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Corporate Jan 4, 2013

Revival plans: Govt may incentivise airlines to fly smaller cities

By Sindhu Bhattacharya

New Delhi: The Civil Aviation Ministry is mulling over a proposal to offer incentives to airlines which serve smaller towns and cities and has already initiated the process of making suitable changes in the route dispersal guidelines.

At present, these guidelines make it mandatory for all domestic airlines to offer at least 10 percent of their services on routes to the North East, with Air India usually exceeding this limit.

But now, the ministry has sought comments from airlines on a proposal to encourage them place orders for smaller planes and tie up with various state governments so that inter-state connectivity and intra-state connectivity (as opposed to connectivity only to state capitals) is boosted.

What the ministry needs to consider is drafting clear guidelines for regional connectivity where airlines are incentivised for providing services PTI

A top ministry official said it was possible that state governments would underwrite seats - which means commit to buy certain number of seats per flight - in case an airline offers connectivity to remote cities and those destinations which are until now not on the aviation map.

He also spoke of offering more concessions to airlines which offer such connectivity such as cheaper fuel and lowering of landing, parking and other airport charges for aircraft flown by such airlines.

But the ministry's proposal to enhance regional connectivity comes on the back of a failed regional airline connectivity policy which is six years old and has never really taken off. Besides, it may appeal more to NSOPs (non-scheduled operators) more than the scheduled carriers.

In late 2011, the ministry granted an initial NoC (no-objection certificate) to five regional operators. Freedom Aviation and Air Pegasus for the Southern Region; Captain Gopinath's Deccan Charters for the western region; Indus Airways, Karina Airlines and Religare Aviation for the Northern Region. The NoC was valid for 18 months but of all these, only Religare is operational now.

A proposal by an ex-Sahara Airline employee to begin scheduled operations was never cleared.

A comprehensive policy to promote regional airlines was devised in 2007 but till date, not a single such airline operates in the country. A regional airline, by its very definition, connects small cities in a region to the major metro of that same region; it does not operate outside the region and does not connect to more than one metro city.

But this ban on connecting more than one metro cities has proved to be a stumbling block for regional operations in the past and the ministry had earlier wanted to amend it to allow operations to more than one metro.

Also, it had relaxed rules for such airlines by asking them to reach three aircraft fleet size within two years instead of the first year stipulated earlier. Only by the end of five years are they required to operate five aircraft against the earlier deadline of two years.

In the past, Luan Airways wanted to begin from Guwahati, Star Aviation wanted to begin services to smaller south Indian towns from Chennai but both remained on the ground.

Skyking, former Meghlaya Chief Minister P Sangma's airline, got the NoC but could not begin operations, ditto for Jagson Airlines, which now operates only chopper services in select destinations.

Even state-owned Pawan Hans Helicopters' permit for regional connectivity lapsed!

A host of regional cargo services such as Flyington Freighters, Avicore etc also lost their NOCs but could not begin operations.

So what is the ministry doing differently this time around? According to a story in the Hindu Business Line today, a fresh proposal by Gopinath to re-launch a national airline and the Cochin Airport's move to launch Air Kerala hase not been cleared by the ministry.

The HBL story says that a variety of reasons are being given out for not giving a go-ahead to both these proposals: slowdown in the industry, which has seen a fall in the number of passengers flown by domestic airlines and the track record of the promoter in other aviation ventures.

In the case of Air Kerala, the government norms of an airline having to complete five years of domestic operations and having a fleet of 20 aircraft could derail the project.

So what the ministry needs to consider is drafting clear guidelines for regional connectivity where airlines are incentivised for providing services. Even then, many may not come forward unless they see a financial benefit.

by Sindhu Bhattacharya

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