Serious fliers only: Govt to raise bar for airlines

To ensure that the aviation sector attracts only serious players in the long run, the government has decided to raise the bar and increase the minimum equity needed to float an airline to Rs 50 crore for the first five aircraft of an airline with large aircraft feet and to Rs 20 crore for those with smaller aircraft.

To ensure that the aviation sector attracts only serious players in the long run, the government has decided to raise the bar and increase the minimum equity needed to float an airline to Rs 50 crore for the first five aircraft of an airline with large aircraft feet and to Rs 20 crore for those with smaller aircraft.

It’s learnt that the Civil Aviation Ministry will soon be issuing a notification with these changes that will also apply to existing airlines, which will be given a year’s time to bring their equity at par with the rules. The changes are:

For airlines with aircraft weighing 40,000 kg and above (Boeing 737s, Airbus 320, A319s): For the first five aircraft, equity base increased from Rs 30 crore to Rs 50 crore. For every additional five aircraft, equity base must increase by Rs 20 crore.

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For airlines with aircraft weighing below 40,000 kg (ATRs, CRJs): For first five aircraft, equity base has been increased from Rs 10 crore to Rs 20 crore. And for every additional five aircraft, equity base must go up by Rs 10 crore.

Official sources said this being a capital-intensive sector, a high bar was needed to prevent entry of players without the necessary capital to compete. In fact, many of the existing airlines will have to broaden their equity base over the next year to remain in competition.

The changes had been in the offing after several airlines mushroomed during the aviation boom in the past two years.