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- 5/20
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In a policy shift, the civil aviation ministry

is considering giving foreign airlines
traffic rights to key destinations in India
through auction as one of the ways.
The Union government may put limited
seats on auction so that foreign players
are able to fly more seats on a few
destinations where seat entitlement
reaches the limit.
However, the prevailing practice of
government-to-government negotiation
will also continue to exist as Indian
carriers would require traffic rights
abroad and those would have to be
negotiated.

"The foreign carriers will bid on the

number of seats they require additionally
to fly to various destinations in the
country. However, there will be a clear
provision stating that the government
may bypass the auction route and give it
to countries on negotiation basis
separately for trade and negotiation
purposes," said a source close to the
development. Sources said the proposal
may become a part of the draft civil
aviation policy which will be released
soon for public comments by the Union
government. This was also discussed at
a meeting chaired by the Union Cabinet
secretary recently to discuss the draft
policy. The meeting was attended by
secretaries of various ministries such as

civil aviation, finance, commerce and

external affairs.
After coming to power in May last year,
the National Democratic Alliance (NDA)
government has held e-auction of coal
mines cancelled by Supreme Court
judgement last year in August. The
government also auctioned imported
gas through online portal for gas-based
power plants reeling under fuel
shortage. Civil Aviation Secretary R N
Choubey, the erstwhile special secretary
at power ministry, was instrumental in
this exercise. The ministry of mines
would also auction mineral mines on the
lines of coal auctions soon.

India will become the first country to

take the auction route to distribute
foreign air traffic rights. However, this
may be restricted to countries which are
within 5,000 km or seven hours of flying
time away from India. The auction model
will be followed for airlines of countries
from the Gulf region, Middle East and
South East Asia. This is because the
Union government may open up the
skies by allowing airlines of a country
5,000 km or seven hours of flying time
away to operate any number of flights to
India. The 'open sky' policy will help
countries from Europe, Australia, Africa,
South America, among others, to
operate flights to and from India without
any restriction on the number of flights

and seats.
At present, countries sign an air service
agreement through which they decide
the flights or seats per week that can fly
into each other's country depending
upon the market requirements. Then,
the government distributes the allocated
seats to the respective airlines.
However, other countries and also some
foreign carriers have requested the
Indian government to increase the seat
entitlement as they exhaust the limit.
According to the Chicago Convention,
countries have and may exercise
complete sovereignty over their
airspace. Accordingly, countries set their
own rules for air traffic rights which may

be open skies bilateral or a bilateral

agreement with regulated entitlements.
The Union civil aviation ministry is
mulling taking the auction route to make
available seats on Metro destinations
such as Delhi, Mumbai, Kolkata,
Chennai, Hyderabad and Bengaluru to
foreign carriers so that more passengers
fly in and out of the country.
Choubey didn't reply to a text message.
A civil aviation spokesperson didn't want
to comment on the issue. "We are
evaluating several options on bilateral
air traffic rights. A final call will be taken
once the draft aviation policy is
released," said a ministry official.

This comes at a time when the Union

government has raised concerns over
the unutilised bilateral capacity by
domestic carriers at a meeting held with
the domestic carriers. On international
routes, Indian carriers utilised only 32
per cent of the slotted capacity in 2014
whereas the foreign carriers are able to
utilise almost double - 62 per cent of the
total seats allotted to them.
During 2014-15, Indian carriers used
seat entitlement only in 29 out of the
109 countries with which an air service
agreement has been signed. Moreover,
foreign carriers offer 432,456 seats a
week for passengers flying in and out of

India compared to 242,365 seats offered

by the Indian carriers.
Sector experts said this situation of
foreign carriers utilising more seats than
Indian peers in a bilateral agreement is
hurting the aviation sector.
"Protectionism in the skies helps none. It
gives a false sense of security to
domestic carriers and makes them
weak. It creates artificial supply
constraints that only lead to high ticket
prices during peak summer and winter
seasons. The blue collar Indian workers
in the Gulf suffer the most," said Amber
Dubey, partner and India head of
aerospace and defence at global

consultancy KPMG. He said the Union

government should consider declaring
open skies in India to boost tourism and
the aviation sector.
Union Civil Aviation Minister Ashok
Gajapathi Raju recently said the airlines
had an "agreement" on unutilised
bilateral. He said if rules permit, the
airlines will have no objection in
transferring the unutilised air traffic right
to other domestic peers. Raju had also
raised the issue of Indians living abroad
finding it tough to fly back to the country
during festive season due to high ticket
pricing.
The move to liberalize foreign air traffic

rights may irk the incumbent airlines

which have been opposing any move
towards opening up the sector to even
new carriers - Vistara and AirAsia India.
In India, airlines need five years of
domestic flying experience and 20
aircraft in its fleet to fly abroad - the rule
known as '5/20'. The Union government
had planned to relax the rule which
could have helped expedite utilisation of
traffic rights but this was strongly
opposed by the incumbent airlines like
IndiGo, Jet Airways, SpiceJet and Air
India. While Jet Airways and Air India fly
to long-haul destinations, the other
carriers go short-haul.
"The irony is stark. We conveniently

block foreign carriers using quota

restrictions. The Indian quota lies largely
unutilised since our leading carriers
have no plans currently to fly long-haul
to US, EU, Far East and Australia that's like asking sprinters to run long
distance. New Indian startups like
AirAsia India and Vistara that can
provide long haul services are blocked
under the ridiculous 5/20 rule. This
Mexican standoff has only resulted in
Indian tourism losing out to other
smaller destinations despite an
unlimited potential," Dubey added.
India has an 'open sky' policy for United
States, meaning there is no restriction
on the number of flights or seats on the

India-US routes. India also has a 'near

open sky' agreement with UK and there
is restriction on frequencies only on
flights to and from Mumbai and Delhi
airports. India also has 'open sky' policy
for more than a dozen tourist
destinations in Asian or Saarc countries.
According to CAPA India Bilateral Policy
Report released last year, the
international traffic to and from India has
registered a strong 11.3 per cent annual
growth over the last decade. CAPA's
estimates project UAE carriers are
seeking an additional 60,000 weekly
seats in the short- to medium-term to
support increased frequencies.