New aviation policy a pie in the sky, say private airlines

‘With so many regulations in place it has defeated the very purpose of privatisation’

June 15, 2016 11:16 pm | Updated November 17, 2021 05:03 am IST - MUMBAI:

Private airlines have given thumbs down to the new civil aviation policy stating that it lacked pragmatism and would adversely impact their business.

Refusing to comment as they were yet to study the fine print private carriers said the Federation of Indian Airlines (FIA) would comment on their behalf. FIA officials, however, were not available for comment.

“This policy is very restrictive. With so many regulations in place, it has defeated the very purpose of privatisation. How can the government cap fares? If our fares are very high, then people will not fly,” said an official of a private airline, on condition of anonymity. Airline experts were equally vocal.

K.G Vishwanath, Partner and Director, Trinity Aviation Consultants Pte Ltd said: “The policy is negative for the industry. The government is trying to promote air connectivity between tier-3 cities, but which airline will take assets (aircraft, manpower and equipment) to loss-making routes?”

“It would take three years to build regional routes, till then why would some airline divert focus from profitable metro routes? The two per cent cess to support regional connectivity is also negative on the airlines as they will not be able to pass on the additional burden on passengers. Their margins will be hit,” he said.


He said the replacement of 5/20 with 0/20 was a non-event. “It is hogwash. It is not going to benefit new players as they can not scale up immediately to be eligible to fly international,” Mr Vishwanath said.

“One can arrange the aircraft, but having the pilots, crew and related infrastructure in place is not easy. Besides, you need to have a network to make money in international sector.”

New airlines which had lobbied for the scrapping of the 5/20 rule were unimpressed. “0/20 does not mean anything. There has been no scrapping. It should have been 0/0,” said an executive working in one of the two new private airlines. However, the government’s regional focus may benefit the industry in the medium-to-long run, as it maylead to conversion of railway passengers into flyers.

Amber Dubey, Partner and Head, Aerospace and Defence, KPMG in India, said the key focus of the policy was on affordability, connectivity and ease of doing business.

Shares rise

Shares of InterGlobe Aviation had risen 1.90 per cent to close at Rs.1,008. Jet Airways gained a marginal 0.21 per cent to settle at Rs.561. Spicejet rose 3.51 per cent to end the day at Rs. 66.40.

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