 "Regional connectivity scheme finds less takers")
Experts and airlines have criticised the proposal of a fare cap of Rs 2,500 an hour of flight on regional routes, which will qualify under the scheme.
Among national airlines, only Air India has shown some interest in participating in the regional connectivity scheme mooted by the Union civil aviation ministry in its draft policy released on Friday.
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At present, Air India (six ATRs and three CRJs), Jet Airways (18 ATRs) and SpiceJet (14 Bombardier Q400) have smaller aircraft in its fleet catering to regional or short routes. Other scheduled operators in India such as Air Costa, Air Pegasus and TruJet also operate regional aircraft.
"Yes. We'll become a part of the scheme. We're giving a big push to regional connectivity and have already written to all the state governments. We're adding three new ATR72 (turbo prop regional aircraft) in the next two months and shall be adding 10 more next year to our subsidiary Alliance Air. The scheme is excellent and would go a long way in meeting national objectives," Air India Chairman and Managing Director Ashwani Lohani told Business Standard.
GoAir's Chief Executive Officer Wolfgang Prock-Schauer said it had no immediate plans to fly to remote areas and will continue to operate a single aircraft type (Airbus A320s). During a press conference a few days ago, IndiGo President Aditya Ghosh had denied forming a subsidiary to cater to regional routes in the near future.
SpiceJet's General Manager (corporate affairs) Ajay Jasra said: "It looks like an encouraging policy as far as regional connectivity is concerned. However, we need to examine the fine details. Also, there is an issue of training pilots to fly smaller planes. There should be a anti-poaching policy, put in place as it takes a lot of time to train them."
An Air Costa spokesperson said the airline was keen to participate in the regional connectivity scheme. However, it would "like the concessions to be extended to aircraft with 120 seats." At present, the proposed policy offers a slew of incentives, including viability gap funding to aircraft with 100 or less seats.
Air Costa also opposed the move to cap fares at Rs 2,500 an hour on regional routes. "Price cap cannot be a long-term solution and it will not incentivise airlines to perform better. Rather, the government could consider a fare band for the regional routes," the official added.
The Union government also feels the policy will suit the regional carriers more than the national ones. "We don't think other (national) carriers will go there at all. You can't take a 250-seater aircraft flying 20 passengers to such remote routes… It depends on an airline's business model. Normally, airlines don't like multi-configuration aircraft. It's difficult to have separate facilities for them. In this case, these airlines might decide to have a subsidiary for regional connectivity," Civil Aviation Secretary R N Choubey had said in an interview last week.
The Centre has proposed a regional connectivity scheme by offering concessions to the airlines incentivising them to fly on regional routes. The draft policy puts an airfare cap of Rs 2,500 for an hour's flight on remote routes to be covered under the scheme. The Centre will fund 80 per cent of the airline's losses and the rest will come from the states.
A regional connectivity fund is proposed to be set up by levying a two per cent cess on domestic and international tickets.
The Centre will take the help of airlines and state governments in identifying potential under-served regional airports. On these airports, the states will provide concessions such as free land, reduced rates of power, water and other utilities, one per cent or less value-added tax on aviation fuel, among others. The Centre will also waive off service tax on tickets on regional routes and the aviation fuel drawn by airlines from such airports will be exempt from excise duty. However, these concessions will be made available to scheduled commuter airlines using aircraft with 100 seats or less.
Experts have raised questions over a lack of clarity in the policy. "There needs to be a further clarity on the regional connectivity scheme and concessions, which are being offered under it. Also the policy states that concessions will be offered to a new category of scheduled commuter airline. It is not known whether the existing regional airline permit holders will be entitled to those benefits under the regional connectivity scheme," said aviation expert Anurag Jain.
"CRISIL Research believes this move would cap the prices on regional routes, which is a negative for airline companies given the government intervention and price control. Besides, more details are awaited in terms of whether a fare of Rs 2,500 per hour will be capped even for a last-minute booking, identification of specific routes and associated regional impact, if any, and specific modalities and procedures to be adopted in administering this scheme," said CRISIL Research in a detailed note.
ROUGH LANDING
- The draft policy puts airfare cap of Rs 2,500 for an hour's flight on remote routes to be covered under the scheme
- Centre will fund 80% of the airline's losses and the rest will come from the states
- Among national airlines, only Air India has shown some interest in participating in the regional connectivity
- Union govt feels the policy will suit regional carriers more than national ones