Kerala government plans to launch a budget carrier to cater to its Gulf diaspora
If things go as planned for the Kerala govt, foreign as well as Indian airlines will soon have serious competition on the lucrative Gulf routes. Air Kerala Ltd, a state-owned company headed by the chief minister, is awaiting the Centre's clearance to start flights to Gulf destinations.
Kerala Chief Minister Oommen Chandy
If things go as planned for the Kerala government, foreign as well as Indian airlines will soon have serious competition on the lucrative Gulf routes. Air Kerala Ltd, a state-owned company headed by the chief minister, is awaiting the Centre's clearance to start flights to Gulf destinations.
The move by Kerala's Congress-led United Democratic Front government has been triggered by widespread concerns that airlines operate like a cartel during peak seasons and exploit travellers to the Gulf countries - the fares, at times, are higher than those on the US route. There are an estimated 2.5 million Malayalees working in the Gulf region, and their remittances of about Rs 50,000 crore a year are the backbone of the coastal state's economy.
The airline will be a government-private initiative with its equity structure modelled on the lines of Cochin International Airport Limited (CIAL). The new carrier will have 26 per cent stake held by the Kerala government and CIAL together, and the rest by individuals.
It will have an equity of `200 crore initially. "Our idea is to start with 200,000 shares each with a face value of `10,000, and increase this to one million shares in five years. We hope to see good participation from non-resident Keralites as this is going to be their airline," says Air Kerala Managing Director V.J. Kurian, who is also MD of CIAL. "Many people scoffed at the CIAL idea when it was first floated. Today we are the most profitable for the size of capital employed." In 2011/12, the airport earned a net profit of `100 crore.
There are sceptics. Deccan Aviation Chairman G.R. Gopinath thinks Kerala should stay away from the initiative as it would involve a conflict of interest. "Since the airport operator is also the promoter of Air Kerala, it is likely to treat the airline with favourable business terms, and the government might extend tax sops," says Gopinath. Precisely the reasons why the airline will likely be viable and profitable, reckons a sector expert.
The move by Kerala's Congress-led United Democratic Front government has been triggered by widespread concerns that airlines operate like a cartel during peak seasons and exploit travellers to the Gulf countries - the fares, at times, are higher than those on the US route. There are an estimated 2.5 million Malayalees working in the Gulf region, and their remittances of about Rs 50,000 crore a year are the backbone of the coastal state's economy.
FROM THE MAGAZINE: How Kerala is charting its own growth paths Kerala has asked for a waiver of the existing five-by-twenty rule: an airline must have 20 aircraft and five years' experience in domestic operations to launch overseas operations. "I have discussed with the Prime Minister, and he has promised to consider our request. We are ready for the launch any moment," Chief Minister Oommen Chandy told BT. The Kerala government has drawn up a contingency plan too. If the Centre delays the necessary approvals, Air Kerala will still take off but only on domestic routes.
| FACT SHEET AIRLINE: Air Kerala Limited EQUITY: Rs 200 Crore BUSINESS PLAN: Services between Kerala and Gulf SHAREHOLDING: Government-26%, private - 74% TAKE OFF: In a year's time |
The airline will be a government-private initiative with its equity structure modelled on the lines of Cochin International Airport Limited (CIAL). The new carrier will have 26 per cent stake held by the Kerala government and CIAL together, and the rest by individuals.
It will have an equity of `200 crore initially. "Our idea is to start with 200,000 shares each with a face value of `10,000, and increase this to one million shares in five years. We hope to see good participation from non-resident Keralites as this is going to be their airline," says Air Kerala Managing Director V.J. Kurian, who is also MD of CIAL. "Many people scoffed at the CIAL idea when it was first floated. Today we are the most profitable for the size of capital employed." In 2011/12, the airport earned a net profit of `100 crore.
There are sceptics. Deccan Aviation Chairman G.R. Gopinath thinks Kerala should stay away from the initiative as it would involve a conflict of interest. "Since the airport operator is also the promoter of Air Kerala, it is likely to treat the airline with favourable business terms, and the government might extend tax sops," says Gopinath. Precisely the reasons why the airline will likely be viable and profitable, reckons a sector expert.
