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Air Kerala: State to press Centre for rules relaxation

October 16, 2012 15:31 IST

Keen on floating a state-sponsored air service, Congress-led UDF government has asked the Centre to waive certain regulatory norms to start its proposed low-cost airline 'Air Kerala', mainly to operate services to Gulf countries.

Under the present rules, an airline can fly international routes only after five years of domestic service operations and acquiring at least 20 aircrafts.

However, to reinforce its case, the state has cited the exemption given by the Centre to Air India when it launched Air India Express budget airlines.

"When Air India Express was floated, the Centre made some relaxations in the regulations. We are seeking a similar gesture from Centre for Air Kerala," Chief Minister Oommen Chandy told PTI.

Air India Express was given certain relaxations citing that it was a subsidiary of Air India. As Air Kerala is being promoted by the state government, the Centre should adopt a positive approach, Chandy said, adding, "We expect a favourable decision in this regard."

The issue was brought before Prime Minister Manmohan Singh when he visited Kerala for the 'Emerging Kerala' global investment meet last month. Singh had then assured the state that he would look into the issue.

Asked about reports that government had plans to explore possibility of having a tie-up with foreign airlines, Chandy said it was conceived as "a government venture with people's participation."

Cochin International Airport Ltd (CIAL), promoted on PPP mode, would be followed for Air Kerala, too. But, "we have added one more 'P' to PPP. Air Kerala would be Public-Private-People's-Participation model, Chandy said.

The dream project is being planned and executed mainly for conducting services from Kerala to the Gulf countries, where more than 2.5 million Keralites are living.

Originally conceived in 2005, Air Kerala was registered as Air Kerala International Services Limited during Chandy's first stint as Chief Minister. However, the project failed to take off in next five years of LDF rule.

Consultancy firm Ernst and Young that conducted a study in 2006 had found the project feasible. The firm has now been asked to draw up a detailed project report and it was expected soon, Chandy said.

After reviving the proposal, it had received good response from investors at the 'Emerging Kerala' meet, Chandy said.

Of late, the non-resident Keralites (NRKs) have been facing serious hurdles with frequent cancellation of flights, without sufficient notice, by operators like Air India.

Besides, frequent hikes in fares by Air India had also caused serious hardship to the NRKs.

This had been the prime reason that prompted the government to revive Air Kerala idea, as it would certainly benefit Keralities in Middle East as a budget airline.

On the financial structure of the venture, Chandy said, as per the present thinking, the state would have 26 per cent stake with an initial equity base of Rs 200 crore (Rs 2 billion). The rest would be raised as investments from NRI's particularly Keralites and business groups in Gulf regions.

The share value has been fixed at Rs 10,000 per share. Ernst and Young is helping the government with a feasibility report on the airline project. The report is expected by December end, officials said.

The enterprise was expected to be a success as it is being planned on the lines of the Cochin International Airport Limited, set up with investment from users and general public.

According to senior officials involved in the project, it would not be difficult to raise initial capital of Rs 200 crore (Rs 2 billion) as a few major NRK business groups had already shown keen interest in the venture.

"These business groups on their own have an employee strength of around 65,000 in the middle east region. All these workers have promised to be a part of this initiative," a senior bureaucrat said.

J Ramakrishnan Thiruvananthapuram
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