Home >Politics >Policy >Govt clears the decks for six new airlines

New Delhi: Overturning a policy of selectively granting aviation licences to applicants, the civil aviation ministry has approved six new airlines.

The move could result in as many as eight new airlines taking to the skies this fiscal year, including Tata Sons Ltd’s low-cost joint venture (JV) with Air Asia Bhd that has already started flights and its premium JV with Singapore Airlines Ltd (SIA), expected to launch operations in October.

Three of the new approvals are for national airlines.

The move is likely to stoke competition, leading to lower fares for consumers, and at the same time improve connectivity across the country.

Civil aviation minister Ashok Gajapathi Raju has, in the last one month, awarded no-objection certificates to the six airlines that have been pending approval for a long time, said a government official who declined to be named.

Once the no-objection certificate is obtained, the new airlines can approach the Directorate General of Civil Aviation (DGCA), the aviation regulator, for an airline licence—a process that takes about three months.

These airlines include Air One Aviation Pvt. Ltd, Zexus Air and Premier Air, that are seeking to become national airlines; Turbo Megha, Air Carnival and Zav Airways want to take to the skies as regional airlines that operate in limited geographies and face restrictions on where they can fly to.

“The focus of the new minister is to improve connectivity and he has said it often," said the same government official quoted above. “It’s quite a departure from the earlier practice of picking and choosing who to give a licence (to)."

Mint reported on 4 February that the aviation ministry, then under Ajit Singh of the United Progressive Alliance (UPA), was planning to limit the number of domestic airlines by tightening the criteria for new airline permits and had asked for a capacity study to be conducted by DGCA.

The UPA was ousted in the April-May general elections by the National Democratic Alliance (NDA).

“This new government has its own thinking, as you can see," the government official cited above said.

A second government official confirmed that the no-objection certificates had been issued to new airlines.

India already has six airlines—Air India, IndiGo, Jet Airways, SpiceJet, GoAir and Air Costa.

Of the new applicants, Air One already runs charter operations with about half-a-dozen business jets and helicopters and is likely to be based out of Delhi, the first government official cited above said.

Air One has been promoted by Alok Sharma, who headed the erstwhile Air Sahara. The airline is expected to have a paid-up capital of 90-100 crore.

Zexus Air is expected to be based out of Delhi while Premier Air, which is promoted by non-resident Indian Umapathy Pinaghapani, is expected to be based out of Bangalore.

Turbo Megha, which also operates charter flights out of Hyderabad, is expected to be based in the same city.

Turbo Megha currently has two active directors/partners including Vankayalapati Umesh and Ram Charan Tej Konidala.

Air Carnival is likely to operate from South India while Zav Air is likely to run services from the Northeast, as per the proposals the airline companies have sent to the aviation ministry, the first government official said.

The companies could not immediately be reached for comment.

In its June outlook report for the airline industry in 2014-15, consulting firm Capa Centre for Aviation had estimated that India’s domestic airline capacity would expand by around 8-10% this fiscal and most of the growth would be generated by AirAsia India, Tata-SIA, and possibly Air Costa, all of which combined could deploy up to 18-20 aircraft in the market by the end of FY2015.

Jet Airways, the report predicted, was likely to freeze its domestic fleet expansion this year, and noted that most of its new Boeing 737s were to be deployed on international routes; Air India did not have any outstanding orders for domestic aircraft and SpiceJet was expected to see a contraction of its domestic operations as the airline engages in a restructuring of its business to address financial problems.

IndiGo was to deploy six more A320s and GoAir just one this fiscal.

One organization of consumers welcomed government’s move.

“This will bring healthy competition and break monopolies," said Sudhakara Reddy, chairman, Air Passengers Association of India. “I think it is a good move. At the end of the day, you would like to have competition as fares will slowly come down."

Reddy cautioned that the government should not evaluate the applicants on the basis of their finances alone, but also take their past business track record into account to ensure fly-by-night operators are kept out.

The new airlines have received their no-objection certificates at a time existing ones are struggling with intense competition and high operating costs.

Over the last seven years, Indian airlines have lost about $10.6 billion, according to Capa. These years also saw the closure of Kingfisher Airlines, Air Deccan (which had merged with Kingfisher), Deccan 360, MDLR Airlines, Paramount Airways and Indus Air.

After posting a combined industry loss of about $1.7 billion in FY2014, airlines may lose in the range of $1.3-1.4 billion in the current fiscal year, Capa has forecast.

“The consumer will have more to choose from but there will be a lot of bloodshed," said Shakti Lumba, chief of operations of Dubai-based airline start-up Nashwan Aviation SZC, who was also part of the IndiGo start-up.

Lumba said the entry of more airlines will also put pressure on India’s limited aviation industry workforce. He said DGCA should remove the six months notice period pilots are required to give their employers to join another airline. “It’s all very well to give licences but you have to remove all the entry barriers because until then, the deck is stacked up against the new entrants. Let the fittest survive," he said.

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