Vistara, AirAsia India eye overseas flights with government rule change

Newer entrants like Vistara - the full-service carrier started by Singapore Airlines and India's Tata Sons - are expected to benefit from the decision.
Newer entrants like Vistara - the full-service carrier started by Singapore Airlines and India's Tata Sons - are expected to benefit from the decision.PHOTO: SIA

The Indian government's move to open up the world's fastest-growing air-travel market makes it easier for domestic carriers to fly overseas, but aviation industry experts say that will not happen overnight.

Newer entrants like Vistara - the full-service carrier started by Singapore Airlines and India's Tata Sons - and AirAsia India are expected to benefit from the decision.

After over a decade of discussion about liberalisation, Wednesday's announcement allows new carriers to fly international routes provided they have 20 planes, or 20 per cent of capacity - whichever is higher - on domestic routes.

The government removed a restriction mandating five years of domestic operation. Now, Vistara, which started flying last year, and AirAsia India, which started in 2014, can fly to South-east Asia and other parts of the world, once they fulfil the 20 per cent condition.

"It is encouraging to see that the government has established a policy which promotes the overall growth of the industry... We would have preferred, of course, that the 5/20 rule be completely abolished to ensure that Indian aviation achieves its full potential," said Vistara chief Phee Teik Yeoh.

The airline has 11 planes and, according to initial plans, would have added nine more by June 2018.

Changes to the 5/20 rule, which required carriers to complete five years of domestic operations and have a fleet of 20 planes to be considered for international flights, had for years been opposed by established carriers. AirAsia chief Tony Fernandes tweeted that the partial rollback "was almost an end to vested interests".

AirAsia India has six planes.

India is expected to become the world's third-biggest air-travel market by 2022, after the United States and China. It is currently in ninth spot. Last year, Indian airports handled 190 million passengers. Yet carriers, a half dozen now, have had to struggle to maintain costs over high fuel expenses and airport taxes, and price sensitive fliers. The difficulties saw Kingfisher Airline collapse in 2012.

Industry experts said it would still take time for the new carriers to start foreign routes.

"New carriers can't start going international from the first day. How can they have 20 planes? It is not just about planes but also about network and routes. New airlines would need at least another two years," said Mr Kapil Kaul, chief at aviation consultancy firm Centre for Asia Pacific Aviation, India.

Still, the new policy - which also caps base fares on regional routes at 2,500 rupees (S$50) per hour - is expected to encourage first-time fliers and increase competition.

"It would make flying more affordable for domestic fliers and India more accessible to international travellers," said Mr Palash Roy Chowdhury, of the Federation of Indian Chambers of Commerce and Industry.

A version of this article appeared in the print edition of The Straits Times on June 17, 2016, with the headline 'Vistara, AirAsia India eye overseas flights with Delhi rule change'. Print Edition | Subscribe