In order to enhance connectivity between Tier II and Tier III cities, the government today announced a new policy for regional airlines, which will operate primarily between airports of any of the four regions classified as North, South, West and East/North-East.

Under the policy, which will cover both aircraft and helicopter operators, the airports of one particular region will be designated by the Airports Authority of India.

All the new applicants awaiting permission to start airlines are more likely to get the regional airline licence now. "We do not want to give the licence for all-India operations now because there is already so much congestion at the metros. However, after a few years of operation as a regional airline, the carrier can apply for a second permit for pan-India operations," said a ministry official.

However, the new policy does not offer any sops to regional carriers. Incentives like total exemption from navigation and airport charges, and a lower 4 per cent sales tax on ATF are available to both regional as well as pan-India carriers as long as the size of the aircraft used is less than 40,000 kg.

The regional airlines will get a scheduled operators' licence, which is different from the one given to a scheduled operator having pan-India operations. An airline in a particular region will be able to operate from one metro (e.g. Delhi for the north region) to all the non-metros in the region. It will also be able to operate to other regions provided it does not operate into a metro.

However, the airlines, which have taken a licence to operate in the southern region can operate flights between the three metros in the region - Chennai, Bangalore and Hyderabad.

The new carriers under the policy also do not have to follow route dispersal guidelines like the pan-India scheduled carriers, which have to fly non-profitable routes, like in the North-East.

In order to operate as a regional airline, a carrier has to acquire at least three aircraft in the first year and a minimum of five aircraft in the second year.

To ensure that such airlines remain viable, they should have a paid-up capital of Rs 30 crore (Rs 300 million) and three aircraft to begin with. Addition of each aircraft would require Rs 10 crore (Rs 100 million) more, subject to a maximum of Rs 50 crore (Rs 500 million) of equity.

For airlines having aircraft with a take-off mass of less than 40,000 kg, the paid-up capital should be Rs 12 crore (Rs 120 million) for three aircraft and for two more planes, a total paid-up capital of Rs 20 crore will be required.