Tuesday, June 20, 2017

Preparing for take off

With the cancellation of Air Carnival’s licence, only one among four regional airlines remains in operation. The rest of them are grounded with lessors taking possession of the aircraft they had leased to them. Trujet based out of Hyderabad is the only one which operates flights in and around the region, though little is known of its financial viability. At a time when the Centre is rightly pushing for regional connectivity through its UDAN (Ude Desh Ka Aam Nagrik) scheme to connect tier two and three cities, news about the grounding of yet another regional airline comes as a dampener. But it must be noted that these regional airlines started their operations much before the Regional Connectivity Scheme (RCS) came into being. They were treated as any full-service airlines and had to pay the same charges levied for any other carrier. That said, it is now quite clear that not much groundwork was carried out by these failed ventures before they turned up at the airports. For example, the Vijayawada-based Air Costa placed its bets on Brazilian aircraft, Embraer, which was good for the passengers but not for the airline, and is now struggling to restart operations. Experts say most of these airlines were undercapitalised; they ended up selecting the wrong aircraft and suffered from a lack of management depth.

Airlines under the UDAN scheme receive several concessions such as excise duty at 2 per cent on aviation turbine fuel (ATF) for flying on regional connectivity routes and at RCS airports; reduction of VAT to 1 per cent on ATF at RCS airports and no landing or parking charges by airport operators. Airlines which have bid successfully for a particular route will get three-year exclusivity so that they don’t have to compete with another carrier on the same route for that particular period.
19/06/17 Business Line