IndiGo and SpiceJet clash over 3-year exclusivity right

Tags: News
Weeks after prime minister Narendra Modi flagged off the inaugural flight under the regional connectivity scheme (RCS), two leading carriers IndiGo and SpiceJet are at loggerheads over 3-year exclusivity right offered in the scheme for airlines winning the bid to launch the subsidised flights.

While SpiceJet has continued its support for this key offering, rival IndiGo has opposed the move, claiming it will create monopoly on such routes and allow the selected airline pocket additional profits.

An official source said that the country’s largest private carrier IndiGo has given their inputs to the Union aviation ministry ahead of the second round of bidding for the RCS routes. The airline is learnt to have pitched for complete removal of the exclusivity clause or keep it at most for a year.

“If somebody is ready to fly on regional routes without taking government subsidy, why should there be a problem,” the airline is learnt to have argued.

IndiGo has entered into the fray for RCS routes a bit late. Only last month, it announced to buy 50 turboprop ATR planes worth $1.3 billion, signaling its plan to bid for regional routes connecting smaller towns.

With its current fleet of narrow-body A320s, it cannot operate in many towns on the regional network as the runway and other facilities donot support operations of big jets.

SpiceJet, which already has smaller jets Bombardier Q400 in its fleet, had bid for RCS routes and bagged flying rights for 11 of them in an auction. It plans to bid for more routes in the second round, which is expected shortly.

IndiGo banks on its ability to quickly develop the market and stimulate demand on new routes and therefore does not want the RCS routes to be blocked for any airline. It has argued that if an airline is given three-years exclusivity on a route, there would soon be monopoly over there. Since half of the seats on a flight would be subsidised by the government with a fare cap of Rs 2,500 (about an hour-long flight), for the remaining they could charge any amount, say Rs 15,000 to Rs 20,000.

According to the official quoted above, the airline further claimed that the subsidy would be given for these RCS seats from the fund collected by all airlines. So, why should public money be used for subsidising flights where it is least required. “Eventually, the burden would be on all passengers flying on major routes,” he said attributing to the airline. The last date for submitting inputs before the launch of second round of bidding for RCS routes expired on June 16.

In order to promote flying between smaller cities, the RCS provides for three years exclusivity to selected bidder on regional routes. During this period, no other operator would be allowed to operate flights on these routes. The government had in March awarded 128 RCS routes to five airlines - Alliance Air, SpiceJet, Turbo Megha, Air Odisha and Air Deccan to boost air connectivity to remote areas.

nirbhaykumar @mydigitalfc.com

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