Air Costa stops flight bookings, hunts for investors amid cash crisis

Regional airline Air Costa, which suspended flights last week, incurred a loss of Rs130 crore on revenue of Rs327 crore and operating expenses of Rs457 crore in 2015-16


The aviation ministry, which has been pushing its UDAN regional aviation policy, has been supportive of Air Costa, which is one reason its planes have not been deregistered from India’s flying registry and only grounded. Photo: Venkat Mangudi
The aviation ministry, which has been pushing its UDAN regional aviation policy, has been supportive of Air Costa, which is one reason its planes have not been deregistered from India’s flying registry and only grounded. Photo: Venkat Mangudi

New Delhi: Regional airline Air Costa, which suspended flights last week amid a cash crisis, has stopped taking all future bookings.

“Revival is looking increasingly difficult. Flight bookings have been blocked for all days. We have been told that a search for investors is on,” said a person with knowledge of the matter who did not want to be named. 

The airline had earlier blocked ticket sales till 8 March.

Vijaywada-based Air Costa, founded in 2013 by L.P. Bhaskara Rao, a property developer, is yet to report profits. It incurred a loss of about Rs130 crore on revenue of Rs327 crore and operating expenses of Rs457 crore in 2015-16, according to data provided by the airline to the Directorate General of Civil Aviation.

“We have extended the suspension till Thursday and we have blocked the entire summer schedule bookings. Until we announce the resumption the bookings will remain on hold. The final date of resuming the operations will be clear on Monday,” an Air Costa spokesman said.

Two Brazil-made Embraer jets used by the airline have been impounded by GE Capital Aviation Services (GECAS) because of payment defaults and are now parked in hangars at Hyderabad international airport.

The airline has an order for 50 Embraer aircraft that are scheduled to be delivered starting next year.

Air Costa’s problems with the payments for planes, running into few million dollars, started in January.

The aviation ministry, which has been pushing its Udan regional aviation policy, has been supportive of the airline, which is one reason its planes have not been deregistered from India’s flying registry and only grounded, giving the airline some leeway to attract funds or investors, said the person quoted above.

The airline had also grounded operations last year after similar issues with the aircraft lessor—but that was only for a day. The cash-strapped carrier, which has 600 employees, has not paid salaries for January.

Another regional airline, Bengaluru-based Air Pegasus, has been grounded since July last year, unable to start services despite announcing new investors last year.

Regional airlines have been facing difficult times in India. Religare Voyages Ltd (which operated Air Mantra), MDLR Airlines Pvt. Ltd and Paramount Airways Pvt. Ltd, among others, have shut shop, in some cases after similar defaults with aircraft lessors and delays in payments to oil companies and airport operators. 

Some of the smaller airlines came up after the civil aviation ministry introduced the so-called scheduled operator permits for regional airlines in August 2007 to increase air services to smaller cities.

In 2016, the ministry released a new regional policy called Udan. The difference this time is that the ministry is providing a monetary subsidy from a Rs500 crore corpus to smaller airlines.

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