Smooth take-off

New Delhi, May 2: The government plans to encourage feeder airlines operating out of regional hubs with incentives in the form of concessional airport tariff and fast track clearances in its proposed aviation policy.

The new aviation policy, to be tabled before the cabinet soon, is in favour of the existing ceiling on foreign direct investment (FDI), though the finance ministry has proposed a higher limit as well as foreign equity in Indian-run airlines.

The civil aviation regulator will set standards for the entire sector, issue licences to operators and personnel, regulate tariff, punish those who violate standards and ensure that there are no unfair trade practices and abuse of market dominance.

In the meantime, the government is set to appoint a consultant to facilitate the merger of Indian Airlines and Air-India.

The consultant will prepare a time-table for the merger, including the public issue.

Civil aviation minister Praful Patel said, “The airlines’ boards will meet shortly and take a decision to appoint a consultant. The board of any one airline can take this decision. The board will meet this month itself.”

The consultant would draw up the roadmap for the merger and also advise the government whether the valuation of the initial public offer would be higher for a combined entity or the two entities separately.

“We have to complete the process of merger in 2006-07 financial year itself. That is the deadline and we cannot keep the issue open,” the minister said.

Patel also indicated that the consultant would be charged with deciding whether Alliance Air and AI Express, the two subsidiaries run by the two state-run airlines, would be merged with the new entity or allowed to remain subsidiaries.

Patel said the guidelines for mergers and acquisitions in the aviation industry have been prepared by the aircraft acquisition committee and the ministry would give its nod as soon as these were submitted.

The draft policy will also have a section on mergers and acquisitions, which will allow 100 per cent transfer of aircraft, flight rights, parking bays on a payment of transfer fees.

It will however, not allow, grandfathering of these rights, which means these rights and slots cannot be sold to another airline before or after the merger.