Exit VRL; Few Takers Left for Centre’s Regional Connectivity Scheme

Government’s Regional Connectivity Scheme finds few takers.

Experts and airlines question lack of clarity, price cap.

VRL Logistics drops its civil aviation foray.

Even as the Central Government has grand ambitions to promote regional air connectivity, questions have been raised on whether the proposed policy will ever take off or not.

The Centre has proposed a Regional Connectivity Scheme by offering concessions to the airlines to fly on regional routes. The draft policy puts an airfare cap of Rs 2,500 for an hour’s flight on remote routes to be covered under the scheme.

aeroplanes by shah juniad

Experts have raised questions over a lack of clarity in the policy. “There needs to be a further clarity on the regional connectivity scheme and concessions, which are being offered under it. Also the policy states that concessions will be offered to a new category of scheduled commuter airline. It is not known whether the existing regional airline permit holders will be entitled to those benefits under the regional connectivity scheme,” said aviation expert Anurag Jain.

“CRISIL Research believes this move would cap the prices on regional routes, which is a negative for airline companies given the government intervention and price control. Besides, more details are awaited in terms of whether a fare of Rs 2,500 per hour will be capped even for a last-minute booking, identification of specific routes and associated regional impact, if any, and specific modalities and procedures to be adopted in administering this scheme,” said CRISIL Research in a detailed note.

VRL Logistics Ltd has decided to drop its civil aviation plans. As reported earlier, its promoters were very keen to take active part in the Regional Air connectivity scheme. 

ReadBizarre Story of VRL Logistics: Will its Airline Idea Prove Deadly ?

Chairman and Managing Director Vijay Sankeshwar, in a stock exchange filing on July 20, 2016 said: “We have decided to drop the plans for an entry into civil aviation space.”

The company had plans to enter the civil aviation industry by incorporating a separate company to undertake the business of a regional airline.

“Subsequently, there have been several developments including the announcement of the new aviation policy by the Centre. The regional connectivity related aspects listed in the said policy do not augur well with our planned business model envisaged for the proposed activity,” Sankeshwar gave reasons for dropping the plan.

The exit of VRL Logistics from the proposed Regional Air connectivity scheme marks the beginning of the end of the scheme itself. 

Among national airlines, only Air India has shown some interest in participating in the regional connectivity scheme mooted by the Union civil aviation ministry in its draft policy released in June 2016.

“Yes. We’ll become a part of the scheme. We’re giving a big push to regional connectivity and have already written to all the state governments. We’re adding three new ATR72 (turbo prop regional aircraft) in the next two months and shall be adding 10 more next year to our subsidiary Alliance Air. The scheme is excellent and would go a long way in meeting national objectives,” Air India Chairman and Managing Director Ashwani Lohani has told media.

AI chairman and managing director Ashwani Lohani
AI Chairman and MD Ashwani Lohani

Regional or short routes operators having smaller aircraft in their fleet :

-Air India (6 ATRs and 3 CRJs),
-Jet Airways (18 ATRs) and
-SpiceJet (14 Bombardier Q400).

Other scheduled operators in India such as Air Costa, Air Pegasus and TruJet also operate regional aircraft.

Experts and airlines have criticised the regional connectivity proposals for its lack of clarity. Global experiences had shown in the past that the aviation industry acted as a key factor for overall economic development. In absence of an environment conducive for the aviation industry’s growth through clear-cut policies, India has now been put to a great disadvantage. The global standing of India in the aviation industry might see a big setback since India gets a lot of attention from foreign investors and carriers because of its exploitation of its burgeoning consumer market.

air costaAn Air Costa spokesperson said the airline was keen to participate in the regional connectivity scheme. However, it would “like the concessions to be extended to aircraft with 120 seats.” At present, the proposed policy offers a slew of incentives, including viability gap funding to aircraft with 100 or less seats.

Air Costa also opposed the move to cap fares at Rs 2,500 an hour on regional routes. “Price cap cannot be a long-term solution and it will not incentivise airlines to perform better. Rather, the government could consider a fare band for the regional routes,” the official added.

GoAir had no immediate plans to fly to remote areas and will continue to operate a single aircraft type (Airbus A320s). 

IndiGo has denied forming a subsidiary to cater to regional routes in the near future.

R-N-Choubey-Civil-Aviation-SecretaryThe Union government also feels the policy will suit the regional carriers more than the national ones. “We don’t think other (national) carriers will go there at all. It depends on an airline’s business model. Normally, airlines don’t like multi-configuration aircraft. It’s difficult to have separate facilities for them. In this case, these airlines might decide to have a subsidiary for regional connectivity,” Civil Aviation Secretary R N Choubey had said.


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