Govt may tighten criteria for new airline permits


Jul 21, 2017-The government has been mulling to tighten the criteria for new airline permits with the view of streamlining the industry amid intensifying competition and difficulties in maintaining acceptable safety levels.

A draft Civil Aviation Industry Management Regulation 2017 prepared by the Civil Aviation Ministry has proposed a substantial hike in the minimum investment required to launch a new airline. Companies will need to have a strong capital base to be eligible to get a licence.

The draft policy, prepared by a six-member committee formed by the government, will be made public soon for feedback from stakeholders. It was submitted to the ministry on Thursday.

As per the proposal, a company will require a paid-up capital of Rs1 billion to set up a domestic airline and qualify for a licence, an almost seven-fold jump from the existing Rs150 million.

Likewise, for new international airlines, the draft regulation has proposed separating companies into three categories—Classes A, B and C. 

For a Class A licence, the airline will need to have a paid-up capital of Rs5 billion and a fleet of at least two wide-body jets and one narrow body jet. Currently, the paid-up capital requirement for an international airline company is Rs500 million. 

For a Class B licence, the company will need to have a paid-up capital of Rs2.5 billion and a fleet of three jets with at least two narrow body aircraft. 

For a Class C licence, the company will be required to have a paid-up capital of Rs1.5 billion and a fleet of three jets with two turboprops and a chopper. The international airline licence will be valid for three years compared to one year currently.

According to the draft, a domestic airline licence will be valid for three years, down from the existing four years. 

The draft has also differentiated fixed-wing and rotor-wing operations and companies will need to obtain separate licences for them. 

“As the old regulation had no provision for renewing licences, the new regulation has inserted a provision requiring them to be renewed periodically,” said a ministry official. 

The government will charge additional fees from airlines if they expand their fleet. The government has also opened the door to private individuals or someone who wants to own a private airline.

“There are too many players in the sky. Everyone wants a licence. So we considered changing the requirement criteria,” said Buddhi Sagar Lamichhane, joint secretary of the ministry and the leader of the committee. 

“This is not a plan to discourage new players, but to make airlines sustainable with an adequate capital base that will ultimately meet safety, operational and security requirements in the long run.” There are 19 airlines in operation currently. Among them, 10 are fixed-wing and nine are rotor-wing or helicopter operators.

According to Lamichhane, the new regulation will be discussed with the stakeholders concerned and their feedback will be included. “After that, it will be tabled at the Cabinet for its approval.” 

The key provision

  • Substantial investment required for launching new venture

  • New domestic airline would require paid-up capital of Rs1 billion

  • Domestic airline licence would be valid for three years

  • Door opened for private individuals or those who want to own private airline

  • Paid-up capital requirement for international Class A company at Rs5 billion 

  • For Class B licence, paid-up capital of Rs2.5 billion 

  • For Class C licence, paid-up capital requirement of Rs1.5 billion 

  • International airline licence would be valid for three years

Published: 21-07-2017 08:38

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