5/20 rule for Indian airlines must be scrapped, says Tata Sons' Mukund Rajan

The government should abolish 5/20 rule for the Indian airlines as it demands that an airline must have at least 20 planes and run domestic operations for five years before being eligible to start overseas flights, Tata Sons Chief Ethics Officer and Vistara Director Mukund Rajan told the Economic Times in an exclusive interview.

He said that the rule should be scrapped as local carriers that can go abroad cater to just 30% of Indians travelling overseas because of lack of capacity.

Vistara is India's newest airline which is jointly owned by the Tata Group and Singapore Airlines.

On being asked about the reason behind Tata Group’s decision to enter the airline business, he said the company tried twice to enter the aviation sector but it never happened due to some reasons. “When the previous administration allowed foreign airlines to own stakes in Indian airlines, we were approached by AirAsia first and Singapore Airlines and both were with different kinds of offerings,” he told the financial daily.

Talking about the Indian aviation market, Rajan said that there is space for a low-cost carrier as well as for a premium airline, which Kingfisher (grounded in October 2012) used to offer earlier. “So, these are two different segments and both our partners are the best in their respective spaces,” he added.

On being asked about Vistara’s performance since its launch in January, he told ET that in India there is a kind of traveller who is looking for a better travel experience in terms of hygiene and a little extra care during their travel and there is another kind looking for nothing extra and just for travel between points A and B. “Vistara, with its product offering, has been able to establish the distinction between a full service and a low-cost (carrier) and it will get pronounced further. We are probably the fastest carrier to be able to carry a million passengers in India and that we will achieve before the end of this fiscal,” he said.

Talking about the price of tickets, he said: “We have a concept of dynamic fares, which keep changing based on 'n' number of factors. In terms of economy fares, we are competitive (with) any low-cost carrier but we would not get into offering fares and discounts like many airlines do in India. Our loads in the economy class of our aircraft are phenomenal. But Vistara also has seats in premium economy and business class, which are picking up and will pick up further.”

After being asked to rate this NDA government, the Vistara director said: “ When we entered the aviation market in 2013, there was a sense that a lot of changes are beginning to happen. We have seen the debate on 5/20, Route Dispersal Guidelines (RDGs) and Domestic Flying Credits (DFCs). I am not so sure that the debate is getting resolved in a timely manner and gives clarity to the industry on the way forward. I am not certain that it is in line with the agenda laid out by the government in terms of making India a pivot for economic activity in this part of the world.”

Discussing other issues, he said: “Let us talk about hubs. To put it bluntly, our hubs are actually outsourced to foreign countries. I think hubs outside India have done a great job. Good luck to them. But why cannot these hubs be in India? An aviation hub can have a multiplier effect on the economy. Look at Atlanta, which is an aviation hub.”

(Image: Indiatimes)