Fleet size may be linked to paid-up equity

The draft civil aviation policy proposes to link aircraft acquisition by airlines to their paid-up capital.

Airlines operating large aircraft "" 40,000 kg in payload and more "" must increase their paid-up equity by Rs 20 crore for every five planes added to their fleet. Those operating small aircraft need to increase it by Rs 10 crore.

Thus far, the key requirement has been that an airline flying large aircraft must start with at least five planes and a minimum of Rs 30 crore as equity. Those flying small ones can make do with Rs 10 crore.

The draft policy says the capital requirement should be raised to Rs 50 crore for the first category and Rs 20 crore for the second.

This is proposed to apply with retrospective effect, which means that the airlines already in operation will also have to comply, along with new ones.

Thus, IndiGo, which has placed an order for 100 Airbus A 320 aircraft, needs to have an equity base of at least Rs 440 crore when its fleet is complete. Air Deccan, which had a paid-up equity of Rs 98.1 crore at the time of the public issue with a fleet of 45 aircraft, will be required to increase its paid-up equity to at least Rs 210 crore.

Jet Airways, with a fleet of 53 aircraft and an equity base of Rs 863.3 crore, will not be affected. Similarly, SpiceJet, which has an equity base of Rs 156.47 crore and seven aircraft, will need to worry only when it expands its fleet.

Civil aviation ministry officials said this could form the basis for allowing airlines to import aircraft. They said airlines not conforming to these conditions would not be allowed to expand their fleet. The civil aviation ministry plans to present the civil aviation policy for the Cabinet's approval this month.