The 5/20 rule: TO abolish or replace?

A DFC formula requiring airlines to earn credits by deploying capacity on home routes is one way.

By: ENS Economic Bureau | New Delhi | Published:September 23, 2015 1:31 am

Even as the Prime Minister’s Office (PMO) has weighed in for the removal of the ‘5/20’ rule (which requires a domestic airline to have a fleet of 20 aircraft and operational experience of five years to start international operations), the civil aviation ministry is deliberating whether there should be a complete abolition or a replacement in lieu of the said eligibility norms for domestic carriers to start international flights.

A senior official in the know said, “While the broad mandate is that 5/20 should go, what is being debated on is whether there should be a complete removal of the rule or the abolition should be based on certain conditionalities (which have to be met by Indian airlines).”

Four alternates — complete abolition of the 5/20 norm, continuation of the 5/20 norm, replacing 5/20 with a domestic flying credits formula (DFC requires airlines to accruing miles by flying domestic which can be redeemed for overseas flying rights), and an option for domestic airlines to start flying international from the first day on a written assurance that they would meet the DFC threshold within 18-24 months of start of operations — will be put up for public consultation. A final decision will be taken after the public consultation process and in the final civil aviation policy.

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“The PM, the civil aviation ministry and senior civil aviation ministry officials all want 5/20 to go. The only thing being considered is whether it should be out rightly abolished or there should be some conditions in place so that Indian airlines meet their domestic flying obligations.”, added the official.

The process is in line with indications given by civil aviation minister Ashok Gajapati Raju who while advocating removal of the 5/20 rule has said that a priority for his ministry is to ensure adequate air connectivity within the country.

Of the options being considered to replace the 5/20 norm is a simplified DFC formula which requires domestic airlines to earn credits by deploying capacity on domestic routes and trading them for international flying rights. The earlier DFC formula, developed under former secretary V Somasundaram, was designed to encourage long-haul operations. It stipulated that a new airline will be allowed to operate on international routes, which are less than 6 hours away, with 600 domestic flying credits (DFCs) and will require to earn 300 DFCs to fly on routes beyond six-hour. The eligibility for flying on mid-haul routes was raised so as not to divert traffic to hubs in West Asia and South-east Asia and encourage airlines to operate long-haul international flights. “We are looking at an uniform cut-off in terms of flying credits without differentiating on grounds whether an airline is flying mid-haul or long-haul”, said another government official.

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