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Sunday, October 17, 2021

Flying against logic

The government should scrap the anti-competitive 5/20 rule in the aviation sector that hurts consumer interests.

By: Express News Service |
Updated: February 24, 2016 12:02:46 am

Ratan Tata’s comments favouring scrapping of the so-called 5/20 norm for airline operators merits serious consideration by the country’s policymakers. The chairman emeritus of Tata Sons has rightly criticised the rule that requires an Indian carrier to have a minimum of five years of domestic running experience and at least 20 planes in its fleet to operate international flights. Tata may have business interests in seeing that this rule goes. His group, after all, is a co-promoter of two relatively new airline ventures — AirAsia India and Vistara — whose operations are impacted by the 5/20 rule. But that does not diminish the strength of the basic argument that he is making of how the entrenched carriers are using “monopolistic pressures” and “lobbying” to retain the rule.
Business interests apart, it is consumer interest that is the real issue here. In a liberalised economy, the government cannot dictate the fares that airlines charge from consumers. All it can do is ensure a regulatory environment that allows competition. The 5/20 norm clearly undermines this by circumscribing new entrants and foreclosing the benefits that would accrue to consumers by way of cheaper tickets, better services, newer routes and seamless travel. The supposed rationale behind the rule is to ensure that only credible airlines — with recognised records of safety, experience and financial strength — are allowed to operate. This argument would effectively shut out even ventures that have established international carriers as co-promoters. This is the case with the two Tata joint ventures, and also others that may be wanting to set up similar JVs.
Related to this is the fact that in today’s world, making distinctions between domestic and international operations of airlines makes no sense. There are many overseas Indian workers living in hinterland Indian towns, using domestic flights to connect to metro airports for international travel. These consumers, mostly from less well-off backgrounds, stand to gain from airlines offering seamless connectivity at competitive rates, including through leveraging their international network and plying specific, hitherto underserved routes. At the end of the day, it is all about lowering the barriers of entry in aviation or, for that matter, any business. The NDA government should lay to rest the controversial rule as part of its much-awaited civil aviation policy.

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