AirAsia, SpiceJet On Regional Connectivity, Need To Bring ATF Under GST 

AirAsia India is not looking to bid for routes under the government's regional connectivity scheme that provides subsidy to airlines for flying to smaller cities.

The carrier, a joint venture between the namesake Malaysian budget carrier founded by Tony Fernandes and the Tata Group, operates a single-aircraft model with Airbus A320, which is not fit to land at many of the smaller runways, Chief Executive Officer Amar Abrol told BloombergQuint on the sidelines of Indian Economic Summit of World Economic Forum in New Delhi today. Apart from being commercially unviable, the airline has no plans to induct turbo-prop planes into its fleet at least for now, he said. AirAsia will consider bidding only after turning profitable.

The UDAN scheme, unveiled earlier this year by Prime Minister, targets middle-class travellers in smaller cities by adding 50 new airports to the aviation grid in Asia's third largest aviation market. The government has awarded routes to 33 airports in the first phase.

The second round of bidding is due in November. Unlike AirAsia, its low-cost peer SpiceJet Ltd. is interested in bidding. “Details around the routes under round two that the carrier would be interested in are being worked out,” Chairman and Managing Director Ajay Singh told BloombergQuint.

The airline already operates on two routes it won in the first round of bidding. SpiceJet has a fleet of smaller Bombardier 400 aircraft, fit for such regional operations.

SpiceJet is also exploring long-haul flights, Singh said. “The idea made sense,” but costs have to be brought down, Singh said.

‘Need To Bring ATF Under GST'

Both Abrol and Singh voiced concern over high price of the aviation turbine fuel in India. That's a hurdle in bringing down ticket prices, they said.

The cost of aviation must come down and for it ATF prices and taxes should be brought down, said Singh. “That will bring down fares and the sector would grow even more rapidly.”

Singh said ATF needs to be included in GST, as happens around the world, so that airlines could get input credit on it.