Open skies over small town India

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and Embrears.

Despite the buoyant outlook, there are some uncertainties that could spoil the party for regional airlines. They need to cooperate with larger airlines, as the final destination for travellers from smaller towns is likely to be metros in other regions.

While regional airlines are not allowed to operate between metros, they are allowed to connect between Chennai, Hyderabad and Bangalore in the southern region. Therefore, it is no coincidence that three out of the four licences that are likely to be awarded are for the southern region. This brings regional airlines in direct competition with full-service carriers and could evoke a strong response from them.

Moreover, some non-metro routes could be quite profitable and the main airlines could skim the cream off such routes while leaving unprofitable routes to the regional airlines. The government should keep a close watch on the competitive environment for regional airlines. At the same time, the policy framework should allow inefficient players to be eliminated or taken over.

Another critical success factor for regional airlines is being able to secure slots at busy metro airports. With air traffic already congested in metro airports, regional airlines may not be able to secure attractive slots during peak hours. This could ground their plans. Therefore, there is need for the government to allocate some slots on a preferential basis to regional airlines. Finally, increasing air traffic controllers’ productivity to handle more flights per hour will also create more slots for regional airlines.

The start of regional airlines opens another interesting chapter for aviation in India. The travelling public from non-metro cities will be particularly delighted, as their costs are likely to come down. The government has set the right tone by creating a competitive environment. It should now let the market work and only step in to remove policy constraints or anti-competitive behaviour by larger airlines.