The Hindu Business Line : Govt tightens norms for airline operations

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New Delhi Jan. 19 The Government has revised the norms for airline operations in the country by increasing the subscribed equity capital required for setting up a scheduled airline with five large aircraft from the existing Rs 30 crore to Rs 50 crore.

While this new norm would be applicable with retrospective effect for those having aircraft weighing 40,000 kilograms each, existing airlines would, however, get a year to comply. Moreover, the Government has stipulated that such airlines will have to pump in an additional Rs 20 crore into the subscribed equity capital for every five additional aircraft they induct.

In effect this would mean that the state-owned Indian that has a fleet of 74 aircraft and a subscribed equity of Rs 107 crore would have to pump in more than Rs 200 crore to meet the new norms.

The move is unlikely to affect two airlines - Kingfisher that has a subscribed equity base of Rs 372 crore and a fleet of 23 aircraft and the low cost airline Spice Jet that has a current subscribed equity base of Rs 185 crore and a fleet of 10 Boeing 737s. Most other airlines would, however, have to pay up.

Official sources told Business Line that the new rules, which were approved on Friday, would come into effect from the day that the order is published in the official gazette.

The rules have also been revised for smaller aircraft. Consequently, the subscribed equity capital for an airline with a fleet of five aircraft weighing less than 40,000 kilograms each has been doubled to Rs 20 crore. Such airlines would also have to pump in Rs 10 crore into their equity capital for every five aircraft inducted. While the larger aircraft like the Boeing 737 and Airbus A-320 aircraft have a weight of more than 40,000 kg, smaller aircraft like Dornier and ATR have a weight of less than 40,000 kg.

"The rule will apply to all existing operators. Those who do not comply with the rule immediately will have to do so within a year. The rules have been amended as no changes have been affected for several years and also because this is a capital intensive industry," a senior Government official told Business Line.

The stipulation of having a subscribed equity capital of not less than Rs 30 and Rs 10 crore was implemented on March 1, 1994.