Gujarat eyes PPP model for airline to link cities in state

Gujarat eyes PPP model for airline to link cities in state
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First Published: Mon, May 12 2008. 01 51 AM IST

Infrastructure boost: A file picture of Reliance Industries’ Jamnagar refinery in Gujarat. The state is planning an airline to enhance connectivity between its industrial towns and cities.
Infrastructure boost: A file picture of Reliance Industries’ Jamnagar refinery in Gujarat. The state is planning an airline to enhance connectivity between its industrial towns and cities.
Updated: Mon, May 12 2008. 01 51 AM IST
New Delhi: After partnering the private sector to develop airport infrastructure, state governments are now keen to join hands with private firms to start regional airlines in a bid to boost intra-state air connectivity, while others want to upgrade infrastructure quickly to attract domestic carriers.
The first of such initiative is being led by the Gujarat state government, which plans to put 19 of its cities on the air traffic map through a dedicated regional service, nearly a decade after smaller airlines such as Gujarat Airways and Span-Air of Maharashtra shut down operations.
Infrastructure boost: A file picture of Reliance Industries’ Jamnagar refinery in Gujarat. The state is planning an airline to enhance connectivity between its industrial towns and cities.
Over the past three years, a boom in air traffic in the country and growing income levels have seen even national carriers opting to connect smaller towns, many of which, as in the instance of Delhi-Kullu, have proved to be profitable for airlines such as the Deccan Aviation Ltd-run Simplifly Deccan and state-run Air India.
Others, too, have experimented with the so-called public private partnership, or PPP, models in aviation. Kerala, for instance, had planned to invest Rs200 crore in an airline on a PPP model to connect the southern state with West Asia to tap a market of millions of people from the state employed in the Gulf.
The proposal is still pending with the civil aviation ministry since Indian aviation rules do not allow start-up airlines to fly foreign routes unless they have completed five continuous years of domestic operations.
The Union government also plans to run a dedicated regional service for the north-eastern part of the country and fund the start-up.
The Gujarat government, however, plans to limit the proposed airline’s operations within the state. “At present, most of the scheduled carriers provide connectivity between airports in Gujarat with a metro, however, intra-state airport connectivity is found to be deficient. For enhancing connection between the airports and airstrips in Gujarat, the government of Gujarat envisages the involvement of private sector,” the state government said in its request for proposal through Gujarat Tourism Project Development Co. Ltd, a joint venture between IL and FS Infrastructure Development Corp. Ltd and Tourism Corp. of Gujarat Ltd that is focused on infrastructure and tourism projects in the state.
The state government has sought to appoint consultants to study the demand and market feasibility of such an airline with a 10-year perspective beginning 2008.
The final study, including identification of infrastructure gaps in the state, is expected to be taken up for consideration by the state government around July or August.
The airline, if approved, will benefit from India’s regional airline policy readied last August that offers several incentives to such operators. MDLR Airlines Pvt. Ltd and Jagson Airlines Ltd, based out of New Delhi, Star Aviation Pvt. Ltd in the South, and ZAV Airways Pvt. Ltdfrom Kolkata are among those planning or running regional operations.
Interestingly, there has been no interest from the western part of the country after the policy announcement to start regional services and Gujarat could be among first of such airlines if the project goes through.
“There are people ( in the state) who can bear that expense and on a regular basis,” said a person close to the development, who did not want to be identified since he is not allowed to give media interviews, referring to the potential of a local airline. “The state government can subsidize operations, while the private operator can run the show.”
Gujarat, ranked by Deutsche Bank research as the best investment destination in India in a November report, has 13 airports and six airstrips, of which just two airports are not connected by scheduled airlines. Ahmedabad has an international airport.
Not all large states, however, see reason for a public private partnership for airlines.
Gujarat’s neighbour, Maharashtra, for instance, plans to focus on infrastructure, built through PPP models, in the state.
Airports at Navi Mumbai, Kolhapur, Amravati and Shirdi airports are at various stages of development and upgrading, according to Sanjay Ubale, secretary, special projects, in the state government, who oversees airport-related projects. “Once that happens, within 200 km, the entire state would be approachable by air. There is a big appetite in tier II cities but at some of these airports, a 42-seater aircraft cannot land currently. Our entire focus is to make infrastructure attractive (for) flights,” he said.
Smaller airports in the state are likely to be ready within the next two-and-a-half years, while second airports at Pune and Mumbai will take longer.
Ubale ruled out a PPP alliance on the lines of the erstwhile SpanAir. “We don’t think it’s a good idea. There is so much of private capital available now. Wherever there is private sector, the government should not get into it,” he said.
SpanAir, a joint venture airline of the State Industrial and Investment Corp. of Maharashtra and Span Airways that initially flew regional routes last decade, ceased operations after a spat with the state government and aircraft-related issues.
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First Published: Mon, May 12 2008. 01 51 AM IST