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• The government may decide to significantly relax the mandatory quota norms for domestic airlines to fly to underserved and remotely connected regions as recommended by a panel formed to review air connectivity in these regions. The report submitted by the panel led by former joint secretary Rohit Nandan, now Air India head, to the Civil Aviation Ministry, has also suggested setting up of a non-lapsable regional air connectivity fund to cross-subsidise operations in regions with thin traffic.The recommendations follow several airlines’ demand to exclude some routes from category II (regions with difficult terrain and remote areas), as they have become commercially viable on their own with passenger load factor (PLF) above 70 per cent. The committee, however, did not agree on exclusion of the routes.
• According to the panel, route dispersal guidelines (RDGs) or quotas, restricts the airlines’ commercial freedom and impact the “fare structure across board”.“In order to fulfill the commitment of flying on certain routes, airlines tend to cherry-pick or indulge in cream skimming to limit their commercial losses. This leaves out large areas from air connectivity,” the report observed as a problem with the existing RDG. The ministry had formed the panel in April 2011 to undertake a review of the current RDG and recommend measures to promote and enhance regional connectivity. RDGs were last reviewed in 2002-03. The panel recommends that a Regional Air Connectivity Fund (RACF) may be established through collections made from passengers.
• “The RACF may be used to fund such routes which are commercially unviable for 3-5 years till they reach a level of maturity,” it said. Further, one-third of this fund may be used for establishment and running low-cost airports, heliports and helipads.While observing that in the last one decade, the RDG have done well to serve the purpose of connectivity, the panel said: “Review of RDGs should be conducted through an institutionalised system after every three years. RDGs emphasis on equity must be supported by practical tools to allow airlines to maintain their economic viability as well.” Kingfisher chief Vijay Mallya had recently resented the government’s policy of forcing carriers to fly on these routes, which he claimed were “loss-making”.To boost connectivity, the report advocates a proactive role of states by a host of measures. “States have agreed to substantially reduce trade tax rates in order to attract airlines to refuel in their territory,” it said.

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