Govt lays down capital norms for carriers

Govt lays down capital norms for carriers
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First Published: Fri, Mar 30 2007. 12 08 AM IST
Updated: Fri, Mar 30 2007. 12 08 AM IST
New Delhi: A day after civil aviation minister Praful Patel allayed fears that the ministry was trying to impose ban on the entry of new airlines, the government has revised guidelines for private carriers in the country’s skies by setting minimum equity requirements and an enhanced fleet size for airline companies.
While the new rules will apply to existing carriers, the guidelines will make it more difficult for airlines planning to enter the booming aviation market.
Under the revised norms, airlines operating small aircraft, such as turboprops, should have a minimum equity capital of Rs20 crore and at least five planes by the end of first year of operations. Those operating larger planes, such as those jets made by Boeing or Airbus, should have an equity of at least Rs50 crore and have a five-plane fleet before the second year.
Current rules do not mandate any financial requirement to start an airline in India, prescribing instead that a carrier should have at least three planes in its fleet by the time it is one year old.
There are currently nine commercial airlines in India, six of which are less than three years old. Another eight applications are awaiting permission from the government to start operations. With an increase in the number of carriers and planes in their fleets, passenger traffic crossed the 30-million passenger mark in fiscal 2006 and is projected to grow 20% in the year to end-March.
Indus Air, which was flying just one plane on the Delhi-Chandigarh-Mumbai route with just 50% occupancy suspended its operations last week, owing to what it called “lease cancellations”. Part of the Mohan Meakin Group, a liquor-making company, the airline was planning to lease two new regional jets to meet the stipulated three-aircraft deadline of the ministry.
“The financial strength of the airline for induction of new fleet can be ensured by the net worth of the airline,” the ministry said in a statement, adding that companies with equity more than Rs100 crore can operate fleets of any size.
New airlines in the queue said they were well prepared. “We were prepared for this and we had made an action plan to suit these new requirements. It will help curb the mushrooming of non-serious airlines,” said Koustav Dhar, president, MDLR Airlines, which plans to start operations with two leased British Aerospace regional jets by the second week of April.
Dhar said the airline will stick to regional hubs avoiding congested airports such as Mumbai and Delhi where issuing of new landing and parking slots has been frozen.
Civil aviation ministry has also withdrawn the concession presently available to scheduled airline operators to have only 10% of the paid up capital at the time of issuing of the initial no objection certificate to fly. Hinting at the likely changes, the aviation minister had told Parliament earlier this month that the pending applicants for scheduled domestic operators were being reviewed “from the stand point of financial viability and soundness of business plan”.
New norms are likely to come into effect as soon as the regulatory body Directorate General of Civil Aviation notifies them, a ministry spokeswoman said.
“The aviation sector’s sustainability has been drawing new players one after the other. Without such rules, a capital-intensive industry like aviation could end up in the1990s-like situation where the airlines went bankrupt. So as long as it keeps the fly-by-night operator at bay, it will be a useful rule,” an industry representative, who did not wish to be named, said.
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First Published: Fri, Mar 30 2007. 12 08 AM IST