Civil Aviation Ministry may take time to decide on pending proposals

MUMBAI/DELHI: The Civil Aviation Ministry is going slow on several pending proposals, including a revision of airport charges and enhancement of bilateral flying rights, as civil servants are reluctant to take decisions close to the upcoming general elections in April-May.

Even granting a permit to Air Asia — which has entered into a joint venture with Tata Sons — may take more time than anticipated, say officials involved in the decision-making process.

"There are several proposals pending. At this time, you need to fasttrack decisions to clear some of them. None of that is happening," said a government official who didn't want to be named. The officials said there was a widespread feeling that contentious decisions should be left to the next government.

Further, the government is reluctant to take unpopular decisions such as raising airport charges, which could hit the Congress-led UPA government's prospects in the elections.

MUMBAI AIRPORT CHARGES

One of the proposals facing delays is an application from GVK-controlled Mumbai International Airport seeking to increase airport charges. The proposal was submitted in December, 2013 and GVK wants the tariffs to be revised from April 1 this year.

"Typically, the process (of fixing tariffs) takes many months. They had sent the first proposal in October 2013 and the revised proposal was finalised by mid-November after which stakeholder consultations were held. Stakeholder consultations itself is a lengthy process. So there's no chance that the tariff at Mumbai airport will be revised before the (general) elections," said a senior official at the Airports Economic Regulatory Authority.

Mumbai airport opened its new terminal on January 10. The terminal, which cost Rs 5,500 crore, will open to passengers on February 12. GVK has cited higher depreciation costs on the new terminal to back its case for higher tariffs.

AERA's decision last year to let Mumbai and Delhi airports increase charges by 154 per cent and 346 per cent, respectively, earned it considerable flak from global airlines as well as the International Air Transport Association (IATA). They claimed it would depress demand for air travel.

"The government's proposal would land it in a sticky situation at the elections as it would increase the burden for the air traveller," said Kapil Kaul, CEO, South Asia at Sydneybased CAPA-Centre for Aviation.

APPROVAL TO AIR ASIA 

Two Indian joint ventures from two global airlines—AirAsia and Singapore Airlines—which are at various stages of clearances, may also experience some regulatory turbulence. Both have tied up with Tata Sons. While Tata-SIA is awaiting a no-objection certificate from the aviation ministry, AirAsia is waiting for an air operator's permit from the Directorate General of Civil Aviation, the last stage before it starts flying in India.

Industry insiders said the ministry is "unnecessarily delaying" the clearance process. The DGCA recently put up a notice on its website seeking public views and objections on the AirAsia proposal. On February 19 last year, AirAsia announced it will set up an airline in India. It got a nod from the foreign investment promotion board, which clears overseas investment proposals, on April 5 and an NOC from the ministry on September 26. 

"The airline isn't new. It has units in several countries. It fulfils all the prerequisites required for an airline to fly in India. The public notice should have come at the beginning of the government's scrutiny process, not now," said the insider. 

Another potential impediment for AirAsia is a court case filed on July 25 by BJP leader Subramanian Swamy saying FDI is only permitted in existing airlines and no new company can be floated. The government eased rules in September 2012 to allow foreign carriers to purchase up to 49 per cent in India's airlines. 

BILATERAL RIGHTS 

Officials also say that India will go slow in enhancing bilateral rights between India and United Arab Emirates, Qatar and China. Close to the easing of FDI rules, the government trebled the weekly seat allocations between India and Abu Dhabi. That appears to be one of the key factors behind a deal where Jet sold 24 per cent stake to Etihad Airways for $379 million. 

The enhancement led to Swamy filing a PIL in the Supreme Court accusing the government of diverting Indian international traffic to foreign carriers. Meanwhile, Emirates, which uses all of the 54,000 weekly allocated seats between India and Dubai has proposed enhancing the rights by another 10,000 seats. Qatar has sought to enhance its weekly quota of seats to 72,600 from the current 24,800.

The enhancements sought are linked to a separate proposal — that of allowing the Airbus A380 plane into Indian airports. Unless more seats are allowed, it would be pointless for foreign carriers such as Emirates to bring in jumbo planes to India. This proposal awaits a final clearance from civil aviation minister Ajit Singh.

The model code of conduct for the elections kicks in by end of February. However, ministry officials say that there are no legal or regulatory hurdles to clearing these proposals. "Most of the proposals, including AirAsia and revised airport tariffs can be cleared even while the code of conduct is on," said a joint secretary at the aviation ministry.

Officials say the ministry is keenest at this point in time to change a rule that requires airlines to fly domestic for five years and own a fleet of 20 planes before it can fly international. The ministry is currently drafting a Cabinet note on this. The minister has said he is confident of having the rule changed by end of February. But even in this, not everyone is confident. 

"The only airline which currently doesn't have international flying rights is Go Air, but it will anyway get them in July when it has a fleet of 20 planes since it has already completed more than five years. Among the new ones only Tata-SIA would be keen to fly international so the rule may be construed as favouring the airline," said an industry expert.

DGCA seeks views on AirAsia permit

The Directorate General of Civil Aviation on Monday updated its public notice inviting comments, suggestions and objections if any against the grant of an Air Operator's Permit to AirAsia India. The updated notice clearly specifies that work on processing the application is happening alongside collection of public views. 

It also tells the public to send in comments/suggestions/ objections giving specific grounds of objections with a certificate of authenticity. The timeline for sending the comments remains the same, thirty days from the date of the first issue of the public notice on January 13. Air Asia got an NOC from the ministry on September 26. 

Aviation ministry preparing cabinet note to revoke 5/20 rule

The government may looking at easing norms for domestic airlines to operate international services without restrictions in fleet size and operational experience ahead of the launch of two start-up ventures - Tata-SIA Airlines and Tata-AirAsia.

Existing rules require Indian carriers to be in operation for at least five years and have a fleet of 20 aircraft to be eligible to fly on international routes.

Civil Aviation Minister Ajit Singh today said the ministry is in the process of framing a cabinet note to seek the government’s approval to “scrap” the regulations within the coming month and ease norms for flying international.

“The 5/20 norm for flying international will be completely abolished. We are preparing a cabinet note on the issue. Since everything needs to be completed before February end (when the election code of conduct comes into force), we will do it before that”, Singh informed.

Singh’s proposal has already been endorsed by Finance Minister P Chidambaram, who said in Washington in October last year that if the civil aviation ministry moves a Cabinet note to amend the rules, he would support it.

The move will benefit Tata-SIA and AirAsia, both of whom are expected to take to skies in 2014. GoAir too stands to be a beneficiary from the abolition of the regulation as it would help the airline in improving fleet utilization.

Tata Sons, which tied the knot with Singapore Airline (SIA) to launch a full-service carrier in India with an initial investment of $100 million on September 19 last year, has said it would like to operate international flights from India depending on government approvals.

Tata Sons’ other joint venture partner, AirAsia chief Tony Fernandes, too, has been vocal in his criticism of the 5/20 rule. In a media briefing in New Delhi in July2013, Fernandes had said the rule makes no sense and that India is the only country where such a rule exists. “A one-plane operation like AirAsia Malaysia can fly into India, but an airline with (less than) 20 planes cannot fly out. That's a disadvantage to the (Indian) airline.”

AirAsia has evinced interest in developing India as a hub for international travel.

“India is strategically located. And we can operate flights from the southern part of the country within a four-hour circle to destinations in Africa and on the Gulf route such as Doha, Nairobi, Maldives, Karachi, Bangladesh and some cities in China. It is bizarre that the government has a regulation in place, which allows (only) airlines with five years of operations and a fleet of 20 aircraft to fly international. It does not make sense. Probably Naresh (Goyal) or someone put it down,” Fernandes had said.

Aviation advisory firm Centre for Asia pacific Aviation (CAPA) in a recent report described the 5/20 rule as “the most damaging and discriminatory”. According to CAPA, the financial health of Indian airlines would have been much stronger had they been allowed to commence international operations earlier. It would have improved domestic carriers’ aircraft utilisation and permitted them to compete aggressively with foreign airlines, which over the past few years have snared away international traffic.

GoAir CEO Giorgio de Roni had told Business Standard the airline is looking to fly international upon receiving regulatory approvals, “We already fly our aircraft 13.5 hours a day and, if we have to improve productivity, we need to fly in the night as well. The idea is to improve utilisation by flying on international routes. The Gulf is a possibility.” The airline would have a fleet of 19 aircraft by February 2014 and is looking at a waiver of the 5/20 rule to start overseas operations.

In addition to the abolition of the 5/20 rule, the ministry is also looking into a proposal to allow A380 planes to land in Indian airports. Singh said, "We have asked for comments from ground handling, immigration and security agencies. Because this is the infrastructure which will be affected because one plane will have up to 500-600 passengers at a time. We are awaiting their comments.”

A change could benefit carriers like Singapore Airlines, Emirates, Lufthansa and British Airways that operate A380s and fly to India. Kingfisher Airlines was the only Indian airline to have ordered five A380s but Airbus said on Monday that it has revoked the order. Kingfisher Airlines stopped operations in October 2012 after accumulating losses over several years.

AirAsia forces to expand airlines in southern India

NEW DELHI | MUMBAI : Indian carriers are making southern India an integral part of their expansion plans, especially international, as the region presents the perfect gateway to short-haul international routes and also to take on AirAsia India which will base its operations in Chennai this year. 

In the winter schedule this year, Chennai and Bangalore had a double-digit growth in the number of daily domestic flights taking off from those two cities. Hyderabad for the first time had more than 100 daily domestic flights from the airport. 

"What has helped increased flights is airlines like AirAsia India stating that they will use Chennai as their base of operations and following such announcements, we have seen other airlines such as IndiGo, Jet Airways and SpiceJet increase daily flights from Chennai, Bangalore and Hyderabad," said an official at the state-run Airports Authority of India which runs the Chennai airport. 

"The southern grid comprising Hyderabad, Bangalore and Chennai present a huge potential in terms of best-in-class infrastructure in terms of modernised greenfield airports, traffic potential due to huge corporate presence to both domestic and international airlines. 

The connectivity to the other southern airports like Trivandrum, Coimbatore, Cochin, Calicut and Vizag along with connections to Jaipur, Indore, Lucknow is an emerging opportunity. Apart from the base of IT&ITeS and manufacturing, the south Indian cities also offer good gateways for the tourist circuit in Ootacamund, Coorg, Kerala and Pondicherry, and this supports the airlines to operate profitably where rail or road connectivity would take a higher time to traverse," said Suraj Nair,senior vice-president - strategy & planning, Thomas Cook (India). 

India's southern region has the maximum number of metro airports -- Chennai, Bangalore and Hyderabad -- apart from several other busy airports such as Cochin, Trichy and Trivandrum. Destinations in Kerala have always been money-spinners as connectors to the Gulf region, because of the labour traffic immigrating to the region. The southern region as a whole serves as an efficient hub for traffic to south Asian regions. 

India's largest low-cost carrier IndiGo has moved to increase its capacity across South India. "IndiGo's expansion in South India has been in line with the originally planned growth," said the airline's spokesperson."We have increased flights across South India with increased frequencies on Bangalore-Delhi-Bangalore, Bangalore-Hyderabad-Bangalore, Chennai-Hyderabad-Chennai, Chennai-Kolkata-Chennai, Hyderabad-Goa-Hyderabad, Kochi-Mumbai-Kochi and other such sectors." 

Out of 64 flights that SpiceJet started last year, a majority has been dedicated to expanding its international network via the south. It added flights to Riyadh, Guangzhou, Sharjah, Muscat, Bangkok, Lucknow, Mysore, Pondicherry, Allahabad, Dharamshala and Khajuraho. 

"We added majorly to Bangkok-Bangalore and other routes such as Madurai-Colombo, Riyadh-Hyderabad and Kochi-Male," said an executive at the airline. Also, in December, SpiceJet signed an interline agreement with Tigerair, according to which the Indian carrier will connect 14 cities to Hyderabad and Tigerair will connect the passengers to Singapore. 

"GoAir operated approximately 1,600 flights more to/from Chennai, Bangalore and Kochi. We doubled our capacity to Kochi and added one additional flight on Mumbai-Bangalore-Mumbai and Delhi-Bangalore-Delhi route," said a spokesman.