In a sea of ill-conceived rules governing Indian commercial airlines, the 5/20 rule, which requires Indian carriers to wait five years and have a fleet of 20 aircraft before they can fly the lucrative and profitable international routes is one of the worst. No such restriction applies to the foreign airlines flying IN to India.
The newcomers Tata-SIA Vistara and AirAsia India want the government to remove this rule, while the incumbents Jet Airways, IndiGo, SpiceJet and GoAir, who have waited the required five years and are organised as the Federation of Indian Airlines (FIA), want to retain the rule.
On Tuesday, FIA’s Chairman, Rahul Bhatia, also the promoter of IndiGo, India’s largest domestic airline, wrote to the Indian Prime Minister opposing any move to abolish the 5/20 rule. It is understandable. Nature prefers the status-quo and incumbent businesses absolutely love it. Even in the core science of Physics both Newton and Galileo postulated laws including The Law of Inertia.
In the letter Bhatia wrote “…the removal of these rules will vitiate the level playing field that exists in Indian civil aviation, and tectonically shift it in favour of foreign airline-controlled new entrants…”
How short the memories of Bhatia and his FIA colleagues, are.
The private airlines that are the FIA were formed thanks to the government’s decision 21 years ago, permitting allowing private scheduled domestic airlines and launching the opening of India’s civil aviation market. Opponents of the move, wanting to retain the status-quo, proclaimed curiously similar doomsday scenarios 21 years ago, as cited by the FIA today. Had the status-quo been maintained these airlines would have never been.
Also in the early 1990s, soon after then finance minister Manmohan Singh initiated the liberalisation of the Indian economy opening the country to multi-national corporations, a group of Indian business tycoons came together and lobbied the government saying existing rules and tariffs were being dismantled too fast and Indian industry needed protection from the multinationals. While demanding a “level playing field” some of them went as far to claim a second wave of colonisation was coming and the foreigners would rule the country. These tycoons came to be known as The Bombay Club. Amongst these tycoons’ families were the Wadias who subsequently founded GoAir and the Modis who founded ModiLuft which is now SpiceJet.
Today the terms “protection” and “level playing field” are a distant memory. The tycoons of the Bombay Club, Bajaj, Singhania, Modi, Wadia, Godrej, Bharat Ram, Birla, Arunachalam, and others have become global tycoons. Had the status-quo been maintained where would the Indian economy have been, that is today considered the fastest growing aviation market in the world?
Change is a must on the road to growth. Not all changes will lead to positive results from day one, but we have seen that market forces do ultimately lead to a desired outcome.
I agree with the incumbents; there are some very silly and needlessly cumbersome rules. The route dispersal guidelines (RDGs) and domestic flying credits for example are a bureaucratic and inane nightmare for the industry. The government should revise rules that unshackle and ignite what will become the world’s third largest airline market in the years to come.
Let us begin with abolishing 5/20 over the next two years.