No country will allow Indian companies to substantially own an airline:Spicejet chief

Govt. should allow domestic airlines to grow and help reduce the cost of aviation, says Ajay Singh.

June 23, 2016 04:44 pm | Updated December 04, 2021 11:02 pm IST

SpiceJet Chairman Ajay Singh. File Photo

SpiceJet Chairman Ajay Singh. File Photo

Reacting to the government's move to further open up the aviation sector for foreign players, SpiceJet Chairman and Managing Director Ajay Singh said no country would allow Indian companies to substantially own an airline in their country. Speaking on the sidelines of Assocham’s 9th International Conference on Indian Civil Aviation and Tourism, Mr. Singh said government should allow domestic airlines to grow and help reduce the cost of aviation. Edited excerpts:

You said at the event that opening up the sector wouldn’t help the industry but bringing down the cost of aviation would. Were you hinting at the foreign direct investment (FDI) liberalisation or easing of the 5/20 norm?

I believe the principle objective of the policy is the need to reduce the cost of aviation. It’s only when you reduce the cost of aviation that you bring down fares and only then this growth rate would continue. This 20 per cent growth we are talking about is not likely to continue if we don’t keep the fares low. So, all of us first need to work together to ensure that the cost is low and airfares are low.

What are your views on the FDI reforms?

That’s a government prerogative. This is an enabling legislation which is always good.

You were in favour of retaining 5/20 norm. What is your view on the move to relax the rule?

As you know that existing airlines felt that it was discriminatory when they had been asked to follow 5/20 (rule). They felt that new airlines should also be asked to follow 5/20 which is also linked with RDG [route dispersal guidelines]. Nothing has been done to RDG. The government has still gone ahead and changed 5/20 rule. It’s their prerogative. We believe that ultimately the objective of the policy should be to strengthen indigenous aviation, to ensure that we build hubs within the country and we do not export our hubs to the middle-East and south-east of Asia.

Do you think this objective has not been met in the policy?

We believe work needs to be done by government to ensure that we keep strengthening indigenous aviation. Secondly, these issues must be dealt with on basis of reciprocity. It cannot be that countries outside India will not allow Indian companies to go and own and effectively control airlines in their country whereas we allow them to do the same. So, one must act in a manner in which we strengthen our own aviation sector which means strengthening the airlines, MROs, training infrastructure and making sure that the growth remains profitable growth in the country.

You had complained of some airlines violating the substantial ownership and effective control (SOEC) norms but with the new FDI rules, that question has gone out of the window it seems…

That doesn’t go out of the window at all. The SOEC norms are a part of law and they remain (so). Airlines which are supposed to be substantially owned and effectively controlled by Indians will have to substantially owned and controlled by Indians. This matter is sub-judice. I think I don’t want to comment further on it but it is evident what has happened in the case of that airline. Documents have been put in the public domain and it is for the government and the airline to answer those questions and it is for the courts to interpret the rule.

Government has allowed foreign players to substantially own airlines in India. What is your take?

That is through the approval route so people will have to apply. (Foreign) airlines will still be allowed to own 49 per cent of equity in airlines in India and therefore, airlines in India will have to be substantially owned and effectively controlled by Indians.

Ministry proposed a slew of so-called passenger centric initiatives. How do you see it impacting your ancillary revenues?

Those issues are still under discussion by the ministry. Very often cancellations happen for no fault of the airlines themselves. Cancellations can happen because of variety of reasons which are out of the control of the airlines. We believe as long as the airlines make it clear to the passengers who have bought tickets from them, it is a contract between an airline and a passenger and that shouldn’t be interfered with any other authority. For example, there are certain suggestions that even when tickets are sold by travel portals to passengers the airline would be responsible for the refund. We believe this will not be a legally tenable proposition because this will be a contract between a travel agent and passenger. In all this, the ultimate objective should be to reduce cost of aviation and any directives of this sort will increase the cost of aviation and in turn will not be in the interest of the consumers.

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