Ways2Capital Reviews : Aviation 5/20 Rule Under CBI Scanner, Airline Stocks To Be In Focus

The Central Bureau of Investigation (CBI) has seized files related to the National Civil Aviation Policy which scrapped the 5/20 rule. The CBI is likely to call senior officials of the civil aviation ministry for questioning.

According to the sources, CBI seems to have strong evidence that senior bureaucrats were bribed for the change in rule. CBI has booked top executives of Tata Sons and AirAsia Berhad including CEO Tony Fernandes, deputy CEO Bo Lingam, and TATA Trust Managing Trustee R Venkataramanan for trying to bribe government officials to bend the 5/20 rule so that AirAsia India could become eligible to fly international from the first day. The airline is a joint venture with AirAsia Berhad holding 49% stake in the airline, Tata Sons holding 49%, R Venkataramanan holding 1.50%, and S Ramodarai holding 0.50%, respectively, the latter two holding other key positions in Tata Group.

In June 2016, as per the new Civil Aviation Policy, the government decided to scrap a requirement that mandated airlines to have five years of domestic operations to be eligible to fly overseas. However, an airline was required to allocate 20 aircraft or 20% of their total fleet of aircraft, whichever is higher, to the domestic sector if they wished to fly overseas. This effectively meant that a carrier must have a minimum 20 aircraft in its domestic fleet. This was to ensure that any new airlines starting business in India should essentially serve the remote parts of the country. At that time, older airlines such as IndiGo, SpiceJet, Go Air and Jet Airways were against the decision to abolish the 5/20 rule.

However, new entrants - Vistara and Air Asia had said that the 5/20 rule was not in the interest of the aviation sector as it limits the growth prospects of any new airline.

In another positive development, aviation turbine fuel price was cut by Rs1,942 a kilolitre to Rs68,086 per kilolitre in Delhi, a decline of 2.7%. The decline comes after two successive monthly hikes, a steep 7% and 6.3% in June and May respectively.
 
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About Bhoomi Desai

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