5/20 Rule: Why Vistara and AirAsia India want it removed

Today, Ratan Tata, Chairman emeritus of Tata Sons tweeted about the 5/20 Rule that airlines follow and said that airlines that are supporting this rule are doing so to protect their vested interests.

Ratan Tata said that such discriminating policies were holding back progress. He has stakes in both newly started airlines Vistara and AirAsia India.

Mr. Tata had tweeted: "In the airline industry in India, it is sad to see the incumbent airlines lobbying for protection and preferential treatment for themselves against the new airlines which have been formed in full compliance with prevailing government policy and providing air transport to Indian citizens in line with the dream of a ‘New India' promoted by the new government under Mr. Modi's leadership."

He further continued that: "The lobbying for discriminating policies between old and new airline is reminiscent of the protectionist and monopolistic pressures by vested interests' entities who seem to fear competition, as in a variety of other sectors over the years. These protectionist moves have held back progress in India compared to open economies that have thrived on competition overseas."

5/20 Rule and Vested Interests pic.twitter.com/fQRtfEZlbK

— Ratan N. Tata (@RNTata2000) February 21, 2016

So what is 5/20 Rule:

Simply put rule 5/20 means that only those Indian airlines which have a fleet of 20 aircrafts that they have already operated in the domestic sector for five years can start operating in international sector.

The issue became topical as a Group of Ministries discussed the draft of new aviation policy.

Stand of Start-Ups:

Two Start-Ups Vistara and AirAsia India though are trying their level best to remove the 5/20 Rule and are calling opposition to the removal by established airlines as motivated by their vested interests.

In support of 5/20 Rule:

The established airlines want the status quo to be maintained on the 5/20 Rule. When new aviation policy was rolled out last October many provisions like two percent levy on all air tickets to fund regional connectivity and tax sops were considered.

Seeking PMO's intervention:

Body of Federation of Indian Airlines (FIA) sought PMO's intervention with regards to incorporating some of its concerns when draft civil aviation policy is finalised.

Jet Airways, IndiGo, SpiceJet and Go Air had a meeting with Minister of State in PMO Jitendra Singh and submitted a memorandum to him where they had mentioned that they are against removal many rules including 5/20 Rule and also against auctioning of additional seats to foreign players and the issue of substantial ownership and effective control.