Remove 5/20 Rule and First Right of Refusal to Air India to allow aviation take-off: ASSOCHAM

With a sharp fall in fuel prices, the Indian aviation sector can take off to a phase of sustainable growth if restrictive rules like 5/20 and First Right of Refusal to Air India in regard to international routes are dispensed with, an ASSOCHAM paper has suggested.

There is a need to replace/rework the 5/20 Rule in order to equip Indian commercial airline operators with long term financial security and international quality standards. Revisiting this rule will provide incentive for new players to enter the market due to advent of opportunity for enhancing revenues, yields and ultimately, profits, reveals the ASSOCHAM-Yes bank joint study on Indian Civil Aviation -At the Cusp of Taking Off.

For optimizing bilateral agreements and international traffic rights, the Ministry of Civil Aviation, in coordination with the Ministry of External Affairs should undertake negotiating higher number of routes, especially in the lucrative markets such as the US and Europe.

Besides, Air India's First Right of Refusal on new routes should be relooked with the objective of private airlines getting fair opportunities to expand their international routes, the ASSOCHAM Paper said.

Under the 5/20 Rule, carriers should have served at least five years in operation and must also have minimum 20 aircraft before they are to fly abroad, adds the study.

We have situations where fast growing airlines have certainly acquired a large fleet offering top service but may not have completed five years, ASSOCHAM Secretary General Mr. D S Rawat said.

The award of overseas operations license should be linked to completion of certain number of hours/kilometers on domestic routes and subject to thorough audit of safety records, though.

While thanks to drop in the jet fuel prices, some of the operators have really turned around in terms of their financial performance, for making the sector robust and sustainable for further growth, an enabling environment must be created for generation of non-aeronautical revenue stream both at the AAI and privately managed airports.

There should be further incentivisation of domains like food and beverages, retail, concessions, advertising, car parking car rental and duty free outlets.

The paper also suggested third party airport lounge concessions/development model for achieving wider customer base. Utilisation of excess space at major airports should be encouraged for convention centres, entertainment centres, hosting of events etc.

For development of the cargo sector, old and redundant and un-utilised domestic passenger terminals held by the Airport Authority of India should be optimally utilized by converting them into cargo facilities. Projects should also initiated for better road and rail connectivity to air cargo terminals to improve cost accosts and time efficiency of the cargo operations.

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