Even as the draft Civil Aviation Policy highlights the need to improve regional connectivity, Air India has already jumped into the fray and promises to take early lead.
It is as if Air India had pre-empted the mood of the civil aviation ministry mandarins vis-à-vis the new policy which is likely to become a reality soon. On 30th October, the unveiled revised draft civil aviation policy has placed improving the regional connectivity as the topmost agenda. And Air India, via its subsidiary Alliance Air, seems to be well geared up to rev up the regional sectors by connecting smaller cities and towns. For this, the national carrier has set afoot the process of forging alliances with the state governments.
In a unique initiative, Air India for the first time has approached the state governments directly to provide connectivity to their destinations with smaller aircrafts of Alliance Air. The request for this kind of partnership had gone straight from Air India’s new CMD Ashwani Lohani. As per Air India’s suggestion, the connectivity to smaller towns will be provided under the viability gap funding (VGF) formula wherein states will have the leeway to participate in the fare related decisions if they agree to square off the losses. And nearly half a dozen states have responded positively to Air India’s regional connectivity gameplan which includes Gujarat, Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharastra and Andaman & Nicobar administration.
“The response from some states is quite over-whelming and our negotiation with Uttar Pradesh and Gujarat governments is in advanced stage for the new regional connectivity routes. We expect this service will kick off anytime after the first half of December,” Anil Mehta, spokesman, Alliance Air told TourismFirst in a recent conversation. But there is a critical difference between the kind of operations which Alliance Air will be undertaking to connect smaller towns in Gujarat and other states which have responded to the new proposal. In Gujarat, the destinations like Bhuj and Jamnagar will be linked with Delhi whereas in other states, it is the state capital which will act as the hub for the new routes. For instance in Uttar Pradesh, the new services will be linking Gorakhpur, Allahabad, Varanasi and Agra directly with Lucknow. In Rajasthan, it will be Jaipur which will act as the fulcrum of connectivity to Bikaner, Jaisalmer, Udaipur and Jodhpur. And in Madhya Pradesh, the direct flights operated by Alliance Air is expected to connect Bhopal with Indore, Gwalior and Jabalpur. “We may be covering some of these destinations right now on our own but not with the route plan wherein state capitals become the hub. Many of these routes like Lucknow and Agra remain unexplored. Our partnership with states will add a new dimension to regional connectivity in the country,” stressed Mehta. With a fleet size of ten aircrafts dominated by ATR72- 600, Alliance Air is presently connecting 30 destinations offering 1700 seats daily on its routes. The airline has reported an average load factor of 76 percent in the recent months.
Among the states, the toss up for the new services triggered by Air India partnership with the state governments, seem to be between Uttar Pradesh and Gujarat. “As per information available to us, Uttar Pradesh CM Akhilesh Yadav has already cleared the proposal. But our talks with Gujarat is also in an advanced stage. By the end of this month, we will be in position to reach to a final decision in terms of where this service will commence first. It could be either of these two states,” Mehta underlined.
A moot point, however, is: will the new services of Alliance Air in partnership with states will conform to `2500 fare structure for all regional flights upto one hour? This is the major highlight of the revised draft civil aviation policy and in all likelihood will be retained in the final policy too. The new fare structure is slated to become operational from April, 1st next year and most of the routes which Alliance Air will eventually cover (e.g., Lucknow-Agra or Jaipur-Udaipur, etc.) as partners of the state will fall under this category. Mehta responded, “It is difficult to say right now. It will be a function of many factors. If state governments agree to bring down the landing charges, it would be quite possible.” Incidentally, the draft policy paper has laid down certain conditions for the states to reap the benefits of the regional connectivity scheme (facilitating `2500 fare structure). For instance, RCS will be made operational only in those states which agree to reduce VAT on ATF at their airports to one percent or less.
Meanwhile, Alliance Air is set to witness a major fleet expansion in next two years which will play a critical role in terms of positioning it as a formidable force in the regional connectivity business – a segment where the focus is likely to be more than ever before in the future. “We are adding three more aircrafts before the end of this fiscal. In 2016-17, ten more aircrafts will be included and before 2017 calendar year end, we are expecting the further inclusion of a similar number of aircrafts. In between, some aircrafts will also be phased out. So from ten aircrafts now, we are expecting to become a 28 aircraft (mostly ATRs) airline by 2017 end. Needless to say, it will provide us a major cushion to expand our wings further in the regional market,” Mehta pointed out.
Alliance Air further penetration plan has tourism component too
While Air India is quite keen to push Alliance Air in the forefront of giving a facelift to regional connectivity, it is also clearly looking for closely aligning its services to the larger need of tourists to reach out to smaller cities and towns. And here again, it has opted for state partnership route.
The recently announced Incredible Air India Holiday Packages stand as a clear testimony to this tourism centric drive. The national carrier is in talks with states like Maharashtra, Karnataka, Sikkim, Gujarat, Uttarakhand, Himachal Pradesh, Uttar Pradesh, Rajasthan and Jammu & Kashmir wherein Alliance Air flights will be used to ferry tourists responding to a composite package offered by the airline. All components of the travel – airfare, ground transportation, accommodation, breakfast & lunches, etc – will be offered in a bundled form the fare for which will be fixed by the state governments. Needless to say, Alliance Air will be collecting its share of charges for air transportation while the remaining amount will go to state tourism kitty. “It will be mostly in the form of two nights/three day packages and will be attractively priced. It is a win,win proposition for both Alliance Air as well as the states,” Anil Mehta said.
The scheme will come into the play from the next month when Air India offers a package for visitors to Gujarat who wish to attend Kutch Festival. A similar package will be offered during the Diu Festival scheduled to commence early next month. “Other states too have shown willingness to join this new package programme which we are keen to push. And given its tourism benefits for the states, we are confident we will forge more partnerships in the coming months,” Mehta added.