Government To RCS Operators, Cut Viability Gap Funding Need By 40%

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Representational picture of a flight under the Regional Connectivity Scheme (RCS). Source: AAI

Regional flights operators awarded under the RCS-UDAN scheme have been asked by the government to lower their overall Viability Gap Funding (VGF) requirement on routes over 500 km by 40 per cent.

According to a Hindu Businessline report, the Union Ministry of Civil Aviation (MoCA) has asked all airlines to either reduce the frequency of flights or the number of seats per flight to meet this requirement.

The business daily quoted industry sources, to say that the Ministry has sent an email to all airlines operating Regional Connectivity Scheme (RCS) routes awarded under UDAN 1, 2, 3, 3.1 and 4, since its inception in 2017.

Under its initiative to connect the country’s under and un-served airports, government provides Viability Gap Funding for a set time period to airlines operating on these routes. Post the pandemic, airlines were not allowed to fly UDAN routes beyond 500 km. But, now, to give flexibility to the airlines, the government will allow routes of over 500 km so long as the VGF cap rules are followed.

Temporary Move: Government

A Civil Aviation Ministry official told the newspaper that this move of the government is a temporary rationalisation effort.

While this rule is applicable to all Scheduled Aircraft Operators (SAOs), Satyendra Pandey, Managing Partner at advisory firm AT-TV, said this is likely to affect regional airlines the most.

“Demand can often be stimulated via tactical measures but this directive speaks to how demand has totally dried up,” Mr. Pandey was quoted as saying.

LSN Murty, CEO, TruJet said this move is likely to impact cash flows of regional airlines. Another regional operator, requesting anonymity, said that this will be a fresh blow to small operators as, “Some of the routes may become unviable after this order.”

Government Trujet ATR-72 aircraft at Ahmedabad airport. - Aviatorsbuzz
Representational picture of a Trujet ATR-72 aircraft at Ahmedabad airport. Source: ahmedabadairspace/
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Mr. Pandey said that the government, too, is losing on RCS funds due to lack of demand, and the pandemic. “Ironically, this action is necessary as UDAN funds are running low due to the overall mechanism of the scheme and allocating taxpayer money for empty flights is not an ideal situation,” he said.

Meanwhile, the operation of commercial flights from Rourkela is expected to begin soon following a high-level meeting between Civil Aviation Joint Secretary Usha Padhee and Rourkela Steel Plant (RSP) CEO in Odisha’s Steel City. Ms. Padhee held the meeting with the RSP authority after visiting Rourkela on Monday paving the way for operationalisation of the airport under UDAN scheme.

Earlier, a high-level team headed by State Commerce and Transport Principal Secretary Madhusudan Padhi had visited the Rourkela Airstrip twice to review the infrastructure. But, the operationalisation of the airport was delayed.

Despite being included under UDAN scheme of the Central Government, the operation of flight services from Rourkela Airport has not yet been possible due to some technical issues.

Developed by the Airport Authority of India (AAI) for operation under Regional Connectivity Scheme – Ude Desh Ka Aam Nagarik (RCS-UDAN), the airport was initially planned for 19-seater aircraft. Now, ATR 72 aircraft has been allowed to operate following licence upgradation and further development of Rourkela airport.

“The RCS routes from Rourkela to Bhubaneswar and Raipur with ATR-72 type aircraft have been awarded to Alliance Air and Turbo Aviation. However, the operations are yet to commence due to lack of readiness of Rourkela airport for Code 3C operations,” Union Civil Aviation Minister Hardeep Singh Puri had said in a reply to Rajya Sabha member from Delhi Sanjay Singh recently.

Meanwhile, IndiGo will operate new flights between Agartala – Aizawl under RCS scheme and exclusive flights between Bhubaneswar-Patna, Jaipur-Vadodara, Chennai-Vadodara, Bengaluru-Shirdi, Patna-Kochi, and Rajahmundry-Tirupati. IndiGo will be also be commencing flights between Kolkata-Gaya, Cochin-Trivandrum, Jaipur-Surat, Chennai-Surat.

“We are pleased to add 22 new flights including RCS routes, enhancing connectivity in the southern, western, eastern and north-eastern regions. The introduction of these new exclusive routes will further bolster the airline’s domestic network, while augmenting inter and intra-regional accessibility,” Sanjay Kumar, Chief Strategy and Revenue Officer, IndiGo said.