The Telegraph
Since 1st March, 1999
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Tough terms for Alliance Air subsidy

New Delhi, June 20: The Union Cabinet will clear a promised annual subsidy for state-run airline Alliance Airís north-east operations tomorrow but set four conditions that include shifting the operational hub for north-east from Calcutta to Guwahati and jacking up capacity from 2,125 seats to 4,177 seats a week.

The main condition of shifting the hub for north-east operations to Guwahati has been conceded by Alliance Air, a subsidiary of Indian Airlines, but the feeder airline continues to use Calcutta as the main hub as the airport there has engineering facilities and is currently better connected with the rest of the country and global destinations.

However, the Cabinet wants the hub to shift to Guwahati which will emerge as the main link with the rest of the country and even destinations in south east Asia for the north-eastern states.

IA officials said the Cabinetís approval will mean the release of an annual subsidy of Rs 35 crore which will help it bridge part of the Rs 50-55 crore loss it is running up by flying four ATR 42s exclusively for intra- region links and links with Calcutta besides Boeing 737 and Airbus 320 aircraft which link north-eastern capitals with Calcutta.

Of this, the airline claims that the majority of about Rs 38 crore in losses are just from ATR operations partly because of the small size of the aircraft and partly because of the new infrastructure the airline has had to bring in.

The four turbo-prop ATR aircraft were bought earlier this year for the region after considerable controversy. Two managing directors ó P.C.Sen and Anil Baijal ó had to leave the airline because of their opposition to the purchase of this aircraft.

The BJP government has been pushing the domestic carrier to buy the 52-seater French made turbo prop aircraft for a long time. Two years back, in an apparent move to push Indian Airlines into doing just this, it took a Cabinet decision to price aviation turbine fuel for turbo prop aircraft at 40 per cent lower than the normal rate.

The sop was doled out after IA pointed out after a techno-economic viability study that it would be not be economical to buy and fly ATRs as they were cost-ineffcient due to a number of factors, including high aviation fuel prices.

Both Sen and Baijal had warned that the purchase of small aircraft would push the airline deeper into losses as revenue generated by these planes would be far less than the interest and capital repayment outgo.

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