Good news for passengers: Cabinet clears Civil Aviation Policy
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The cabinet today cleared the much-awaited Civil Aviation Policy, which includes a plethora of passenger-friendly measures, like airfare cap at ₹1200 for 30-minute flights and ₹2500 for one-hour flights. The cabinet also approved changing the 5/20 rule for international flying to 0/20. Currently, only carriers that have been in the business for at least five years and own a minimum of 20 aircraft can fly abroad. This will enable new carriers like Vistara and Air Asia to start international operations sooner.
Now in case of flight cancellations announced within 24 hours of departure, the compensation amount has been enhanced to up to Rs 10,000. Refunds will be applicable on all fares, including promotional and special rates. The new aviation policy seeks to create an eco-system to handle 300 million domestic passengers by 2022 and 500 million by 2027, and 200 million international travellers by 2027.According to the Civil Aviation Policy, released by the ministry on Wednesday, the government has decided to scrap the minimum five years requirements However, an airline will have to allocate 20 aircraft or 20% of their total fleet of aircraft, whichever is higher, to the domestic sector if they wish to fly overseas. This effectively means a carrier must have a minimum 20 aircraft in its fleet. Last week, the ministry also decided to fix the fee for extra baggage at Rs 100 per kilogramme.
The markets reacted positively to the news, Jet Airways was up 1.82%, Indigo share prices increased 2.49% and SpiceJet was up by 4.29%. According to the Business Standard, the aviation industry has been sharply divided with the older airlines like IndiGo, Spice Jet, Go Air and Jet Airway crying foul over the decision to abolish the 5/20 rule. Top executives of IndiGo, Jet and GoAir and Jet Airways had repeatedly said that they were particularly miffed with the ministry's persistent refusal to allow them to present their views about an important policy.
Rahul Bhatia, chairman of Federation of Indian Airlines (FIA), had told Business Standard that a legal recourse would be a possible option. “We don't want legal battles but if the ministry is not ready to listen to us, what is the option? We just want a level-playing field," he said. Similarly, Vistara and Air Asia had repeatedly said that the 5/20 rule, in its present form, hurts the interest of the aviation sector as it stifles the growth prospects of any new airline. In February, Tata Group Chairman Emeritus Ratan Tata had accused older carriers of lobbying and using “monopolistic pressures” to retain preferential treatment under the 5/20 rule which sparked a war of words between the older and new airlines. Currently, Vistara and Air Asia have 11 and six aircrafts, respectively.
