Hitting out at older carriers, top industrialist Ratan Tata on Sunday accused them of lobbying and using “monopolistic pressures” to retain preferential treatment under the controversial 5/20 rule that restricts overseas flying by new airlines.
Reacting strongly to the charge, low-cost carrier SpiceJet’s chief Ajay Singh asked him to rather advice the two airlines associated with Tatas – Vistara and AirAsia India – to first serve India and then seek to fly international.
Singh also alleged that the two carriers were apparently controlled by their foreign parents and said they had undertaken, while applying for the licence, to follow the 5/20 rule which they are opposing so vehemently now.
AirAsia India and Vistara – two airlines operated by the Tatas through joint ventures – are presently ineligible to operate overseas under the 5/20 norm, which requires an Indian carrier to have minimum five years operational experience and at least 20 planes to operate international flights.
The government is currently in advanced stage of finalizing its new civil aviation policy, wherein one of the proposals is to scrap the 5/20 rule.
While several older airlines including SpiceJet, Jet Airways, IndiGo and GoAir are vehemently opposing any move to scrap the 5/20 norm, Tata has applauded the civil aviation ministry’s proposal to remove the “controversial” rule.
Terming as sad the lobbying of incumbent airlines for “protection and preferential treatment”, he tweeted that such moves were reminiscent of the monopolistic pressures by entities with vested interests who fear competition.
5/20 Rule and Vested Interests pic.twitter.com/fQRtfEZlbK— Ratan N. Tata (@RNTata2000) February 21, 2016
“The lobbying for discriminating policies between old and new airlines is reminiscent of protectionist and monopolistic pressures by vested interests’ entities who seem to fear competition, as in a variety of other sectors over the years,” Tata said in a strong message posted on his Twitter page.
“These protectionist moves have held back progress in India compared to open economies that have thrived on competition overseas,” Tata Group’s chairman Emeritus said in his message titled ‘5/20 Rule and Vested Interests’.
“In the airline industry in India, it is sad to see the incumbent airlines lobbying for protection and preferential treatment for themselves against the new airlines…
“…(the new airlines) have been formed in full compliance with prevailing government policy and providing air transport to Indian citizens in line with the dream of a ‘New India’ promoted by the new government under (Prime Minister Narendra) Modi’s leadership,” said Tata, who was instrumental in the group’s re-entry to the aviation sector.
Tata Group and Singapore Airlines together run Vistara, while AirAsia is a three-way joint venture between Tatas, Malaysia’s AirAsia and Arun Bhatia’s Telestra.
AirAsia India is less than 2-year-old with six aircraft, while Vistara was started in January 2015 and has nine planes.
With the government considering the removal of 5/20 norm, Tata said, “One hopes when the new policy is introduced it will be free of discrimination and protectionism, so that Indian aviation can grow for the benefit of consumer and the common man — not to serve the interests of select beneficiaries of protectionism.”
According to Tata, the call for a new open market economy in India, in line with policies promised by Modi, will “promote growth in an open market based on competitiveness and not from self interest-based protectionism”.
Reacting to Tata’s comments, SpiceJet’s Singh said all the airlines were asked “to serve our great country before we got profitable rights to fly abroad” under the 5/20 rule.
“We served with great pride. What is wrong if these two foreign-controlled airlines are also asked to serve India before being allowed to fly international?
“Mr Tata, whom we respect greatly, should in fact urge these airlines in which his group is a shareholder, to serve India willingly before being allowed to fly international,” Singh said.
The SpiceJet chief further said that the two airlines associated with Tata group had undertaken to follow the 5/20 rule while obtaining their licenses, but “they are now opposing (this rule) so vehemently”.
He also alleged that “it is evident that these airlines are controlled by their foreign parents”.
“This is in complete violation of Indian laws that require airlines in India to be effectively controlled by Indian shareholders. Ratan Tata should urge these airlines to follow Indian law in letter and spirit.
“No country in the world, including Singapore and Malaysia, allows its airlines to be controlled by foreign airlines. If Indian airlines like SpiceJet and Indigo are not allowed in these countries, why should they be allowed to control airlines in India?,” he added.
Recently, the industry body FIA had also alleged that AirAsia India was being controlled by its foreign joint venture partner AirAsia.
A delegation of FIA (Federation of Indian Airlines) — a grouping of established airlines Jet Airways, SpiceJet, IndiGo and GoAir — has submitted a memorandum to Prime Minister’s Office on their opposition to removal of 5/20 norm and on the issue of substantial ownership and effective control.
On February 18, a group of ministers discussed the draft aviation policy, including the 5/20 norm and the proposed options – scrapping or retaining this rule – at a meeting here chaired by home minister Rajnath Singh.
At the meeting, attended by finance minister Arun Jaitley and civil aviation minister Ashok Gajapathi Raju among others, extensive discussions were held on the norm for international flying by domestic carriers and regional air connectivity.
Feature image source: PTI