The Civil Aviation Ministry has revised the terms of reference for the establishment of new airlines and upgradation of domestic airlines into international carriers in a move to ‘properly manage’ and increase their market share of foreign routes.

According to ministry officials, a draft of the terms of reference was sent to the Cabinet for its approval last week. The ministry has amended the categories of international licences and revised the paid-up capital requirement to establish new airlines.

The ministry issues three categories of airline licences: A, B and C. Under the old rules, a Class A licence is granted to airlines whose flights last longer than three hours, Class B to airlines whose flights last three hours, and Class C to carriers operating flights lasting less than three hours.

Under the proposed new policy, however, licences will be issued based on the weight of the aircraft. The ministry has proposed Class A licences for carriers flying aircraft having a maximum take-off weight (MTOW) of more than 125 tonnes. A Class B licence will be issued to carriers flying aircraft with an MTOW of more than 40 tonnes, and a Class C licence will be issued to carriers flying aircraft with an MTOW of less than 40 tonnes.

Likewise, Class A airlines are required to have a paid-up capital of Rs1 billion, Class B Rs750 million and Class C Rs500 million, as per the revised terms of reference.

All new airlines are required to have at least three aircraft in their fleet. The airlines are required to increase their paid-up capital by Rs100 million for each aircraft they add to their fleet beyond the mandatory requirement of three aircraft, ministry officials said.

Moreover, prospective airlines will have to provide a security deposit of Rs750,000 which will be refunded after they begin operations.  

The proposed policy has set a licence fee of Rs5 million for scheduled passenger airlines, Rs3 million for cargo airlines and Rs2 million for helicopter services. “The licence has to be renewed every three years by paying half of the licence fee,” said ministry officials. Currently, airlines are required to renew their permits every two years.

As per an earlier Cabinet decision, the terms of reference need to be reviewed every three years; but the government has not reviewed them since March 2010. The ministry recently reviewed them as several domestic airlines want to go international. The last time the government issued a licence to operate international flights was in 2011 to the now defunct BB Airways.

Shree Airlines has applied for a Class C licence. The carrier plans to link South Asian countries, particularly India and Bangladesh. It currently has four Bombardier Canadair Regional Jets (CRJs) in its fleet, and plans to add more aircraft after receiving an international flying licence. Similarly, there are a few other prospective operators planning to fly on international routes, said officials.

According to them, a 45-day notice will be issued inviting expressions of interest from prospective domestic airlines after the Cabinet approves the new terms of reference. At least two passenger airlines and a cargo carrier will be granted licences after assessing their eligibility and required criteria, officials said.

Under the existing rules, domestic airlines are required to have five years of domestic flying experience and a minimum of three aircraft in their fleet to qualify to fly to foreign destinations.