The war of words between the Federation of Indian Airlines (FIA) and the Tata Group escalated on Wednesday, with arguments and counter arguments being forwarded by both sides on what would constitute the ideal national civil aviation policy.
Tata Sons, which owns stakes in Vistara and AirAsia India, said the 5/20 rule, which bars airlines from starting international operations till they have a fleet of 20 aircraft and five years of domestic flying experience, must be abolished in “national interest”.
“The 5/20 rule has thus far principally benefited only foreign airlines, who have captured 70% of global traffic with India, taking Indian jobs and revenue with them,” the Tata Group said.
The removal of the 5/20 rule, it argued, is estimated to boost global traffic to and from India to over 100 million passengers by 2020-21, from 43 million in 2013-14.
Countering the FIA’s claim that both Vistara and AirAsia India were foreign controlled, Tata Sons said: “Majority ownership and effective control of both airlines are with the Indian parties.”
Further, all the important decisions concerning the day-to-day operations of the airlines are taken by the management teams under the overall supervision, control, and direction of the respective boards of directors (which include a majority of Indian nationals).
The FIA, which comprises IndiGo, SpiceJet, Jet Airways and GoAir, responded saying it was “evident and unfortunate” that “Tatas, Vistara and AirAsia are seeking to deliberately mislead the government, the flying public and the people of India.”
“It is not in the national interest but self-interest on the part of Tata Sons and its partners Singapore Airlines (Vistara) and Air Asia that leads to their demand for the abolishment of 5/20. If 5/20 is abolished, while the Tata’s and their partners would be free to deploy aircraft capacity to international and domestic sectors at their will, they will be able to circumvent the need to serve the national interest of flying to the remote areas of India, which are often unprofitable, as provided in the route dispersal guidelines,” the FIA said.
On the issue of substantial ownership and effective control, the FIA said: “In AirAsia the Indian majority ownership is spread between two independent, unrelated Indian shareholders who effectively have less shareholding then the foreign partner, namely Air Asia, Malaysia. De facto therefore, Air Asia Malaysia is the largest shareholder.”
“The chief executive appointed by AirAsia Malaysia, the largest shareholder, has just resigned citing interference by Tony Fernandes and AirAsia Malaysia in all decision-making. The other Indian shareholder Arun Bhatia has stated that he wishes to withdraw from his shareholding on the grounds of interference in the operations by Tony Fernandes and AirAsia Malaysia. In the case of Vistara, the chief executive is seconded from Singapore Airlines.”