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India may put new airline proposals on hold

The government is likely to put on hold proposals from new airlines seeking to enter the country's tightly-regulated domestic sector until its civil aviation regulatory body completes an estimate of future demand, a senior government official said on Tuesday.

At least two new private airlines, North Star Airlines and Royal Airlines, are waiting for government approval to start operations in Indian skies, currently dominated by state-run Indian Airlines and privately-owned Jet Airways.

Both North Star Airlines and Royal Airlines, seeking to fly on the country's main routes, are backed by groups of expatriate Indians. Another airline, Crown Express, which joined the line-up of aspirants last year, has now withdrawn its proposal, citing bureaucratic delays.

India's domestic airline industry, which ferried more than 13 million passengers in 2000, is tightly regulated by the government despite an open skies policy cleared in 1993 allowing private players into the sector.

The government has in the past resisted the entry of new airlines in the domestic market on grounds that demand was not enough on the main air routes.

The Directorate General of Civil Aviation is now conducting a survey of demand in the country's airline sector which it says will be ready in two months.

"New airline licenses have to be based on demand for air services. If the demand is not there in the market, what is the point of starting a whole lot of airlines?" said the senior civil aviation ministry official who did not want to be identified.

The official said airlines seeking to operate turbo-prop aircraft on regional routes such as Bombay-based start-up Visa Air would be allowed to begin operations because the government was encouraging air connections between small cities and towns.

A proposal by India's largest private conglomerate, the Tata group, to start a domestic airline with Singapore Airlines failed to take off in the mid-1990s because it did not get permission from the government

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