The new Civil Aviation policy has been a long time coming. Is it truly transformative like the New Telecom Policy introduced by the Vajpayee Government or just another piece of paper, Kushan Mitra takes a look.
The headlines were blaring ‘Cheap Flights’ and some papers blew the trumpets declaring how the Modi Government has finally started reforms. On the face of it, there are some key announcements in the New Civil Aviation Policy announced by Civil Aviation Minister Ashok Ganapathi Raju, but the headlines seem to have missed the point. While the reforms announced will certainly lead to more flights and thus enhanced competition, cheaper flights are not the key part of the package. Nor is this the most crucial bit of reform that this Government has undertaken, major changes in the power and coal sector possibly trump this piece of reform.
Beyond the headlines of cheaper flights, the biggest single change in this policy is the decision to ostensibly free international flights for airlines as the 5/20 rule that stipulated that an airline should have five years of experience and a fleet of at least 20 aircraft before they could get international rights, has been scrapped.
The new rule insists that an airline have at least 20 aircraft before they can start flying abroad. The news rule keeps the 20 aircraft rule and insists that at least 20 aircraft or 20 per cent of an airlines fleet is deployed domestically whichever is greater. This means that an airline can only start flying abroad after they have a fleet of 21 aircraft, and that too with only one plane.
The rule change might havre come too late for Vijay Mallya whose Kingfisher airlines had over 40 aircraft deployed to domestic operations before the old policy forced Mallya to buy Air Deccan which only accelerated Kingfisher’s demise and could be seen as the root of all of Mallya’s troubles. The new rule will help airlines to expand their operations abroad quicker, and will help Indian-carriers not lose out at the expense of airlines from South-East Asia or the Gulf countries which could fly to India from the first day of their operations.
It is very unlikely that any airline will start with a fleet of greater than 20 aircraft, even Vitara has taken over two years to build up a fleet, as per airfleets net of 10 planes. GoAir which could likely be the first beneficiary of the ruling could have already qualified under the 5/20 rule. While Air Asia India could grow its fleet fast by transferring aircraft between its other operations to India, the airlines partners Air Asia and the Tata Group are facing some issues according to news reports.
In addition, while flying abroad has been liberalised - to some countries like the UAE, a favoured destination for many Indian carriers using Airbus A320 and Boeing 737 planes flights and passenger numbers are restricted under bilateral Air Services Agreements. India does have freedom to fly unlimited flights and passengers to some countries, but flights to many major markets are hobbled under this norm.
Then there is the other headline from the new policy - cheap flights. The first thing to explain is that this new change will not make flights between existing major cities very cheap. In this regard the Government’s communication has been abysmal, as many people actually asked whether this means that flights between cities like Delhi and lucknow or Kolkata and Patna will now fall to Rs2500.
The short answer is no they will not, this new policy is to ensure connectivity increases to small airports currently unconnected to the national air grid in Tier-II and Tier-III. The policy talks about building out many smaller airstrips - say at Bikaner or Nashik - with small low-cost terminals and then to encourage airlines to fly there provide a viability gap funding jointly between the State and Central Governments which will keep the fare to below Rs2500 on these routes.
This is ostensibly a great idea and could dramatically increase connectivity in the long run. Yet in India as of today almost three-quarters of air traffic starts or ends or connects between one of four major cities which are India’s economic powerhouses. The major announcements in civil aviation this Government has made, may not be this particular policy but the second airports near Mumbai and Delhi respectively.