The government will have to foot an annual bill of Rs 6.6 crore just for the first sector under Udan (Ude Desh ka Aam Naagrik) regional connectivity scheme on the Delhi-Shimla route that took off last week.
This is apart from the exemption from airport charges, fuel and other taxes.
Alliance Air, which has been allotted the route, has chosen ATR42 type aircraft due to regulatory and safety restrictions of flying to Shimla.
Out of the total 48 seats, only 35 passengers could be carried while travelling from Delhi to Simla and just 15 passengers on return flight due to payload restrictions. The flights are scheduled five times a week.
As per the agreement, the Central government is paying Rs 3,440 for 24 seats (50% of capacity) covered under viability gap funding or Rs 82,560 per flight on Delhi-Shimla route. The rest 11 seats can be sold at an average Rs 5,000 per seat, according to an internal calculation done by Alliance Air. On the return Shimla-Delhi flight, the central government subsidy is Rs 51,500 (3,440 x 15 seats) while none of the seats can be sold at the market rate.
A back-of-the-envelope calculation shows that there is a loss of Rs 141,950 per flight (projected cost minus revenue (Rs 406,000-254,040). This loss has to be borne by the Himachal government. So the Central and state government will collectively be paying Rs 6.6 crore per year to the airline in order to keep the scheme floating.
On the projected cost by the airline and the compensation paid by the government, Jitendra Bhargava, former Air India executive director and author of the book 'The Descent of Air India', said the seats under the sale category (non-RCS) were reportedly sold at Rs 18,000-20,000. "So if the those who booked well in advance irrespective of their economic background will get to fly at Rs 2,000 while those who booked late, irrespective of their background will be forced to shell out Rs 20,000 odd fares," he said. "So, in case if a 'common man wearing chappal' wants to fly in an emergency then he will still be shelling exorbitant fares. Then how will it spur the growth in aviation? It will be like 'first-come-first-serve basis?" he asked.
Bhargava said instead the low fares should be based on certain parameters, the way it is like in income tax and a lot of fine-tuning needs to be done to make it better.
Though he is positive for RCS scheme and hoped for it to be successful, Bhargava said it should be done carefully. "It should not become like the way it was in the 1990s, when suddenly too many airlines propped up and then suddenly vanished."
Rajan Mehra, COO, at Club One Air and former India head of Qatar Airways, said these are early days and the scheme has just been launched and there we should not write it off immediately. "Several issues will be settled as we move along. The airlines will certainly cry hoarse and ask for more subsidy. But it is in the interest of the nation that the scheme be a success."
Under the RCS scheme which are meant to connect underserved and unconnected airports in the country, five airlines have won bids to operate on 128 routes, connecting 70 airports. The flights will be connecting airports spread across over 20 states and Union territories.
Meanwhile, the government is considering revising the minimum number of the seat under the scheme. The revised norms will be applicable for the second phase of RCS, which is likely to commence within the next three months. Currently, airlines are required to offer 50% of total seats on an aircraft at discounted fares. The number of discounted seats should be at least nine and should not exceed 40. The move follows feedback from airline operators who expressed their willingness to induct aircraft with four to six or more seats and requested that subsidy is provided for these flights as well, a source said.
Analysts want the government and airlines to work carefully within the cost and operation structure without losing the big picture. The airfares under the scheme start at around Rs 2,500, which is primarily meant to encourage regional connectivity in the country. The government has created a corpus of Rs 500 crore raised by taxing flights on trunk routes.
...& ANALYSIS
- There would be a loss of Rs 141,950 per flight on Delhi-Shimla sector which would be borne by the govt
- Those booking late will be forced to shell out Rs 20,000 odd fares, irrespective of their background
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