New Delhi: Tata SIA Airlines Ltd-promoted Vistara has asked the government to delay the implementation of a new rule that makes it mandatory for local airlines to deploy planes to connect smaller towns saying it will affect the viability of new airlines.

Vistara said it wants at least a one-year grace period after it starts operation before the regional connectivity rule is implemented, as it could potentially impact start-ups such as AirAsia India and six other companies that have recently won airline licences.

“We would like to submit that this proposal will only accelerate the immediate demise of new start-ups before they are given the opportunity and time to bolster their performance, financially and operationally," Vistara wrote in a letter to the aviation ministry headed by P. Ashok Gajapathi Raju. Mint has reviewed a copy of the 12 September letter.

“Being a Tata company, we understand the responsibilities we must undertake to address the needs of the nation to the fullest extent possible... the proposed guidelines on regional connectivity may be made applicable only when an airline has been given international flying rights, in order to allow sufficient bandwidth for such diversified operations and also for a new airline to establish itself firmly," the letter notes. “A sustainable model would require airlines to cross-subsidize these routes with either domestic or international connecting traffic. Both options are not available for new start-ups."

Vistara said it needs a year to stabilize operations before flying to several regional routes as proposed under the ministry’s new policy. It has said its business plan was made according to the government’s stated policy in March.

Tata Group and Singapore Airlines Ltd are making their third attempt to start operations in India in a joint venture, having been thwarted twice in the past.

Vistara, whose first aircraft induction has already been delayed by a fortnight because of regulatory hurdles, has for the first time shown its keenness to fly international routes in the same note.

The current rule mandates that an airline may ply abroad after it completes five years and has a 20-aircraft fleet.

At a high-level industry meeting held on Tuesday with the aviation minister, many existing airlines have openly opposed any move to abolish the 5/20 rule. These airlines said that as everyone had to wait out for five years they did not see why the new airlines should be granted special favours.

Aviation consulting firm CAPA said 5/20 rule was flawed from inception and has made sure Indian airlines have about 30% of the international passenger traffic share which should be at least 50%.

“The 5/20 year rule was one of the most negative regulatory decisions taken since 2003/04 and has seriously impacted India’s national interests, reputation and industry’s ability to grow. India is the only country to have this rule which discriminates against its own carriers," it said in a note on Wednesday, “Government should have a larger national perspective in mind and not accept the lobbying by Indian carriers."

Close