Air Costa, a regional airline that operates in south India, cancelled all its flights on Thursday, citing problems with its aircraft lessors. The airline said flights will restart on Friday.

“Air Costa has suspended its operation of all 24 flights only for today i.e. 4 August. Tomorrow i.e. on 5 August, we will start our operations as scheduled," an Air Costa spokesperson said.

The move, which follows similar cancellations last month by Air Pegasus, another south India-based airline, has triggered concerns over the financial viability of regional airlines.

“We are resolving the issues we have with lessors. Currently, we are operating with three Embraer E190s and simultaneously, other developments about inducting new aircraft as well as a pan-India licence are in process. We are very positive about our operations and future expa-nsions. There are absolutely no issues regarding salaries in Air Costa. We have also taken care of the passengers scheduled to fly today," the spokesperson added.

The airline, promoted by Vijayawada, Andhra Pradesh-based construction firm LEPL Group, had plans to fly to New Delhi, Bhubaneswar, Varanasi and Pune from this summer.

Even as the government is optimistic that the new civil aviation policy cleared on 15 July will boost regional connectivity and take flying to the masses, experts believe it’s a tall order as any new airline may not be able to make a profit overnight. They will need to create a network and feed for making money from the potential new market.

“Regional airlines are inherently unprofitable as the those residing in small towns and cities are value-conscious," said Devesh Agarwal of Bangalore, a blog on commercial aviation. Moreover, road and rail connectivity to these destinations is far more convenient and economical. “Why should one take a flight from Bengalaru to Mysore when one can drive and reach in almost the same time?" he asked.

The only way such airlines can survive is by means of a viability gap funding by the government, he said, citing an example from the US, where the government supported small regional airlines with funding after the financial crisis triggered by the collapse of Lehman Brothers in 2008.

To be sure, instances of regional airlines that have been grounded are aplenty.

On 31 March 2013, Mint reported that Religare Voyages Ltd, which runs Air Mantra, stopped operations eight months after launch because of poor bookings. Religare Voyages was promoted by brothers Malvinder Singh and Shivinder Singh. Air Mantra started operations in July 2012 with daily flights connecting Amritsar and Chandigarh. It became the first regional airline to be launched in the country in five years.

MDLR Airlines Pvt. Ltd, the only regional carrier that started operations in 2007, stopped flying on 1 November 2009.

Apart from MDLR Airlines, several firms, including Star Aviation Pvt. Ltd, ZAV Airways Pvt. Ltd, Jagson Airlines Ltd and King Air Pvt. Ltd, were licensed to fly as regional carriers, but none of them could launch because of high jet fuel prices and the economic slowdown of 2008.

Significantly, Paramount Airways Pvt. Ltd, a scheduled airline that had a substantial southern focus, suspended operations after the aviation regulator cancelled its operating licence when it fell short of the minimum requirement of five aircraft.

The ministry of civil aviation had introduced so-called scheduled operator permits for regional airlines in August 2007, to increase air services to smaller cities. Regional airlines are required to operate in small towns within one of the designated regions—north, south, west, east and the north-east. But they are not allowed to connect to more than one major city, except those licensed to fly in the southern region.