Q. How will the new aviation policy change the sector in India?
Aviation has moved, in the Indian sense, from an elitist activity to a general one. The composition of travellers has changed. Since we are a big country, the connectivity should be better. There has been consistent demand [to connect smaller towns] and past performances probably do not reflect a correct thinking in choosing locations. It has resulted in 30-31 airports being inactive. We wanted to see how many of these can become performing assets, where the impediments are, where we would like to put in new airports while not making the same mistakes so that airports can contribute to the economy, and also gain from it. We are going [ahead] keeping passengers in mind. There has to be definiteness [to the policy], say 3-5 years, so that economic activity can begin as well.
Q. Do you think if this draft comes into effect it will revolutionise the aviation sector?
There’s potential... this kind of activity will help us harness that potential.
Q. Are states an impediment to implementing this policy smoothly?
I don’t see any impediment there. The idea of an hour-long flight at Rs 2,500 has excited some. If it has to work, there has to be a certain amount of sacrifice from all stakeholders, state governments and the government of India… I have written to all the chief ministers and we solicit their advice. A lot of interaction [with the states] has gone into it and that is why our confidence level is high right now.
Q. But airlines are not very happy about the Rs 2,500 per flying hour scheme...
What is proposed is a cess of two percent on certain vibrant routes. This raises certain monies that will cross-subsidise certain routes that do not have connectivity. Those states that want to opt for the scheme can opt for it. The proposal is that the government of India will give up its service tax and excise duty on ATF in those [unviable] areas. State government reduces VAT on ATF to 1 percent. The Airports Authority of India for those three years will not charge for landing. A transparent procedure has to be followed, where bids are called on and the airlines will participate if they want to.
Q. How long before the draft becomes a policy?
It took a long time [to be completed]. [But] the type of discussions that we have had with all stakeholders has never been done before. We need to have it going before the end of 2015, so that we can start by March 2016.
Q. The draft policy has called for a review of the 5/20 rule (which mandates that a domestic airline have a fleet of 20 aircraft and flying experience of five years before starting international operations). When will it be scrapped?
This is a regulation that is not there in any country. To me, it [the 5/20 rule] pulls down Indian players. It is a regulation for regulation’s sake. It is a decision that has come from the Cabinet. So we need to take it back to the Cabinet. By the end of 2015, we should be getting everything going. The Prime Minister gave us two sittings and gave his inputs.
Q. Only 75 of the 470-odd airstrips/airports in India are operational. How do you plan to upgrade/operationalise airstrips/airports?
These strips are unutilised assets. Few of the strips may be far-gone [but] some can be salvaged. But we have to start that exercise. We can make those strips active.
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(This story appears in the 11 December, 2015 issue of Forbes India. To visit our Archives, click here.)
5/20 rule, high VAT, lack of airport future planning (Coimbatore Airport is a classic example and ), not much momentum in getting privatization of airports (big airports like chennai and kolkata are better run by disciplined private organization.) are all issues that needs to be addressed soon. the policy is like the groom that never arrived, it has been a year and a half! AAI should stick to medium and smaller airports and push all the larger ones to privitization till AAI proves that it can handle execution at scale flawlessly. kolkata and chennai airport are nothing in comparison to delhi, hydrebad or bangalore airport. 5/20 is a rule made for Air India and the result is that Emirates is more like the psuedo flag carrier for india. it is a shame that we have not allowed private companies to soar into the skies with profitable international routes. Vistara could be a great product for worldwide international travel and we can create an aviation industry like that of dubai and qatar. mr. raju better act fast and give a policy that has sensibile rules Also the most important thing apart from the 5/20 rule is the safety aspect. after the air asia crash reports and callout from engineers that airlines are glancing over safety to get more revenue and utilization is very scary and concerning. we should not wait for a disaster to change policy. we need stronger standards that match FAA norms.on Dec 9, 2015