Debunking the charge levelled by older airlines that scrapping the controversial 5/20 rule would lead to higher fares, Tata Sons, which controls Vistara and Air Asia India, on Wednesday said the entry of the two airlines into the domestic skies has resulted in downward pressure on airfares and improved service levels.
In further escalation of war of words with older airlines — IndiGo, GoAir, Jet Airways and SpiceJet — Tata Sons termed their allegation as “specious and unfounded”.
It further said that the government should abolish the 5/20 rule in national interest as it will help the country realise its full potential and improve India’s connectivity with the world.
"Apart from the fact that there are no global parallels to this rule, the rule is discriminatory to Indian airlines as foreign airlines that do not meet these criteria are allowed to operate in Indian skies, but Indian airlines cannot enjoy reciprocal rights,” Tata Sons said in a statement.
As per the eligibility criteria laid down by the government, a domestic airline is allowed to fly on international routes only after completing five years of operation in the domestic market and possessing a minimum fleet of 20 aircraft. This bars Vistara and Air Asia India from flying overseas.
In October last year, the government released a draft aviation policy that indicated the overseas flying could be relaxed and foreign routes would be opened for all the domestic scheduled carriers. As the move could intensify competition on foreign routes for incumbent carriers, they started protesting against the proposal and launched extensive lobbying for retaining the controversial 5/20 rule.
Senior executives of these carriers recently met minister of state in the prime minister's office (PMO) Jitendra Singh and sought his intervention for maintaining status quo on the overseas flying norm. The executives also raised the issue of substantial ownership and effective control clause and alleged that foreign parents controlled Vistara and Air Asia India.
While Singapore Airlines holds 49 per cent in full-service Vistara with remaining stake with Tata Sons, Malaysian low-cost carrier AirAsia has 49 per cent equity participation in budget airline Air Asia India. Tata Sons has 41 per cent stake in Air Asia India.Tata Group has denied that foreign partners were controlling the two carriers.
“Tata Sons would like to emphasise that both its joint ventures with Air Asia and Singapore Airlines are fully compliant with the requirements of Indian regulation. Majority ownership and effective control of both airlines are with the Indian parties as per the requirements of press note 6,” the company stated in its official communication.
The war between the two camps has intensified following a tweet by Tata group patriarch Ratan Tata last Sunday that incumbent airlines were putting monopolistic pressures to retain the 5/20 rule.
