Sunday, May 20, 2012

New Delhi, India: Government bid to boost regional air links

NEW DELHI: In a move that could boost connectivity, the government plans to make it mandatory for airlines to operate feeder flights into big cities from nearby places. Such a move would, in turn, make it mandatory for all scheduled carriers to have small turboprop aircraft in their fleet.

Aviation minister Ajit Singh recently said: "The idea is to have regional connectivity to the local hub. For example , there is a huge market around Delhi that would like to fly into the capital and then take connecting flights. We are planning to make it a must for airlines to have such flights." These feeder flights would be in addition to the existing norm of flying to the northeast and Kashmir. But would Indian airlines, all of whom are facing serious financial troubles and struggling to survive , be able to afford this move if it means buying small planes? At present, airlines like IndiGo and GoAir operate an all-Airbus fleet with no turboprops .

"Aviation turbine fuel (ATF) is the single biggest operating cost element for airlines . I have asked the oil ministry to put it in the list of petro products whose price is determined by the government and not oil companies. There is a feeling that cross-subsidization of other petro products is happening by disproportionately hiking ATF prices each time crude shoots up," the minister said.

The aviation ministry feels that if ATF is notified, oil companies would have to give some serious logic for the hike in prices. At present, high sales tax levied by states on ATF along with steep base price (possibly to subsidize loss on sale of diesel, petrol, LPG) of jet fuel make ATF among the most expensive in the world here. ATF alone accounts for almost half of an airline's total operating cost. The ministry feels if this is brought down to global levels of about 30% with rationalization of ATF prices, airlines can return to health. Also there are indications that the much-awaited decision to allow foreign airlines to pick up up to 49% stake in Indian carriers could be taken by Juneend . The move will gather speed now with Parliament session coming to an end.

Highly placed sources say the owner of nearly bankrupt Kingfisher recently called on Singh and linked the airline's survival to allowing FDI by foreign airlines. Apart from airlines like Jet and IndiGo, the biggest opposition to FDI comes from Trinamool Congress . Sources say Singh has had talks on the issue with Trinamool . "We have to take steps for making the industry viable without a bailout package for private airlines," Singh said.

More Strain

Airlines like IndiGo and GoAir, which operate an all Airbus fleet, will have to buy small turboprops Aviation ministry has sought putting ATF in notified goods category to end practice of oil companies pricing jet fuel as they wish There are indications that the much-awaited decision to allow foreign airlines to acquire stake up to 49% in Indian carriers could be taken by June-end.

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