India has made it easier
for the country's airlines to fly abroad as part of the first set of
comprehensive rules governing civil aviation which are designed to boost air
travel and economic growth.
Prime
Minister Narendra Modi's government presented the national civil aviation
policy, which has been years in the making, as a bid to make flying more
affordable for India's expanding middle class, to bolster competition and to
get more of the country connected.
Under
the policy, domestic carriers will no longer have to operate for five years
before they can start flying abroad, although they must still have 20 aircraft
in their fleets.
"We
want airlines to start flying quicker so there is more competition," civil
aviation secretary R. N. Choubey told reporters after the cabinet cleared the
policy.
Easing
the so-called 5/20 rule marks a further step towards liberalising India's
aviation market, the world's fastest growing, and is a boost for Tata Group's
two recent ventures - Vistara, in partnership with Singapore Airlines, and
AirAsia India, a venture with Malaysia's AirAsia Bhd.
The
rule, unique to India, had sought to encourage the growth of the nascent
domestic aviation industry, but many officials say it now inhibits Indian
carriers from increasing their share of international travel.
Incumbents
such as Etihad-backed Jet Airways, InterGlobe Aviation's Indigo Airlines and
SpiceJet already flying overseas had lobbied hard to keep the rule in place.
Shares in Jet Airways,
InterGlobe and SpiceJet rose on news the civil aviation policy had been
approved.
Vistara,
with 10 jets, is at least a year away from having the 20 planes needed to fly abroad,
meaning that there is no immediate threat to the established players. AirAsia
India has only six A320 planes and its fleet growth plans remain unclear.
CAP
ON FARES
The
government also announced it would cap base fares on regional routes at 2,500
rupees ($37) per hour of travel to get more people flying, with the government
providing funding to make it viable.
Funding
for new "no-frills" airports would also be made available and excise
duty on fuel would be cut, Choubey said.
India's
air travel market has boomed in the last decade as it opened up to competition,
ticket prices were slashed and the number of people wealthy enough to travel
ballooned.
Still,
very few Indians have enough money to fly - with 0.04 annual trips per capita
against 0.3 in China.
Amber
Dubey, head of aerospace at KPMG in India, said he welcomed the focus on
regional connectivity and replacing the 5/20 rule, predicting it would
accelerate growth.
"The
National Civil Aviation Policy ... is likely to enhance that further by taking flying
to the masses through a slew of policy initiatives and fiscal and monetary
support," he said.
Dubey
faulted the new policy, however, for remaining silent on the issue of setting
up an independent civil aviation authority and on addressing whether to
privatise lossmaking flag carrier Air India.($1 = 67.1200 Indian rupees)
(Additional
reporting by Nigam Prusty; additional reporting and writing by Tommy Wilkes;
editing by Douglas Busvine and David Clarke)
Representative
Image
Source: Reuters
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