Air service fund could drive up flight cost

The civil aviation ministry?s move to implement an eight-year old proposal could lead to higher air fares, while helping to increase connectivity to unprofitable routes shunned by carriers.

The proposal aims to set up an essential air service fund (EASF), which would be used to cross-subsidise air travel to such routes. The idea is to encourage airlines to operate such flights by making good the losses made in such routes with money from the fund.

Airlines must contribute a portion of the ticket price towards the fund. Once implemented, carriers are sure to pass on this cost to passengers, leading to fare hikes.

Such funds for universal services exist in other sectors as well. In the telecom sector, for instance, all operators contribute 5% of their adjusted gross revenue towards a universal service obligation fund, which is used to provide telephony in rural and remote areas.

The Naresh Chandra committee on aviation sector made this recommendation in its report in 2003, before the dawn of the low-cost aviation revolution in India.

The proposal was revived after new civil aviation minister Vayalar Ravi expressed his keenness to improve connectivity to the North-East and other remote areas.

At present, seven scheduled passenger airlines in India with a combined fleet of 400 aircraft carry about 47 million passengers every year.

?If the government decides to set up EASF, it would be a progressive step,? Foundation for Aviation and Sustainable Tourism (FAST) director general Gurcharan Bhatura said adding that Airports Authority of India (AAI) has been cross-subsidising operation of smaller airports and hence, the idea of setting up the fund is not a new concept.

However, airline companies are not enthused.

?What the Naresh Chandra committee recommended in 2003 is not relevant today. In those days, only Indian Airlines operated to Guwahati, Srinagar and other unviable routes. Today, scheduled private airlines are operating almost a dozen flights to Srinagar and Guwahati profitably,? an executive with a private airline said.