LEVY ON KEY ROUTES WILL JACK UP AIRFARE

The government’s decision to levy up to

8,500 per flight on major routes to fill the viability gap for strengthening regional connectivity would result in increased fare on the busiest routes like Delhi-Mumbai, DelhiBengaluru, Bengaluru-Mumbai, etc. This would amount to subsidisation by those flying on trunk routes who would pay more for the benefit of passengers on short hauls. This would be done through a Regional Connectivity Fund (RCF) of ` 500 crore of which ` 400 crore has to be contributed by the levy on the long haul flights and the rest by the state governments. As per the details shared by Civil Aviation Secretary, RCF would have contributions from the airlines, (read passengers) and the states where the regional connectivity would be implemented.

The viability gap which is being bridged by RCF should eventually be giving way to efficient business models. As such cross subsidy cannot be sustained over long period of time even though it is being used as a take-off tool for UDAN under which the fares of half of the seats operated in a specific flight would be capped at ` 2,500 for one hour flying time. The airlines must also match and mix their flying routes and the aircraft fleet in a manner that should make for a smart business model. It cannot be assumed as if flying to the north-eastern states would be a losing proposition for all times to come. Likewise, there is no guarantee that the Delhi-Mumbai route would always remain lucrative not to necessitate alternative revenue sources. Different aviation stakeholders including the regulators must consider ways to make the sector grow in a sustainable manner.