Regional air connectivity scheme unveiled, levy proposed

Flyers may have to shell out slightly more for tickets to fund the government's ambitious regional connectivity scheme that was rolled out today under which airfares will be capped at Rs 2,500 for one-hour flights on unserved and under-served routes.
The RCS, which was mooted in the new civil aviation policy as part of government's plan to serve smaller cities, has been put up for stakeholders' consultations including state governments, airlines and airport operators. It will target 90 airports.
The stakeholders have been given three weeks time to submit their comments and suggestions on the draft scheme, which is expected to be finalised by August.

Also as part of the proposed scheme, a new category of airlines, scheduled commuter airlines, is being created where a new operator may be allowed to start operations with just one plane.
Under the proposed scheme, the government would be providing Viability Gap Funding (VGF) -- which would be financed through Regional Connectivity Fund (RCF).
Union Civil Aviation Minister Ashok Gajapathi Raju while unveiling the draft policy said RCF would be created for funding RCS "through levy on certain flights".

In this regard, the government would be charging a levy in the form of per domestic departure from the airlines on certain routes, a move which is expected to push the airfares marginally higher.

The Ministry would contribute 80 per cent of the VGF, while respective state governments would chip in with the remaining 20 per cent to the fund which will have a corpus of Rs 500 crore each year.
When asked how much levy is likely to be charged, Civil Aviation Secretary R N Choubey said, "We are giving final touches to that aspect (levy amount), that will be announced very soon."
Raju said the fare for a one-hour flight of about 500 km on a fixed-wing aircraft or on a 30-minute helicopter ride has been fixed at Rs 2,500.
He added that fares for other route lengths or durations will be priced proportionately (though not linearly).

"The states are interested in connectivity ... Their feedback will also be taken into account. The central government cannot bypass the states. We will take them into confidence and work along with them to make this (RCS) happen," Raju said.
The proposed scheme would be applicable for air services connecting "unserved and under-served routes" ranging from 200 to 800 km, while there would be no lower limit for hilly, remote, island and security sensitive regions.
"There are 31 airports inactive as of now. So, inactive airports will become low hanging fruits in different states," said Raju.
There are 394 unserved and 16 under-served airports in the country. "The scheme is demand driven. Wherever the state governments and airlines are coming forward for making them functional, we would be very happy to revive those airports," Choubey said.

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The government has also announced that it would provide funds for revival of another 60 airports, Choubey said, adding that 90 airports are already targeted of the total 410.
The cap on the fares will be applicable on half of the seats and the subsidised fares will be available on first-come first-serve basis. Operators on the RCS will be free to charge any amount for the rest of the 50 per cent seats.
Also, aircraft with up to 80 seats are allowed under this scheme. A minimum of three and a maximum seven flights per week per route with minimum 9 and maximum 40 seats per flight will be allowed under the RCS.

Raju said VGF would be reduced if passenger load factor remains high and would be discontinued after three years when routes become self sustainable.
Airlines interested in participating in RCS would have to provide bank guarantee of Rs 50 lakh per route and will get exclusive rights to fly on the route.
Besides, for the shortest route operated under the RCS, which stand between 200-225 km or less than an hour of flying, fare has been fixed at Rs 1,770 while the same for the longest route will be Rs 4,070.
In addition to VGF, the Central government would also provide concessions in taxes such as service tax and value added tax besides allowing liberal code sharing with domestic as well as international airlines for RCS airports.

The scheme will be in operation for 10 years with individual route contracts for a 3-year span.
RCS is one of the key elements of the national civil aviation policy, announced by the Government last month which envisions domestic ticketing to reach 30 crores by 2022 and 50 crores by 2027.