The government is expected to scrap in the near future the 5/20 norm that restrict new airlines from flying abroad as there is “massive lobbying” against it, says AirAsia Berhad–a key stakeholder in start up budget carrier AirAsia India.
AirAsia’s remarks come amid high decibel debate over the continuance of 5/20 norm–whereby only local airlines having at least five years of operational experience and a fleet of minimum 20 aircraft are allowed to fly overseas.
Start up carriers AirAsia India, a joint venture between Malaysia’s AirAsia Berhad and Tatas, as well as Vistara are seeking removal of the rule whereas established airlines, including Jet Airways, are opposed to its scrapping.
“Currently, the airline (AirAsia India) is restricted by the 5/20 ruling which requires airlines to have served the local market five years and operate at least 20 aircraft before they can go international.
“However, the ruling is expected to be revoked along with a new National Civil Aviation Policy (NCAP) to be introduced in the near future, given massive lobbying against it,” AirAsia Berhad said in its 2015 annual report.
While the government is yet to take a final call on the fate of 5/20 norm, Civil Aviation Minister Ashok Gajapathi Raju last week virtually disapproved continuance of the rule asking who has benefited from the rule and gave an indication that government was going to scrap it.
AirAsia Berhad also said repealing the rule would benefit the entire aviation industry.
“Although currently hampered by a 5/20 rule…we are hopeful that this regulation will be repealed in the near future given the widespread benefits it would have on the entire travel and tourism industry,” it said.
In February, Tata Group Chairman Emeritus Ratan Tata had accused older carriers of lobbying and using “monopolistic pressures” to retain preferential treatment under the 5/20 rule.
Under this norm, AirAsia India and Vistara–both operated by the Tatas through joint ventures–are ineligible to fly overseas.
The annual report said AirAsia India’s decision to focus on Tier-II cities in the country was a strategic response to competition in the aviation industry.
“This competition is heaviest in the tried and tested ‘traditional’ routes connecting India’s most populated urban metros. By opting to focus on more non-traditional routes, AirAsia India not only escapes from the cluttered sectors but also has the benefit of serving large numbers of rural Indians who are migrating into smaller cities in droves,” it added.
In the three months ended March 2016, AirAsia India saw its net loss narrow to Rs 7.86 crore as revenue grew significantly to Rs 196 crore.
The airline had reported a net loss of Rs 26 crore in the 2015 December quarter and Rs 65 crore in the last September quarter.
According to the annual report, the AirAsia brand is proving to weave its magic in India, too, with AirAsia India tripling its capacity and more than quadrupling the number of guests carried in 2015.
“We feel very bullish about the potential of AirAsia India given the sheer number of people in the country–1.3 billion and growing–as well as their strong links with ASEAN,” it noted.