CHENNAI: Air passengers have plenty of reasons to cheer with the Union Cabinet on Wednesday approving the country’s first National Civil Aviation Policy, 2016. In a first, one-hour regional flights will be capped at Rs 2,500 per passenger.
Two, overseas flying is bound to get competitive, as the decade-old 5/20 norm ‘has been thrown to the dustbin’, allowing new entrants like Vistara and Air Asia to fly abroad. Three, with sector regulator DGCA tightening guidelines, passengers may get higher compensation on delayed or denied boarding, or cancellations and lower tariffs on extra baggage.
On the downside, airfares may rise marginally, with the policy imposing a 2 per cent cess on all domestic and international tickets to improve regional connectivity.
Ashok Gajapathi Raju, minister for Civil Aviation, tweeted the policy will be a game-changer, while Union Minister Ravi Shankar Prasad said, “A questionable legacy (5/20 norm) has been thrown into the dustbin.”
By capping regional fares, the government wants more Indians to fly. If everyone in the middle-class income bracket take a flight just once in a year, it translates to 300 million tickets, an exponential jump from 70 million sold in FY15.
“The policy is revolutionary and air traffic will get a booster shot. The Rs 2,500-cap will attract passengers. If we incur losses, the government may compensate up to 80%... we will have clarity after the fine print is out,” Prem Kumar Pandey, assistant vice president, Truejet told Express.
The Regional Connectivity Scheme (RCS), which will come into effect this month or next, offers tax incentives for carriers flying under-served routes. “We have to see what constitutes ‘regional’,” said Pandey. Only those states, which reduce VAT on ATF to 1 per cent or less, provide support services and 20 per cent of Viability Gap Funding (VGF) will be part of RCS.
Meanwhile, flying overseas could be cheaper as more players enter the fray for international foray. Until now, all domestic carriers had to finish the mandated five years of domestic operations to be eligible to fly outside India. “The abolition of the 5/20 rule has come as a respite and will enable them to expand services internationally now,” said Sharat Dhall, president, Yatra.com.
There are 10 scheduled domestic carriers, of which five airlines namely Air India (including Air India Express), Jet Airways (including Jet Lite), Spice Jet, Go Air and IndiGo fly abroad. The other carriers include Air Costa, Air Asia, Vistara, Air Pegasus and Truejet, which will stand to benefit from the new policy.