India Ratings and Research (Ind-Ra) believes that the draft aviation policy will benefit regional airlines, maintenance, and repair and overhaul (MRO) providers and air cargo players but falls short of addressing structural issues to ensure long-term viability of major players i.e. full service carriers (FSCs) and low cost carriers (LCCs).
Ind-Ra however believes that any significant improvement in the regional market will result in FSCs and LCCs entering aggressively into the segment, thereby putting pressure on the profitability of regional players.
The success of the policy is contingent on the support from states and while it entails significant impetus for development of regional airports and provides incentives for airlines to operate on regional routes availing viability gap funding (VGF), it fails to address structural issues such as air turbine fuel (ATF) taxation in the metros and provide clarity on the 5/20 rule for operating overseas. Ind-Ra therefore expects the private LCCs and FSCs such as Interglobe aviation (Indigo), Jet Airways India, Go Airlines India (Go Air) and Spice Jet to take a cautious stance to expand in the regional areas and to enter this arena only after assessing the performance and profitability of regional airlines. Consequently, capacity additions in the regional markets will initially remain limited and will pick up only once FSCs and LCCs have an opportunity to expand in this market.
23/11/15 my iris
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Ind-Ra however believes that any significant improvement in the regional market will result in FSCs and LCCs entering aggressively into the segment, thereby putting pressure on the profitability of regional players.
The success of the policy is contingent on the support from states and while it entails significant impetus for development of regional airports and provides incentives for airlines to operate on regional routes availing viability gap funding (VGF), it fails to address structural issues such as air turbine fuel (ATF) taxation in the metros and provide clarity on the 5/20 rule for operating overseas. Ind-Ra therefore expects the private LCCs and FSCs such as Interglobe aviation (Indigo), Jet Airways India, Go Airlines India (Go Air) and Spice Jet to take a cautious stance to expand in the regional areas and to enter this arena only after assessing the performance and profitability of regional airlines. Consequently, capacity additions in the regional markets will initially remain limited and will pick up only once FSCs and LCCs have an opportunity to expand in this market.
23/11/15 my iris
