The government will continue to protect state-run carriers Air-India and Indian by giving them additional equity support and prolonging their monopoly over certain international routes.
It is contemplating organisational, managerial and financial restructuring of the two carriers. According to civil aviation ministry sources, the government is of the view that the two carriers will require a larger equity base to attract international lenders for bankrolling their aircraft-acquisition plan.
Air-India's total paid-up capital is Rs 153.84 crore (Rs 1.53 billion) and Indian has a paid-up capital of Rs 105.19 crore (Rs 1.05 billion). The quantum of additional equity which will be infused is yet to be decided.
The last Budget had provided Indian Rs 320 crore (Rs 3.2 billion) for increasing its equity. At the same time, the two carriers will need an additional equity base to meet the recent government regulation linking fleet size to paid-up equity of a carrier.
For Indian, the government may also go beyond the Rs 320-crore support. "Indian Airlines will be using the Rs 320-crore support at the time of fleet acquisition. But the government is of the view that it would require a larger support than this," said an official.
The government has also decided to extend the bar on private carriers flying the Gulf region by another two years.
Originally, routes to the Gulf were to be reserved for Air-India and Indian only till 2008. Sources say, route reservation would be extended till 2010 in view of the delay in the fleet acquisition plans of the two carriers.
The government will allow international airlines to enter into commercial agreements with Indian carriers for operating flights to India.
This means that Indian carriers will be free to enter into marketing agreements with international airlines for operating on international routes.
As per present policy, the government decides on the commercial agreements that international airlines need to enter into with Air-India and Indian and vice-versa.
Some commercial aspects covered under the mandated agreements at the governmental level are: landing slots at various airports, points of operations and timing of flights. India now has commercial air-service agreements with 100 countries and carriers of 51 countries operate to India.
The government will discontinue the practice of demanding compensation from international airlines for operating to India.
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