Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / Experts say proposed overseas flying norms are too complex
BackBack

Experts say proposed overseas flying norms are too complex

Analysts caution that the domestic flight credit rules would add to regulatory costs

Photo: Hindustan TimesPremium
Photo: Hindustan Times

Mumbai: India’s proposed new eligibility rules for airlines wishing to fly overseas routes, discussed by the civil aviation ministry with airlines on Wednesday, have been criticized by analysts and aviation executives who see them as too complex.

“The idea is to make and keep rules simple. The new rule is complex and would need an army of people to monitor compliance," says G.R. Gopinath, who founded India’s first low-fare airline Air Deccan, which started off by selling air tickets at 1.

Gopinath was referring to the government’s proposal for a new domestic flying credits (DFCs) rule to decide whether a local airline is eligible to fly on overseas routes, replacing the so-called 5/20 regulation. The current rule requires an airline to have operated domestic routes for five years and have a fleet of at least 20 aircraft.

“The so-called 5/20 rule was an aberration to suit individual airlines and keep out others and the government should scrap it. Instead, they should allow airlines to fly international from day one, asking them fly to more on Indian domestic routes by a simple method by equating one foreign flight to one domestic metro flight and corresponding flights to backward areas," Gopinath said.

Civil aviation minister Ashok Gajapathi Raju did say he wanted to scrap the rule but seems to have had a rethink.

The proposed rules aim to encourage airlines to fly to remote destinations within India to enhance regional connectivity, thereby enabling smaller airports to feed into larger ones. Airlines can earn more credits by flying to tier II and tier III airports. Once they have accumulated a certain level of DFCs, they will be permitted to fly abroad.

The new rules may be aimed at protecting existing airlines that fly overseas routes only after meeting the 5/20 criteria.

“Frankly, I don’t understand the logic but am tempted to believe that protection of existing carriers was perhaps, the driver," said Kapil Kaul, chief executive officer (South Asia) at consulting firm Capa Centre for Aviation, adding that processes will get tougher with the new regulation as further complexity has been added.

Whatever the reason, the proposed rules only serve to complicate the issue.

They go against the grain of India’s desire to make it easier to do business in the country, said a consultant who works with airlines and who spoke on the condition of anonymity.

He cautioned that if adopted, they would add to the regulatory burden and costs, besides granting one more provision to penalize Indian airlines, while international carriers feed off the attractive outbound passenger market that India offers.

AirAsia India and Vistara, new airlines that will be affected, declined to comment.

The methodology is, as the consultant said, complex.

The capacity deployed by airlines as available seat-kilometres (ASKMs) in regular scheduled operations multiplied by a factor devised for providing an incentive for operating on remote area routes shall be treated as the DFC. A flight between a large city and a remote destination will get three times the weightage of a flight between two large cities. And a flight between two remote destinations will get five times the weightage.

An airline can apply for international flying permits to destinations at least six hours away after it accumulates 300 DFCs. It will need 600 credits to operate flights to destinations under six hours away. The proposed rules also allow companies to buy a fourth of their required credits from regional airlines.

Kaul said the new rules will impact Vistara and AirAsia India, and “going forward, I sense a conservative approach to expansion in India will be visible."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 20 Mar 2015, 12:41 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie