The Indian Government mulls out the option of scrapping the 5/20 rule to allow Indian domestic carriers to fly abroad. A move which could help Singapore Airlines and AirAsia to expand their international footprint through their respective Indian affiliate.
There is a rule applying to India’s air transport which is a deterrent factor for foreign companies to enter one of the world’s most promising aviation market: any new carrier must wait five years before being able to fly internationally. Even more stringent, airlines which wish to fly outside India must have a fleet of at least 20 aircraft. Both requirements are known as the 5/20 rule and so far have discouraged many potential investors to go into the India market.
So far, only two ASEAN based carriers – AirAsia and Singapore Airlines- have been tempted by an operation in India. AirAsia started flying domestically in June 2014 in a joint venture with Indian conglomerate Tata Sons Ltd. Vistara, another joint venture set by Tata Sons Ltd with Singapore Airlines took off in January 2015. The full service carrier is based in Delhi and flies this summer to 17 cities from its main hub, offering some 400 weekly frequencies. The carrier plans to take delivery of four new Airbus A320 during the year, boosting its total frequencies to 580 by next October.
What both airlines are now missing is a connection to an international entry point. Vistara dreams to serve Singapore and creates synergy with its parent company. Same idea for AirAsia. The carrier has two domestic bases – the largest in Bangalore and a second in Delhi. Although both are already connected by other airlines from the group to Malaysia and Thailand, AirAsia would love to see its Indian affiliate developing its own international network. This would help for example to capture some of the Singapore-India or the Gulf-India markets.
According to business daily e-paper Live MINT, the Indian government is now considering to relax those rules. In the possible future amendment, the total number of requested aircraft to operate internationally could be reduced or even scrapped while the five-year waiting time would simply be lifted. This would enable any carrier to immediately fly overseas if they have traffic rights.
Both Singapore Airlines and AirAsia would greatly benefit from the new law. Vistara could play synergies with the SIA group in Singapore by complementing the carrier’s network to new destinations -especially in South Asia and the Gulf. For AirAsia, it would then enable more connections from the various carrier’s bases across ASEAN into India while enabling AirAsia to expand its footprint westwards to new Gulf destinations.
They are no indication for now over a timing for the government’s decision. According to Live MINT,other carriers such as IndiGo and SpiceJet are lobbying the government by arguing that scrapping the current law would favour new airlines. Ratan Tata, former chairman of Tata Sons Ltd. indicated to the newspaper that the current rule is “reminiscent of the protectionist and monopolistic pressures by vested interests’ entities who seem to fear competition.”