VRL promoters scrap regional airline plan

Promoters of VRL Logistics Ltd on Wednesday said that they have abandoned plans to launch a regional airline saying the new civil aviation policy does not auger well for its planned venture.

On May 24, when the promoters of VRL Logistics Vijay Sankeshwar and Anand Sankeshwar announced their intention to to start a regional airline focusing on the Southern markets.

They said they could sell as much as 2% in VRL Logistics, founded by former BJP MP Vijay Sankeshwar to fund the airline.

The stock had plunged 20% on the news, but has recovered since then to close at Rs 314.60 on Wednesday.

"We had expressed our intention of commencing a regional airline. Subsequently, there have been several developments including the announcement of the new aviation policy by the center. The regional connectivity related aspects listed in the said policy do not augur well with our planned business model envisaged for the proposed activity," Vijay Sankeshwar said in regulatory filings.

In June, the government came out with a Civil Aviation policy that promised viability gap funding for regional airlines who can ferry passengers on a one hour trip to fares below Rs 2,500. It also announced reduced service tax, lower VAT and excise duty on jet fuel. VRL has among India's largest truck and bus network covering most parts of the country.