Draft Aviation Policy Permits 40% Foreign Stake In Airlines

The draft guidelines on the new civil aviation policy state that foreign airlines should be allowed to acquire up to 40 per cent equity in domestic airlines. The draft norms also suggest that construction of new airports should be undertaken either on a build-own-operate or build-own-operate-transfer basis, with foreign equity participation up to 40 per cent.

The draft guidelines prepared by the Union civil aviation ministry also stipulate that the chairman/managing director or chief executive officer, and two-thirds of the directors on an airlines board should be Indian nationals, including non-resident Indians.

The draft norms are currently being considered by the government. However, a majority of United Front leaders reportedly feel that foreign airlines should be allowed to hold only up to 26 per cent equity in domestic airlines.

 

The guidelines suggest that private airlines should be allowed to operate to foreign destinations which are not being serviced by either Air India or Indian Airlines. However, airlines will not be allowed to compete with each other on international routes.

The draft policy also recommends that the operators should have the freedom to determine fares for each sector, while passenger service fee should be cut to 25 per cent of the normal charges. State governments could be requested to exempt levy of sales tax on aviation turbine fuel for operations on the north-eastern region.

The draft policy suggests that entry and exit of operators should be allowed without any strings attached. However, to ensure that only the financially sound enter the aviation sector, private airlines will be required to have at least five aircraft to become eligible for scheduled operator status.

The average age of the fleet should be below 10 years, while transport operations should be regulated through aircraft acquisition committee, add the guidelines.

The guidelines also seek to make it mandatory for airlines to employ only Indian nationals for flying aircraft. However, foreign nationals can be employed for a short duration until Indian nationals acquire the necessary licences or ratings.

Non-scheduled and charter operators are proposed to be exempted from seeking clearance from the Directorate-General of Civil Aviation (DGCA) for each flight. But operators who want to fly on routes designated for scheduled operators will be required to seek the DGCAs clearance.

Foreign tourist charter flights can also be operated by any operator, even without any air services agreement, in accordance with the guidelines.

The draft policy recommends that a `slot-for-slot norm should be adopted to derive full commercial benefits from the entitlement of air service agreements.

With regard to development of airport infrastructure, the report states that the private sector should be allowed to undertake expansion projects of existing airports in accordance with the master plans of the airports, with or without existing foreign equity participation on a build-own-operate-transfer basis.

The owners of new airports should be freed to fix non-aeronautical revenues to make the airport projects commercially viable, while only the civil aviation ministry should have the right to fix the aeronautical charges, state the guidelines.

The report adds that only the Airports Authority of India should have the right to run air traffic control services at private airports. The revenue from such services should be shared by both the authority and the owner of the airport.