Small planes may get relief

Small aircraft like Bombardier Q400, ATR and Embraer E170 could be exempted from a fee of Rs 8,000 per flight that the government has proposed to mop up funds for subsidising air travel to smaller towns.

“It (exemption) has been proposed in the aviation policy sent to the cabinet for approval,” an aviation ministry official said. The proposed fee would lead to an increase in fare on metros and other high traffic sectors where airlines operate with A320s and B737s that carry up to 180 passengers.

In its bid to promote air connectivity in tier II and tier III cities, the aviation ministry on October 30 last year suggested a 2 per cent cess on each domestic and international passenger. It, however, later dropped the proposal in the face of strong protest by both domestic and foreign airlines. “I don’t see feasibility of this levy. Either the 2 per cent cess or the Rs 8,000-fee, you need a new legislation,” said Kapil Kaul, India head of aviation consultancy Centre for Asia Pacific Aviation (CAPA).

An airline industry executive wishing not to be named pointed out that passengers flying on metro routes are already paying indirectly for subsidising travel on smaller cities under the route dispersal guideline (RDG).

“The proposed Rs 8,000 fee per flight would be the second levy for subsidising airfares on regional routes. Excessive burden on passengers flying on metro routes could affect growth,” he added.

Regional planes with seating capacity not exceeding 80 already enjoy incentives like zero landing charge and lower sales tax of 4 per cent on aviation turbine fuel (ATF). The exemption from the proposed fee would be a further boost. The government has been offering sops to small jets as it helps connect small towns and far-flung areas.

Bigger planes cannot land at smaller airports and also they are commercially unviable due to low traffic volume.

“The operating cost of a 70-seater plane is twice that of A320 or B737. In terms of capacity, an A320 is almost 2.5 times that of turboprop Q400 or ATR and as a result have lower CASK (cost available seat kilometre),” said an airline executive. As per latest financial figures, the largest domestic carrier, IndiGo, had a CASK of Rs 2.92 in the quarter ending March 2016. Excluding fuel, the cost per ASKM stood at Rs 2.02.

The move to levy a fee per flight is set to benefit regional airlines Air Costa, Air Pegasus and Turbo Megha that operate on shorter routes like Hyderabad-Vijayawada and Chennai-Madurai with small planes as it would help them better compete with the bigger airlines that operate with narrow body A320 and B737.

Fearing market distortion as a result of additional cost burden, bigger airlines such as IndiGo could take court route to stall the proposal. An industry source said the airline has conveyed this to the civil aviation ministry.

While Air India, Jet Airways and SpiceJet have some smaller jets in its fleet, other major carriers IndiGo, Vistara and Air Asia India operate only A320s as part of their business model. State-run Air India has 11 small planes in its fleet, while Jet and SpiceJet fly 18 and 14, respectively. Largest domestic carrier by passenger flown IndiGo has 107 A320s in its fleet. Vistara and AirAsia India has 9 and 5 aircrafts, respectively.