New Indian aviation policy may give wings to Air Kerala project

Dubai - Easing the rule would mark an important step towards liberalising India's aviation market

The Indian government's green signal for a new civil aviation policy has once again rekindled hopes for the much-awaited Air Kerala to take off.
The Central Government on Wednesday scrapped the 5/20 clause which required an airline to have at least five years of domestic flight service experience for starting an overseas service. However, the condition that the airline must have at least 20 aircraft to launch an international service has been retained.
Easing the rule would mark an important step towards liberalising India's aviation market, the world's fastest growing. The change is expected to increase regional connectivity, boost cargo operations and make flying cheaper.
V. J. Kurian, additional chief secretary to the government of Kerala and managing director of Cochin International Airport Limited (CIAL), said now that the deck has been cleared for the airline, it's up to the new Left Democratic Front government to take a final decision. He said a CIAL board meeting at the end of the month will take stock of the situation.
Talking to Khaleej Times, Kurian said the cabinet decision is a welcome change. "Starting an airline is not an easy business. There is risk involved in it. But once a policy decision is taken, we will look at the viability of the whole thing, not forgetting so many carriers are running services from here."
"The world over, airlines have never been a great business, except for some like Lufthansa, Emirates, AirAsia etc. Most of them are not making big money. But a policy decision has to be taken based on the social aspect as well. Air Kerala will be a boon to millions of people, especially the low-income group, working in the Middle East," he said.
"Our original idea was to start a mass-based airline, like we did with the Cochin International Airport. We were planning an investment contribution of Rs20,000 from 500,000 people, which is an investment of Rs10 billion. Our informal offer to the investors was that they will get a discount of Rs4,000 over a period of five years, which means the investor gets back his money in that period. For that the investor has to be a traveller, which will indirectly ensure a cache of clientele for the airline. Nobody has tried out this model, but we can take that risk as there are 2.5-3 million Malayalis working abroad," Kurian explained.
"We start with a big financial muscle so that we can get better lease terms and we won't be constrained by lack of money."
Kurian said that another advantage of starting an airline is an expected boost to the tourism sector. "The growth of any tourist destination is always backed by an airline. Emirates has played a very, very major role in the development of Dubai. Same is the case with Singapore, Thailand and Malaysia. If you are looking at tourism as one of your growth areas, an airline would offer an advantage. But it demands lots of commitment and professionalism. Let the government take a call," he said.
The office of the chief minister of Kerala told Khaleej Times the government will take a call "after reading the fine print" of the cabinet decision.  Though Air Kerala, first proposed in 2005 by the government of chief minister Oommen Chandy, had initially planned to commence operations in 2013, the project was put on the back burner after the Indian government refused to climb down on the 5/20 clause.
The state government in the last budget set aside Rs100 million for the carrier, envisaged as a cheaper alternative for expatriate Malayalis working in the Middle East.
Civil Aviation Minister Ashok Gajapathi Raju said in a Twitter message that the policy will help India become the world's third-largest civil aviation market by 2022, behind the US and China. It would be "a game-changer for the sector", he said.
The policy seeks to create an eco-system to handle 300 million domestic passengers by 2022 and 500 million by 2027, and 200 million international travellers by 2027. India had seen 139.32 million domestic and over 50 million international air travellers in 2014-15.
The Air Kerala project had assumed so much importance that Yusuffali, chairman of the Lulu group, resigned in 2012 from the Air India board, citing conflict of interest.
"With the Kerala government deciding to go ahead with the proposal to float Kerala Airways, I felt there would be a conflict of interest if I remain on the board of Air India. Hence, I decided to resign," he had said at that time.
- suresh@khaleejtimes.com