The policy cleared by the Union Cabinet on Wednesday has done away with the first five-year wait, but airlines will need 20 aircraft or fly 20 per cent of their total capacity on domestic routes.
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Former civil aviation minister Praful Patel said the policy is a welcome step.
Airlines in India carry 80 million passengers and the figure is growing by 20% every year.
The policy has recast what is called the 5/20 norm – that is an airline must have five years of domestic flying and a fleet of 20 aircraft to qualify to fly overseas.
The government said necessary administrative and financial flexibility will be provided to Director General of Civil Aviation (DGCA) for an effective aviation safety oversight system and for creating a transparent single-window system for all aviation safety related issues. This will help finance the the viability gap funding to implement the regional connectivity scheme.
“The highly illogical and anti-competition 5/20 rule has been replaced with 0/20, which effectively translates to 3/20 as it will take at least 3-4 years to have a 20 aircraft fleet”, he noted. As Kuljit Singh, partner at EY, says, “Perhaps, it would have been better if this fare was linked to some cost elements of airlines, for example, the ATF (aviation turbine fuel) prices”.
Under the policy, the airfares have been fixed at Rs 2,500 for an hour-long flight.
“The centrepiece of this policy is the BJP manifesto’s promise of Regional Connectivity”, he tweeted after the Cabinet meeting. The details will be in the regional connectivity scheme whose draft will be put up for public discussions in the next 10 days. “Now, the domestic airlines will not require prior approval before entering into global code share agreements”, he said.
“The biggest takeaway fron the new civil aviation policy is clear vision that aviation ministry has set and we can look at massive growth from India to global and also within India regional connectivity”, said Amber Dubey, partner and head aerospace and defence at KPMG India.
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The government will also exempt airlines from all landing, parking and other charges on the RCS airports. The government proposes to see a sale of 30 crore air tickets per annum in the domestic sector by 2022 and 50 crore by 2027. The move is likely to increase competition in the worldwide destinations market and may force existing players to reduce their ticket prices to safeguard their market share. For instance, there are no flights between Bangalore and Mysore simply because there is no passenger load factor. The airport operator will ensure that there will be three Ground Handling Agencies (GHA) including Air India’s subsidiary/JV at all major airports as defined in AERA Act 2008.
