Higher subsidy for airlines connecting two regional airports

The Centre will provide higher a subsidy to airlines that operate flights between two regional airports under the regional connectivity scheme.

It will also allow airlines to transfer its rights or contract to get the subsidy from the government and fly on regional routes to another airline operating a similar type of aircraft, according to the regional connectivity scheme document.

The subsidy amount given to airlines that operate between two unserved or underserved airports will be 10 per cent higher than the sum offered to airlines that connect only one regional airport. There are 16 airports that have had no flights in the past one year and another 399 airports or airstrips that have not seen flight operations for more than three years.

Three-year subsidy

Under the scheme, also known as UDAN, the Centre will provide a three-year subsidy to fund the losses of airlines to enable them to offer airfares at Rs.2,500 for an hour’s flight on half the seats. The subsidy amount for airlines connecting to one regional airport will vary between Rs.2,350 and Rs.5,100 per seat depending upon the distance covered between two destinations.

In another move, the Union civil aviation ministry has scrapped its earlier proposal to reduce the subsidy amount based on improved passenger load factor. Earlier, the draft scheme had proposed that if an airline manages to fill 90 per cent of its seats by operating regional flights in the first year of its operations, the subsidy amount in the subsequent year would be reduced by half as the route would become viable.

The government has also reduced the bank guarantee to be provided by airlines to fly on each regional route. Airlines will be required to submit a bank guarantee equivalent to 5 per cent of the total subsidy amount. An airline operating a 40-seater aircraft to fly thrice a week throughout the year on an 800-km distance flight will need to submit about Rs.8 lakh as bank guarantee, as against an earlier proposal of Rs.50 lakh for each regional route.

Airlines will still be required to submit an additional bank guarantee of Rs.1 crore if they seeks to fly from a non-operational airport.

[Source:-The Hindu]