MUMBAI/NEW DELHI: The government is set to play a big role in purchase of aircraft by private airlines and may push them into increasing flights to smaller cities under a controversial set of rules that is set to rile the industry.
The civil aviation minister, Ajit Singh, is pushing for a more aggressive stance towards private airlines who buy a large number of aircraft and deploy them on a few routes creating overcapacity. He wants them to tailor those purchases and increase flights to non-metro cities and small towns as part of the government's drive to extend and deepen connectivity
But the rules are likely to fall afoul of airlines who want complete freedom in purchases and deployment. The industry has not taken kindly to the ministry's desire to increase flights to smaller airports, saying that such flights will be uneconomical.Experts say that the government could end up micro-managing the sector and revive memories of a bygone era when government decided the location and quantum of business investment.
"We are going to nudge the airlines to fly to smaller airports but we cannot mandate them to buy any particular type of aircraft," the aviation minister told ET. "What we are looking at is the option that an airline can tie up with a non-schedule operator and have some kind of code share agreement with that operator for enhancing regional connectivity," he added.
The ministry has been talking about the need to increase flights to smaller cities so that passengers in the hinterland can enjoy quick, hassle-free travel. Last month, Ajit Singh gave a clear warning of his intentions when he chided the airlines for their preference for larger planes which he said was hindering connectivity with smaller towns. A revaluation of the policy governing fleet expansion was necessary, he added.
In India, clearance for aircraft purchaseis given by the aircraft acquisition committee, whose members include an official each from the Bureau of Civil Aviation Security and the Airports Authority of India, and a joint secretary-level official from the aviation ministry. The committee, which is currently dissolved, vets the purchase proposals with only route dispersal files.
"There will be a committee that will be reconstituted to look into aircraft acquisition by the carriers but the government will be stricter from now on when it gives a go-ahead to any airline to buy an aircraft. We would want an airline to give us a firm business plan. In the past the number of aircraft that have been booked by airlines far exceed the capacity needed and that might become a problem," Singh said.
The airline industry, naturally, is strongly opposed.
"The government is not putting in money in our airlines as they do for Air India. Then why should they dictate where we expand and what aircraft we fly," a top executive of a private carrier, who did not want to be named said.
An executive of another carrier said: "There's confusion because of the dissolution of the aircraft acquisition committee. There are some aircraft belonging to Jet Airways, SpiceJet and IndiGothat need to be brought in. But clearance for them is in limbo."
Experts say that the government cannot interfere into aircraft purchases. "Its role is to give broad policy framework," aviation expert Mohan Ranganathan said, adding, "The basics are not being addressed. When policy changes for aviation are taking place, where are the airports in tier-II and -III cities? Airlines are here to do business. They (government) have monopoly over Air India, so let them initiate this policy change for Air India."
The plan to regulate goes against a government panel's recommendation made a year ago that the government should distance itself from the aircraft purchase plans of airlines. Rohit Nandan, former joint secretary in the aviation ministry and now managing director of Air India, headed the panel.
A senior ministry official concurred with private carriers saying that regulating purchases using traffic data could be misleading. "Regulating aircraft acquisition has the fallout of bringing on the licence Raj, where a businessman says show me the airline and I'll show you the traffic," the official said, adding, "Traffic depends on many extraneous factors - political unrest, climate changes anything can affect traffic predictions."
What some airline officials find disturbing about the changes is the uncertainty over what the government would do when armed with powers to "nudge" them into flying to smaller airports. Will new aircraft on trunk metro routes be discouraged? If yes, what will be the impact on financials given that most airlines make the maximum money on these sectors? How exactly will the government push the industry into interior towns and cities, given that many of these airports don't have basic infrastructural facilities?
Under route dispersal guidelines formulated in 1994, airlines are allotted routes segregated into three categories. The category 1 routes cover the metros and cross subsidise for loss-making routes that essentially cover difficult terrain, such as the northeast and Kashmir, which fall under category 3. Category 2 routes link tier-II and -III cities. It is mandatory for all airlines to operate a certain percentage of their flights on categories I and II and expand fleet accordingly but few airlines fulfill these criteria.
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