InterGlobe Aviation was up 0.8% at Rs 1,016.80 at 11:15 IST on BSE, with the stock extending gains registered during the previous trading sessions triggered by the government giving fillip to regional air connectivity in its civil aviation policy.
Stock prices of two other aviation firms were in red. The decline in both these stocks in percentage terms was lower than the decline in the S&P BSE Sensex. SpiceJet was off 0.4% at Rs 66.10. Jet Airways (India) was off 0.4% at Rs 558.50. The Sensex was off 371.74 points or 1.39% at 26,354.60.
The stock price of InterGlobe Aviation has risen 2.78% in two trading sessions from its close of Rs 989.25 on 14 June 2016. The stock prices of SpiceJet, Jet Airways (India) and InterGlobe Aviation rose 0.21% to 3.5% yesterday, 15 June 2016, after media reports suggested that the Union Cabinet has approved the long awaited civil aviation policy. The official announcement of the government's nod for the civil aviation policy was made in the Press Information Bureau website after trading hours yesterday, 15 June 2016.
The civil aviation policy aims to enhance regional air connectivity through fiscal support. This will be implemented by way of revival of airstrips/airports as No-Frills Airports at an indicative cost of Rs 50 crore to Rs 100 crore. The selection of airports/airstrips for revival will be based on expected demand and in consultation with state government and airlines. Regional Connectivity Scheme (RCS) will available only in those states which reduce VAT on ATF to 1% or less, provide other support services and bear 20% of Viability Gap Funding (VGF). There will be no airport charges and lower services tax on tickets on 10% of the taxable value for 1 year initially. Airlines can avail lower excise duty at 2% on ATF picked at RCS airports.
The Viability Gap Funding (VGF) will be funded by a small levy per departure on all domestic routes other than Cat II/Cat IIA routes, RCS (Regional Connectivity Scheme) routes and small aircraft at a rate as decided by the Ministry of Civil Aviation from time to time. A detailed scheme will be put up in the public domain for stakeholders' consultations. The VGF will be shared between the Ministry of Civil Aviation (MoCA) and state governments in the ratio of 80:20. For the North Eastern states, the ratio is 90:10.
In a major policy change, the government has abolished the requirement of 5 years of domestic flying as one of the two key prerequisites for starting international operations by an Indian carrier. Henceforth, an airline can commence international operations provided it deploys 20 aircrafts or 20% of its total capacity (in term of average number of seats on all departures put together), whichever is higher, for domestic operations.
The regime of bilateral rights and code share agreements will be liberalised leading to greater ease of doing business and wider choice to passengers. "Open skies" policy will be implemented on a reciprocal basis for SAARC countries and countries beyond 5,000 kilometer from Delhi. A method will be recommended by a committee headed by the Cabinet Secretary for the allotment of additional capacity entitlements wherever designated Indian carriers have not utilised 80% of their bilateral rights but the foreign airlines/countries have utilised their part and are pressing for increase in the capacity.
The civil aviation ministry will continue to encourage development of airports by the state government or the private sector or in public private partnership (PPP) mode and endeavour to provide regulatory certainty. Future greenfield and brownfield airports will have cost efficient functionality with no compromise on safety and security. Meanwhile, the existing ground handling policy is being replaced with a new framework to ensure fair competition. All domestic scheduled airline operators including helicopter operators will be free to carry out self-handling at all airports.
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