New aviation policy may help airline start-ups take wing3 min read . Updated: 17 Jun 2016, 05:40 PM IST
The ministry plans to subsidize airlines that aim to connect cities that have not been connected before
New Delhi: The new aviation policy will lead to the launch of new airlines in the country bringing in more cities on the national network, according to civil aviation secretary Rajiv Nayan Choubey.
India currently has Air Costa, Air Pegasus and Trujet which fly smaller planes and command between them 1.4% of the domestic market. Air India, Jet Airways and SpiceJet also have sizeable small plane operations.
Several entrepreneurs have showed interest in starting new airlines even with a small fleet of three planes while the policy was being framed, Choubey said, adding that he was expecting new launches in the months ahead.
A lot of small plane manufacturers too have been in touch with the ministry, Choubey said. The ministry has told the manufacturers that while they sell their planes in India, they should also create training and aircraft maintenance facilities and offer aircraft and better aircraft leasing terms.
The ministry plans to subsidize airlines that aim to connect cities that have not been connected before. A cess on most domestic flights will be levied to create a corpus that could help keep the fares on such routes at about ₹ 2,500.
“Since inception, Air Pegasus has positioned itself to connect with small towns and cities like Hubli, Kadapa, Belgaum and the policy announced today aims at increasing the connectivity to such smaller towns and cities by offering sops and incentives. This should motivate players like us to increase our connectivity further more with smaller towns as the policy will refund 80% of the losses incurred by airlines due to the cap of ₹ 2,500 for one-hour flights between smaller towns and cities," said Shyson Thomas, managing director, Air Pegasus.
To be sure, many short-haul routes in the country like Delhi-Dehradun, Jammu-Srinagar and others are already available for as little as ₹ 1,100 when booked in advance.
The policy aims to take the number of such city pairs up, but experts say it’s going to be a challenging task.
“The regional aviation ecosystem is going to take a long time and I don’t see it immediately yielding benefits for the passenger," said South Asia CEO for aviation consultant CAPA Kapil Kaul.
Regional airlines are also an expensive proposition. They require investments of ₹ 150-200 crore.
In the past years, regional airlines have also shut down. Paramount Airways and MDLR Airlines, with regional operations, closed in the past decade.
At that time too a new regional airline policy was announced and several airline were granted licences. The policy divided India into four regions. The regional airlines were allowed to connect only metro to non-metros.
The regional players did not do well partly because existing airlines like Air India, SpiceJet and Jet Airways already had small planes. These big airlines could again benefit from this new policy, said another aviation analyst, who did not want to be named.
These airlines can ply new routes and win subsidy from the government and also use these planes on other routes when the plane is free from operating subsidized routes.
The ministry also wants to develop dozens of airports from World War era with investments of ₹ 50-100 crore each.
However, civil aviation minister Ashok Gajapathi Raju told Lok Sabha last month that the government has spent a total of ₹ 600 crore on 25 airports across the country in just two years but those airports have no flights. These include Gondia, Juhu, Kolhapur, Sholapur, Akola, Jalgaon, Jaisalmer, Bhatinda, Ludhiana and Pathankot.
“They have been developing new or old airports and not using them. Shimla Kullu and Turicorion are living examples, not to forget Chandigarh," the same analyst said.
Last month, the courts pulled up the ministry asking why there were no international flights to Chandigarh airport and why was “public money" spent on the airport amounting to ₹ 1,400 crore.
“Use it for wheat storage, if you are unable to start operations. It is not the high court’s job to get into it (pass directions to start operations)," the high court bench of justices S.S. Saron and Gurmit Ram observed, according to a Hindustan Times report published on 13 April.
The ministry has similarly faced tough questions in recent months from courts over why there were no flights to Shimla.
“The development of new or brownfield airports by the Airports Authority of India (AAI) ought to be subject to stringent Techno-Economic Viability analysis as well as Functional requirements. The detailing of this policy must take into account Regional Master Planning of development of airports and not each airport on a stand-alone basis," said Robey Lal, a former AAI board member.