against it. As per the rule, an airline can fly overseas only if it has been in business for five years and owns a fleet of 20 aircraft.
Bringing an end to all speculations, the Civil Aviation Minister Ashok Gajapathi Raju declared in a series of tweets:
“Any domestic airline can start international operations of it puts higher of 20 aircraft or 20% of total capacity on domestic routes”
“Airlines no longer need to wait for 5 years before starting international operations”
“Domestic Airlines will not require prior approval before entering into international code share agreements”
“NDA govt clears India’s first ever integrated National Civil Aviation Policy. This will be a gamechanger for the sector… Regional Connectivity Scheme (RCS) — to revive unserved airports and routes in Tier II III cities”
Effectively, the 5/20 Rule is now amended as 0/20 Rule!
This means a carrier must have a minimum 20 aircraft in its domestic fleet. As per a ministry official, “This is to ensure that any new airlines starting business in India should essentially serve the remote parts of the country.”
This 5/20 rule, so amended, will help new airlines like Vistara and Air Asia, while the group of older airlines – IndiGo, Jet, Spicejet, GoAir – will feel betrayed.
However, Vistara and Air Asia are now more or less 3 years old! They have a fleet strength of 11 and 6 aircraft respectively. Vistara may have the 20th aircraft by June 2018, while Air Asia India may not have 20 aircraft by 2019!
Experts feel that it will not be practically easy to meet the condition of 20 aircraft at once. Shortage of experienced commanders being one of the reasons. For a new airline, it will take at least 3-4 years from now to raise its fleet size to 20 aircraft. By that time both the airlines will be effectively following 5/20, so the older airlines need not have grievance.
Older airlines such as IndiGo, Jet Airways and SpiceJet that fly abroad have been opposing any proposal to relax the ‘5/20 rule’ and had also approached top government officials, including the Prime Minister’s Office, to lobby for the rule. They even had said that they would contemplate legal action against such a move.
Such a modification to the rule would increase the competition among the airlines to travel abroad. Thus, it would eat into the market share of airlines like Jet Airways whose 60% of fleet do International duty at present.
Today, the Indian Aviation Industry is also anticipating clarity on several issues through the policy. It is silent on some critical issues. Their main concerns are :
– government needs to do more in terms of simplifying rules and cutting bureaucratic hurdles,
– fast-tracking policy initiatives,
– improve airport infrastructure
– more proactive steps from the government that will help unleash the full potential of the sector.
Some of these measures can be taken outside the ambit of the aviation policy since these involve mostly government-owned entities and their work culture.
How the Civil Aviation Ministry’s new measures will make your flight more cheerful.
Cheaper charges, higher compensation amounts and faster refunds: there is much more to cheer about
Last year 4,000 flights were cancelled, and another 64,000 flights were delayed. The Civil Aviation Ministry took cognizance of such rising complaints by travelers against Indian carriers. It decided to step in with a slew of traveler-friendly changes.
Veteran airlines appear to be little rattled by these announcements as their shares start to decline. As per Amber Dubey, partner and India head of global consultancy KPMG: “The proposals would have a direct bearing on airline’s bottom line. It needs 3-4 years of 18-20 per cent annual growth to consolidate and expand; and to recover the huge debt and losses of the past.”
The flyers, in particular, and the Indian public as a whole stand to benefit if such a policy is brought. With more airlines to choose from, fares will be cheaper. Similarly, the Airlines, too, will find more takers and will feel their capacities insufficient. It could be a win-win situation for all !!