Govt launches regional aviation scheme to get more people flying

Industry experts expressed reservations about levy; ministry defended the scheme, saying it will boost overall market

Aviation ministry said on Friday the first flights under a scheme to boost air travel between smaller cities should take off in January, after it finalised rules to make flying more affordable in the world's fastest-growing aviation market.

Under the "Regional Connectivity Scheme", air fares on routes between towns and cities currently poorly connected will be capped - at 2,500 rupees ($37.4) for every 500 km of travel - and service and fuel taxes reduced.

A small levy will be slapped on existing routes to help pay for the scheme, while the government will provide funding to make the project viable and spend 40 billion rupees ($598 million) to reopen 50 disused airports within four years.

Some industry executives have expressed reservations about the levy, but the ministry defended the scheme, saying it will boost the overall market.

"When we jump start the regional aviation market, the beneficiaries will be the airlines themselves. They will get a lot more traffic," Jayant Sinha, the junior civil aviation minister, told reporters.

India's air travel market has boomed in the last decade as it opened up to competition. Ticket prices were slashed and the number of people wealthy enough to travel ballooned.

Passenger numbers on domestic flights run by carriers including InterGlobe Aviation Ltd's IndiGo, SpiceJet Ltd, Jet Airways (India) Ltd and state-owned Air India Ltd jumped 21 percent in 2015 to more than 80 million. The government aims to increase that number to 300 million by 2022.

Still, India's annual trips per capita, at 0.04, compares with 0.3 in China, and flying remains unaffordable for the overwhelming majority.

The ministry's top bureaucrat, R N Choubey, said airlines could now start bidding to run specific routes.

Successful bidders will have exclusivity for the route for three years, after which government support would tail off as the market becomes sustainable on its own. The scheme will run for 10 years.

"We expect flights to commence in January," Choubey said.

The most popular routes, such as New Delhi to financial capital Mumbai, will not be affected by the price cap.