KPMG Gets Dragged Into Airline Discord On 5 And 20 Ruling

Tuesday, 28th July 2015 at 05:04am

The entry of KPMG appears to have fanned existing disagreement between airline majors and startups who have opposing views on the 5/20 ruling.

Recently, India's aviation ministry contracted the services of KPMG to lend its expertise with regard to formulation of new rules and regulations for India's aviation sector.

New entrants Vistara and AirAsia India Pvt Ltd (AAIPL) are in favour of softening existing 5/20 ruling whereas major, long-time industry players like IndiGo and SpiceJet remain hell-bent on having it retained.

Major airlines allege that soliciting advice from KPMG would result to a conflict of interest as it had, in the past, worked with startup Vistara. With this, major airlines suspect that KPMG's views on the 5/20 ruling would tend to lean towards relaxing the rule - a major plus for new entrants eager to bring their wings abroad.

While it is true that KPMG served as Vistara consultant for past projects, industry observers note that the former has also served as consultant for a number of local airlines, airports, and government agencies.

The existing 5/20 ruling only allows local airline to conduct flights abroad if it has been in operation for at least five years and if it owns and operates no less than 20 aircrafts.

Major airlines do not buy the idea of relaxing these two prerequisites while startups would want these abolished so they could conduct flights abroad without completing the five-year requirement.

Despite the difficulties encountered, airline majors IndiGo and SpiceJet followed the 5/20 ruling before they were able to fly overseas. They believe new entrants should likewise abide by the same ruling.

Air India and Jet Airways were already flying internationally even before this ruling was ratified.

The Federation of Indian Airlines (FIA) which are composed of long-time Indian airlines including IndiGo and SpiceJet reportedly plans to meet with the aviation ministry to discuss their concerns.

India's aviation ministry headed by R N Choubey is in the process of creating new rules and regulations for India's aviation sector. Reportedly, it plans to replace the 5/20 rule with a new one that will best uphold the interests of India's airlines, both old and new.

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