Friendly entry norms wind beneath wings of small airlines

Friendly entry norms wind beneath wings of small airlines
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First Published: Fri, Aug 10 2007. 01 40 AM IST
Updated: Fri, Aug 10 2007. 01 40 AM IST
Paving the way for the emergence of scheduled airlines that will connect smaller cities and towns to metropolises in the country, the Union government has announced less stringent entry norms for regional carriers. The norms are likely to help a raft of start-up airlines waiting for government approval to start flight services in India and will likely benefit southern India the most, analysts said.
As per a notification on Thursday, a new licence will be issued to airline firms operating turbo-prop and 80-seater planes and helicopters. The companies will have to undertake operations primarily between airports of any of the four regions - North, South, West and East - unlike national carriers such as Jet Airways (India) Ltd, which are allowed to connect any city in the country, after permission from regulatory authorities.
The regional carriers will be allowed to operate from only one metro in a region to any non-metro within the region or outside. The metros identified are New Delhi in North India, Kolkata in the East (which includes the North-East states), Mumbai in the West and Chennai, Bangalore and Hyderabad in the South. So, a regional airline that chooses to operate from the northern region can connect New Delhi with Kota in Rajasthan or Varanasi in Uttar Pradesh, but it cannot add Mumbai to its route map. It can, however, chose to fly Delhi-Nagpur or even Delhi-Coimbatore routes.
“Airline companies can initially start operations with one aircraft, but within one year, they must have a fleet of three. In two years from the start of operation, they need to have five aircraft,” civil aviation minister Praful Patel said here.
Such airlines should have a paid-up capital of at least Rs30 crore and three planes to begin with. (National airlines get licences only with a minimum equity of Rs50 crore and at least five aircraft by the end of first year of operations.) Addition of each aircraft at the regional carrier would require Rs10 crore more, subject to a maximum of Rs50 crore of equity. Route disbursal guidelines, which mandate that airlines fly on routes with thin demand to ensure connectivity in areas like the North-East, will not apply to the new regional airlines.
Airlines plying smaller routes which generally tend to use below-80 seater aircraft are already exempt from airport charges and invite reduced taxation on fuel increasing the chances of breaking even on investments earlier than national carriers.
There have been no new additions to the number of scheduled domestic airlines—nine are licensed in India so far—in the past year though the ministry has an equal number of airline-applications pending approval.
On Thursday, Patel forecast a fourfold increase in the number of small planes flying Indian skies. “I see 200 regional aircraft flying in the next five years,” he said. “A lot of applicants so far have not been serious enough... Now, they can use this as an opportunity to get into and prove themselves; then get apply for a fresh (national) permit.”
National carriers will not be permitted to apply for regional licences unless “there is a very exceptional business plan”, he added. Further incentives for regional airlines will be notified “in due course”.
Start-up airlines such as Chennai-based EasyAir may benefit in one relaxation the government has made for carriers that want to operate in South India. Unlike in other metropolitan regions where regional carriers cannot connect metro routes, those that start operations from the cities of Hyderabad, Chennai and Bangalore can connect between the three cities.
An analyst predicted an aviation boom in South India. “If they are allowing it there (connectivity between the three metros), South will defy all optimistic projections also because of the excellent airport infrastructure coming up,” said Kapil Kaul, a Centre for Asia Pacific Aviation (Capa) analyst.
A senior official said at least four new private carriers have expressed interest in a regional operator permits, but declined details. Capa’s Kaul said new regional players will reduce fares charged on short-haul routes. For example, the Delhi-Kullu route is among the more profitable sectors for the low-cost carrier Air Deccan because it is the only airline on that route and recovers more than Rs10,000 on round trip tickets. That could see a correction with more competition, he said.
PTI contributed to this story.
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First Published: Fri, Aug 10 2007. 01 40 AM IST