Carriers may have a younger fleet

Move to make fleet acquisition expensive.

In a move that may push up the cost of fleet acquisition, the government is likely to reduce the age limit of aircraft that can be bought by an Indian carrier from 15 to seven years.

"There is a need to take a re-look at the fleet age. Indian carriers need to have a younger fleet," said Civil Aviation Minister Praful Patel.

According to aviation industry estimates, newer aircraft are likely to cost about 25 to 30 per cent more than older aircraft. This will make it more expensive for Indian carriers to lease as well as buy aircraft.

Globally, cost of leasing aircraft has already risen with the Indian carriers placing huge lease orders. It is estimated that the leasing cost has gone up by about 40 per cent in the last 12 months to about $15 million a year, after it hit an all-time low following the global aviation slump in 2001.

Patel also said the proposed civil aviation policy was likely to spell out the details of this move by the government.

"We have to set a realistic age for aircraft. We are in discussions with the directorate-general of civil aviation and the players to determine what is best for the industry," Patel said.

The proposed policy will also raise the entry barrier for new airlines by raising the minimum equity cap to Rs 50 crore from the present Rs 30 crore. However, the minimum number of aircraft that a carrier needs to operate in the domestic sector remains five.

The new condition is, however, unlikely to impact any of the existing operators as all of them have paid up equity of over Rs 50 crore.

Patel also said the government wanted to re-work the route dispersal guidelines for domestic carriers with an aim to rationalise the number of hours that an airline needs to fly on less profitable routes.