Vistara-CAPA report seeks liberal aviation policies

Opposes regulation of airfares; seeks abolition of the '5/20' rule to fly abroad

Ahead of the release of the government’s draft civil aviation policy, Vistara has sought the current requirements to fly abroad and the compulsive allocation of flights to remote regions be done away with. It also opposed regulation of airfares.

The report, titled ‘Maximising the contribution of aviation to the Indian economy’, was released on Tuesday. It was prepared by the Centre for Asia Pacific Aviation (CAPA). The report, also submitted to the Union civil aviation ministry, said by 2025, the steps it recommended would help the aviation sector contribute $250 billion a year to India’s gross domestic product, against the current $25 billion a year.

The report sought abolition of the ‘5/20’ rule to fly abroad. Currently, an Indian carrier has to run operations for five years and have 20 aircraft to fly on international routes. There is no such restriction on international airlines taking passengers to and from the country. “This is the equivalent, to draw an analogy, of stopping Indian IT professionals from going abroad to service customers, while allowing foreign competitors free play in the Indian market,” said Mukund Rajan, director on board, Vistara, while releasing the report. He slammed incumbent airlines that opposed a move to scrap such a norm.

Vistara CEO Phee Teik Yeoh said 70 per cent of Indian passengers used foreign airlines to go abroad and only 26 per cent of the bilateral was used by incumbent players.

“Ultimately, all carriers should come and agree that this will help the cause of Indian aviation. I can’t understand how any airline could possibly say it is good for Indian aviation when the bulk of the passengers are carried by not Indian carriers but foreign carriers,” he said.

Vistara, which started operations eight months ago, clarified it wouldn’t change its strategies even if uncertainty over the ‘5/20’ norm continued. “Our business model was based on the fact that ‘5/20’ exists. So, our build-up of aircraft, routes and destinations will continue exactly as we plan. We make it clear we are committed to the longer run,” said Vistara chairman Prasad Menon.

The report criticised the government’s proposal to cap airfares, especially during the festive season. “Plans to introduce a price ceiling and floor should be permanently shelved. During the peak period, it is imperative that fares will increase, just as the case with hotels and other seasonal businesses,” the report stated.

Recently, Prime Minister Narendra Modi had expressed “serious concern” over the steep rise in airfares, particularly during the festive season. This prompted the aviation ministry to direct airlines to cut fares at a meeting last month.

The CAPA-Vistara report stated airlines should be given a free hand in fixing ancillary charges, as it allowed them to generate higher revenue. Further, it said the selection of routes and capacity deployment on remote routes should be “left to market forces”. At present, airlines have to follow the route-dispersal guidelines set by the aviation ministry, deploying a certain share of aircraft to remote regions.

The report sought a single-window clearance for applications of new carriers. Phee Teik Yeoh mentioned how it took Vistara several months to get an air operator’s permit from the Union government.

The aviation ministry, the report said, should focus on increasing the capacity of airports, airspace and skilled manpower.