Air India holds monopolyin the Gulf sector
The launch of ‘Air Kerala’, with an initial capital of Rs. 200 crore, to operate flights to West Asia will hit the prospects of the national carrier, Air India and its low cost carrier, Air India Express, which hold monopoly in the Gulf sector.
Though the Board of Directors of Air Kerala, chaired by Chief Minister, Oommen Chandy, has decided to launch the airline, several hurdles have to be overcome to commence flight operations to the Gulf countries. The main hurdle is the rule that the airline should have at least 20 aircraft in the fleet and five years minimum domestic flight operations.
It will be difficult to secure exemption from the Union government as it would have to give similar exemption to all companies that come up with similar plans to commence international flights from other States. Highly placed sources in the Civil Aviation sector told The Hinduthat the Union government did not grant exemption when the domestic carriers approached it. Kingfisher airlines had to take over Air Deccan, which had completed five years of domestic operations, to seek permission to fly abroad.
The Union government will also have to consider the ‘threat’ posed to Air India, its low cost arm Air India Express, by the proposed Air Kerala, sources said. The State is pitching for the airline at a time when the government is infusing Rs.30,000 crore to bring the national carrier out of the red.
Air India Express, which has its headquarters in Kochi and mainly concentrates on West Asia, will be the worst hit if Air Kerala is launched, sources said. The national carrier and Air India Express now operate 160 flights a week from the State to destinations in West Asia.
Mr. Chandy has sought necessary exemptions to commence Air Kerala taking into account the hardship Gulf-Malayalis are facing owing to the profiteering attitude of airlines operating in the sector.
The resignation of Non-Resident Keralite businessman Yousuf Ali from the director board of Air India recently has also raised questions. Mr. Yousuf Ali, one of the Director Board members of Air Kerala, has announced that there is an offer to invest Rs.100 crore in the proposed airline.
The State government, Cochin International Airport Ltd (CIAL) and public sector undertakings will together hold 26 per cent of the shares of the company being floated under Cochin International Airport Ltd (CIAL). The initial report for the airline that was drafted some six years ago is now being updated.
Aviation industry sources said private entrepreneurs who will corner 74 per cent of the shares will leave only a minority share of the profit to the government. The industrialists are using the government status to get exemptions and leverages, sources added.
Failed attempt
The earlier attempts to start an airline with the support of the State government had not met with success. In the late Nineties, the Kerala State Industrial Development Corporation's (KSIDC) had come out with intra-State flight plans in collaboration with the Maharashtra-based Span Aviation. The plan remained on paper as one of the key partners, Wardekar, backed out.
· Several hurdles to overcome before launching airline
· Air India operates 160 flights a week to the Gulf
http://www.thehindu.com/todays-paper/tp-national/tp-kerala/article3903254.ece
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