Now, Air India wants to expand its presence on regional routes after SpieceJet. SpiceJet's success in tier-II and III markets has propelled the State-run carrier to the move. It will shortly invite bids to replace its fleet of 11 ATR-42s and Bombardier CRJ planes with newer fuel-efficient turbo prop planes to improve its operating result.
These planes will be operated by Alliance Air, the airlines regional subsidiary. Air India wants to spread wings into regional markets and connect places of tourist importance such as Agra and Varanasi. These routes can generate loads of 80 per cent. It will help to improve its revenue and yields. Airlines are dumping capacity on metros and fares on the routes are market-driven, said a senior Air India executive.
Air India's renewed focus to regional routes comes at a time when Alliance Air withdrew its flights from seven northeast airports, including Tezpur, Lilabari and Shillong, following non-payment of funds by the North Eastern Council (NEC) from January 1. However, Alliance Air is still operating from Guhawati, Silchar and Imphal. NEC used to finance Alliance Airs operations each year through viability gap funding (VGF) of Rs 50-60 crore, in line with a memorandum of understanding between the two.