Overall improvement in the civil aviation regulatory framework as controlled by government policies would be required, if the economics of regional aviation are to thrive

On July 23, Air Mantra, a new regional airline launched by Religare Voyages, commenced operations in the northern region initially connecting only Amritsar and Chandigarh, with two 17-seat Beechcraft 1900D aircraft. Kapil Kaul, CEO (South Asia) of Centre for Asia Pacific Aviation (CAPA) sounded a warning note. “With the current oil prices and having Beechcraft for its operations, it might not be a viable plan for Religare Voyages.” Air Mantra is the first regional airline to be launched in India in five years; the only other regional carrier MDLR Airlines having come to a screeching halt in October 2009. Several other regional airlines were mooted at some time or the other to fill the space not adequately populated by national airlines, but failed to take off. Growing affluence in the smaller non-metro cities, rising awareness about saving time and comfort-enhancement offered by air travel have led to mounting demand for regional flights to pervade the national air space. However, despite the dire need for such a network and government policy aimed at providing connectivity to tier-II/III cities, regional aviation is yet to take off. The reason: the economics and the regulatory framework just do not support a viable model.

The second wave in the Indian airline industry began with the birth of Air Deccan in 2003, the first of the early 1990s having petered out by the end of the decade with only Jet Airways surviving. By 2007, it was evident to the Ministry of Civil Aviation (MoCA) that the new airlines were all gravitating around the metros, a trend that continues to afflict civil aviation even today. Somewhat at unease with this trend, the Ministry tweaked existing regulations to mandate a substantial proportion of an airline’s flying to be flown on non-metro routes. The underlying sentiment was laudable but the financial repercussions rendered the regulation distasteful to airlines from day one.

Connecting Non-Metro Cities

The Route Dispersal Guidelines (RDGs) contained in the Civil Aviation Requirement (CAR) Section 3, Series C, Part II, essentially decree that domestic airlines fly a proportion of their total flying capacity over unviable and unattractive routes connecting cities/towns in the North-eastern Region (NER), Jammu and Kashmir (J&K), Andaman and Nicobar (A&N) and Lakshadweep. There is also a requirement to fly to other non-metros in the country. Routes have been classified into four categories according to these guidelines; these are: Category I, Category II, Category IIA and Category III (see box). For this purpose, the measure of an airline’s capacity is available seat kilometres (ASKM) which is the sum of the products obtained by multiplying the number of passenger seats available for sale on each flight by the corresponding stage distance. Every scheduled airline that flies on one or more of the routes under Category I (routes connecting one metro to another) is required to mandatorily fly in Category II (NER, J&K, A&N and Lakshwadeep to the rest of the country) to the extent of at least 10 per cent of the ASKMs as deployed in Category I. Further, a minimum of 10 per cent of the ASKMs as deployed in Category II is required to be deployed in Category IIA (one Category II airport to another) and a minimum of 50 per cent of ASKMs deployed in Category I is required to be deployed in Category III (the rest of the airports i.e. other than Category I and Category II).

Financial Implications

There is nothing more painful for an airline management than to see empty seats. The problem with the RDG arithmetic is that the smaller cities do not offer lucrative payloads that the metros do. For a national airline, flying to smaller towns over smaller route lengths, has financial implications. The single aisle aircraft of A320/Boeing 737 class which make up the majority holding of domestic carriers can fly stages of four to five hours. Their employment on smaller lengths detracts from their optimum utilisation. In the Indian context, the average metro-to-metro route length which is around two hours is acceptable, but anything shorter than an hour is wasteful and economically distressing. Airlines would like to utilise their aircraft from metro to metro and avoid smaller towns and smaller stage lengths. However, if an airline holds only one type of aircraft, it is forced by the RDG regime to fly short routes such as Delhi-Chandigarh, Mumbai-Pune and so on. These routes mean moving away from the optimum revenue yields and are thus a burden to airlines is to invest in more than one type of aircraft, one optimised for long routes and the other for ‘regional’ ones. Thus we see ‘regional’ aircraft i.e. ATR and CRJ being acquired by airlines. Then again, there is a financial penalty implicit in the management of more than one aircraft fleet on account of additional cost of diverse equipment, manpower and training. Using A320/Boeing737 on short routes or investing in more than one type of aircraft, both are economically hurting to an airline and inhibit regional aviation.

There is one more financially troublesome aspect related to regional flying specifically applicable to the NER. According to a decision of the MoCA taken in the hazy past, after an airline has introduced a flight into any airport located in the NER, it cannot discontinue or suspend the service without permission of the MoCA. Such permission is usually never granted. When an airline commences operations on a new route, there are periods of uncertainty during which the company’s planning premises are either ticked right by near full loads or else proved wrong by poor occupancy. As policy restrictions make withdrawal from NER difficult if not impossible, an airline that forays into the NER faces the possibility of being straddled with routes that prove to be economically unviable.