LEVY ON KEY ROUTES WILL JACK UP AIRFARE

SP's Airbuz - - News Briefs -

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.

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