In a move to keep small players at bay and discourage new entrants to an overcrowded market, the civil aviation ministry has raised the minimum equity capital requirement for carriers to start or continue operations.
A notification from the ministry has raised the minimum equity capital requirement for a five-fleet carrier that wants to fly Airbuses and Boeings (or aircraft above 40,000 kg weight) from Rs 30 crore to Rs 50 crore. There is also an equity requirement of Rs 20 crore for addition of every five aircraft to the fleet.
For carriers operating smaller aircraft like the Dornier (less than 40,000 kg), the government has doubled the minimum equity capital requirement from Rs 10 crore to Rs 20 crore (for a fleet of five aircraft). For addition of every five aircraft, these airlines will have to infuse equity capital of Rs 10 crore. Existing carriers have been given a year to abide by the new rules.
Carriers could earlier expand their fleet without any limit once they put in Rs 30 crore (Rs 10 crore for smaller aircaft) as equity capital.
At the same time, the ministry has put an overall limit of Rs 100 crore as total equity capital. Beyond this, the expansion of fleet by carriers will not be linked to a commensurate increase in its equity capital.
The move will affect over half a dozen carriers which have applied for fresh licences to operate scheduled airlines -- like Easy Air, Air One, Yamuna Airways, amongst others. Most of these carriers have proposals in which their equity capital is much lower than the stipulated Rs 50 crore.
Says Ajay Singh, director of Spicejet: "We have an equity capital of Rs 200 crore and feel that this move will bring in some sanity to this sector, which has many fly-by-night operators seeking entry."
Adds Koutav M Dhar, president (commercial & special projects) of MDLR Airlines, a regional airline that will start operations from next week, "We are a serious player and we welcome the new requirements that will throw out non-serious players."
Welcoming the new conditions, GoAir Managing Director Jeh Wadia says, "This will ensure the financial strength of the existing airlines in the market. It may affect new entrants."
At the same time, The new regulations, however, also give some leeway it will allow a scheduled airline operator to start airline operations with one aircraft against three required currently. However, the requirement for augmenting the fleet size to five aircraft within one year of issuing the scheduled operator permit would continue.
The government has also withdrawn the concession available to scheduled airline operators to have only 10 per cent of the paid-up capital when the initial Non Objection Certificate (NOC) is issued - another step to get small operators keep away from the business.
