Piyush Gupta.The Indian Government approved the country’s first National Civil Aviation Policy (“New Policy”) on Wednesday (15 June, 2016). This update provides a brief summary of the major proposals that are to be implemented under the Policy..1. 5/20 Rule Abolished .As per the erstwhile rule created in 2004 (which was known as the 5/20 Rule), a domestic airline in India was allowed to fly on international routes only after flying for 5 years to domestic destinations and operating at least 20 aircraft. This Rule was always a bone for contention, as domestic airlines would allege that it left them at a competitive disadvantage as compared to their peers internationally, as none of the other countries had similar regulations and their airlines would corner the market during those 5 years. .Under the New Policy, the Government has scrapped the 5/20 Rule and now, any domestic airline can fly overseas provided they deploy 20 planes or 20 per cent of their total capacity for domestic operations. This means that new airlines such as Vistara and Air Asia will no longer have to wait for 5 years to start operations on international routes..2. Open Skies for European and SAARC Nations .Under the current arrangement, India has an open sky policy with the US, but only a ‘near’ open sky policy with the UK, with restrictions on the frequency of flights operating between UK and Delhi and Mumbai..Under the New Policy, India is set to get an open-sky policy for countries beyond the 5,000-km radius from Delhi, on a reciprocal basis. This implies that airlines from Europe and/or the SAARC countries will have unlimited access in terms of the number of flights and seats, to Indian airports, leading to increased flight frequencies with these countries..3. Fare Cap on Flights on Certain Regional Routes .As part of its regional connectivity scheme under the Route Dispersal Guidelines, the New Policy provides that airlines will charge INR 2,500 to passengers for one-hour flights on regional routes..The Government’s Route Dispersal Guidelines have also been a highly contentious issue, since they require Indian airlines to serve Tier II and Tier III cities, even though they may be loss-making for the airline..However, the New Policy provides that the Government will provide support to fund airlines’ losses on such unserved / lesser served routes by allowing the airlines to charge a small levy per departure on all domestic routes, except in remote cities and in the north-eastern states. The amount of levy that the airlines will be allowed to charge is unclear at this time.. 4. Self Ground Handling Permitted .Under the New Policy, domestic airlines will be permitted self ground-handling at all airports to ensure competition and efficiency, as well as lead to cost savings for the airlines..India has had a Ground Handling Policy that was introduced in 2007, which required airlines to outsource the job in New Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Bengaluru to one of the three – (a) an airport operator along with a partner; (b) an arm of national carrier Air India; or (c) a company selected by the operator. Elsewhere, they could manage ground handling on their own or hire agents. The 2007 Ground Handling Policy was stayed after airlines went to court, saying it would make operations more expensive and take away their unique selling proposition of providing extra services to passengers..By allowing the airlines to handle ground handling themselves may lead to cost savings for the airlines, but there are some concerns regarding safety and security of personal belongings of the passengers. Accordingly, it might be prudent for the Government to quantify standards and benchmark costs for ground handling such that safety and security may not be compromised..5. Miscellaneous .Under the New Policy, development of Greenfield and Brownfield airports by the state governments, private sector and/or in Public-Private-Partnership (PPP) mode will be encouraged..Additionally, there is a proposal for the development of four heli-hubs and for the provision of helicopter emergency medical services..Concluding Words .The New Policy certainly seems to have pushed the right buttons in terms of its objectives of making flying affordable, safe and convenient; looking to promote balanced regional growth, tourism, and infrastructure, but the most significant impact that the New Policy has, is that it is in line with the Government’s raison d’être of ease of doing business in India. India is on track of becoming one of the top most civil aviation markets in the world, and the New Policy certainly seems to have the right intention, vision and planning. We will await how the execution and implementation of this New Policy will unfold..Piyush Gupta is a partner and head of the Aviation & Competition law practice at the Kochhar & Co.
Piyush Gupta.The Indian Government approved the country’s first National Civil Aviation Policy (“New Policy”) on Wednesday (15 June, 2016). This update provides a brief summary of the major proposals that are to be implemented under the Policy..1. 5/20 Rule Abolished .As per the erstwhile rule created in 2004 (which was known as the 5/20 Rule), a domestic airline in India was allowed to fly on international routes only after flying for 5 years to domestic destinations and operating at least 20 aircraft. This Rule was always a bone for contention, as domestic airlines would allege that it left them at a competitive disadvantage as compared to their peers internationally, as none of the other countries had similar regulations and their airlines would corner the market during those 5 years. .Under the New Policy, the Government has scrapped the 5/20 Rule and now, any domestic airline can fly overseas provided they deploy 20 planes or 20 per cent of their total capacity for domestic operations. This means that new airlines such as Vistara and Air Asia will no longer have to wait for 5 years to start operations on international routes..2. Open Skies for European and SAARC Nations .Under the current arrangement, India has an open sky policy with the US, but only a ‘near’ open sky policy with the UK, with restrictions on the frequency of flights operating between UK and Delhi and Mumbai..Under the New Policy, India is set to get an open-sky policy for countries beyond the 5,000-km radius from Delhi, on a reciprocal basis. This implies that airlines from Europe and/or the SAARC countries will have unlimited access in terms of the number of flights and seats, to Indian airports, leading to increased flight frequencies with these countries..3. Fare Cap on Flights on Certain Regional Routes .As part of its regional connectivity scheme under the Route Dispersal Guidelines, the New Policy provides that airlines will charge INR 2,500 to passengers for one-hour flights on regional routes..The Government’s Route Dispersal Guidelines have also been a highly contentious issue, since they require Indian airlines to serve Tier II and Tier III cities, even though they may be loss-making for the airline..However, the New Policy provides that the Government will provide support to fund airlines’ losses on such unserved / lesser served routes by allowing the airlines to charge a small levy per departure on all domestic routes, except in remote cities and in the north-eastern states. The amount of levy that the airlines will be allowed to charge is unclear at this time.. 4. Self Ground Handling Permitted .Under the New Policy, domestic airlines will be permitted self ground-handling at all airports to ensure competition and efficiency, as well as lead to cost savings for the airlines..India has had a Ground Handling Policy that was introduced in 2007, which required airlines to outsource the job in New Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Bengaluru to one of the three – (a) an airport operator along with a partner; (b) an arm of national carrier Air India; or (c) a company selected by the operator. Elsewhere, they could manage ground handling on their own or hire agents. The 2007 Ground Handling Policy was stayed after airlines went to court, saying it would make operations more expensive and take away their unique selling proposition of providing extra services to passengers..By allowing the airlines to handle ground handling themselves may lead to cost savings for the airlines, but there are some concerns regarding safety and security of personal belongings of the passengers. Accordingly, it might be prudent for the Government to quantify standards and benchmark costs for ground handling such that safety and security may not be compromised..5. Miscellaneous .Under the New Policy, development of Greenfield and Brownfield airports by the state governments, private sector and/or in Public-Private-Partnership (PPP) mode will be encouraged..Additionally, there is a proposal for the development of four heli-hubs and for the provision of helicopter emergency medical services..Concluding Words .The New Policy certainly seems to have pushed the right buttons in terms of its objectives of making flying affordable, safe and convenient; looking to promote balanced regional growth, tourism, and infrastructure, but the most significant impact that the New Policy has, is that it is in line with the Government’s raison d’être of ease of doing business in India. India is on track of becoming one of the top most civil aviation markets in the world, and the New Policy certainly seems to have the right intention, vision and planning. We will await how the execution and implementation of this New Policy will unfold..Piyush Gupta is a partner and head of the Aviation & Competition law practice at the Kochhar & Co.
