Expect AirAsia India, Vistara To Start Overseas Flights Next Year: Rajan Mehra

After the recent change in aviation rules, Vistara and AirAsia India could start international services in a year, said Rajan Mehra, MD for India & South Asia at iJets.

The government on Wednesday approved the long-pending National Civil Aviation Policy. Under the new policy, domestic carriers will no longer have to operate for five years before they fly on overseas routes, earlier known as 5/20, provided they deploy 20 planes or 20 per cent of their total capacity for domestic operations. 

New entrants in the industry like AirAsia India, and Vistara will benefit the most from this rule, Mr Mehra told NDTV Profit. "I see them (AirAsia India, Vistara) starting international flights in next one year." (Watch) 

Overall, the new civil aviation policy is positive for the long-term growth of the industry, he said. "I think the new policy will have far-reaching impact on the aviation industry in India." 

Mr Mehra said abolition of the five-year requirement is positive for the industry as it will make international fares more competitive and promote tourism. 

Currently, international travel is growing more slowly than domestic travel in India. Passenger numbers on domestic flights jumped 21 per cent in 2015 to more than 80 million. International travel is growing more slowly, at 9 per cent a year. 

However, this decision is negative for older players like IndiGo and Jet Airways as they had to wait for five years to operate international flights, Mr Mehra said. 

If India wants to achieve the target of 300 million passengers by 2022 then, "difficult decisions have to be made and government is doing that," he said.  

The government also capped base fares on regional routes at Rs 2,500 per hour of travel to promote regional connectivity. The airlines would be partly compensated to make the regional routes viable. 

Mr Mehra said the government has addressed the long-pending concerns of the industry and this will promote tourism and domestic business travel. 

The new policy also mandates airport operators to bring down airport charges and royalty for MRO (maintenance, repair and operations). The final civil aviation policy indicated they would persuade state government to abolish VAT on MRO services. 

Currently 90 per cent of the MRO work for domestic airlines is being carried out in Sri Lanka, Dubai and Hong Kong, according to Crisil. 

Mr Mehra said the steps taken will help India becoming a MRO hub.