Airlines look to smaller planes in regional push

By Sweta Singh

HYDERABAD, (Reuters) - Indian airlines are in talks with ATR, Bombardier and Embraer to buy smaller planes to fly to the country's booming second and third tier cities ahead of a government drive to get more of the country connected by air.

National carrier Air India plans to add 40 new planes to its domestic fleet by the end of 2017, of which 13 will be smaller turboprop planes for regional connections, its chairman Ashwani Lohani told Reuters on Friday.

Lohani said the airline, which already leases eight ATR turboprop planes and three Bombardier CRJ-700 70-seater aircraft, would launch "a major foray" in to flying to smaller cities this year.

Low-cost carrier SpiceJet is also talking to small aircraft makers to add to its fleet of 14 Bombardier Q400 turboprop planes, as it expands the number of shorter routes it flies, a company spokesman said.

India's government in October outlined plans to boost regional aviation connectivity by forcing airlines to fly to smaller cities and reopening many of the country's 350 disused airstrips as "no-frills" airports.

"The government's initiative to develop regional connectivity encourages airlines to go into these markets and creates an opportunity for us," said John Moore, head of sales at ATR, one of several firms showing off their latest planes at this week's airshow in the south Indian city of Hyderabad.

ATR, owned by Airbus Group and Italy's Finmeccanica, aims to sell about 90 planes to Indian airlines in the next three to five years, adding to the roughly 30 in operation currently, Moore said.

India is one of the world's fastest growing aviation markets where passenger numbers grew a fifth last year to 81 million, with lower fuel prices and rising disposable incomes helping millions fly.

But most of the travel in a vast country that is home to 1.3 billion people is between the country's larger and wealthier cities. The government wants to make air travel more accessible for the masses rather than the relative luxury it is today.

Critics, however, say that forcing airlines to fly often unprofitable routes where demand is unproven will stifle the market and land carriers with unfair costs.

India's civil aviation minister, Ashok Gajapathi Raju, said on Wednesday that the government planned to publish the final civil aviation rules detailing the regional connectivity programme next month.

($1 = 66.5600 Indian rupees)

(Writing by Tommy Wilkes; Editing by Keith Weir)