Shillong, Dec. 6: Flights between Calcutta and Shillong, Tezpur and Lilabari may be hit from January 1, with Air India reportedly threatening to stop operations following non-payment of funds to its subsidiary Alliance Air since December 2011 by the North Eastern Council (NEC).
The alleged failure of the council to pay over Rs 100 crore has also led Alliance Air to stop renewal of the lease of three turbo-prop ATR planes operating to these cities, sources said. Dissatisfied with the service provided by Alliance Air, the council had stopped making the financial contribution to the Air India subsidiary a year ago.
The council finances the susbsidiary’s operations each year through viability gap funding (VGF) under a memorandum of understanding between the two sides.
Initially, the council paid Rs 35 crore annually as funding to Alliance Air but the amount was later increased to Rs 49 crore.
While Alliance Air submitted its funding estimates in September last year for the grant of Rs 52 crore and Rs 55 crore for 2012 and 2013 respectively, the amount has not been paid so far. The airline has been operating so far on the assumption that the funds would soon be available. The viability gap for this year is now estimated at Rs 60 crore, resulting in a severe cash crunch for Alliance Air.
If the council does not provide the funding due for 2012-13, Alliance Air would not be able to renew the leases and be forced to return the aircraft to the lessor, leading to stoppage of flights on the crucial sectors, according to sources.
“From 2001, there has been a collaboration with Alliance Air and we have been subsidising routes which are supposedly not profitable to run commercially because of the low number of passengers. They identified such routes and we used to provide funding so that they do not run into losses. Unfortunately over the years, we have found the performance of Alliance Air was not up to the mark,” council secretary U.K. Sangma had told reporters in Shillong on September 3.
He had also said, “Alliance Air was interested as our contribution was around Rs 49 crore. They were running at a loss but this amount was like pocket money for them.”
Reacting to the report, Meghalaya transport minister A.T. Mondal told The Telegraph over phone that he has not received any inputs so far on the possibility of Air India stopping its services to Shillong. “I will collect the relevant information on the report by tomorrow,” Mondal said. While Air India has threatened to stop flying to the northeastern airports, a senior council official told this correspondent that an expression of interest has been issued for connecting Lilabari, Tezpur and Shillong with New Delhi.
“The council will provide the necessary viability gap funding for better connectivity of these airports with the national capital. This arrangement will be for a period of three years starting from 1st April, 2013,” Sherry Lalthangzo, NEC director (HRD and planning), said.
She also said a study would be undertaken by the Airports Authority of India to improve air connectivity in the region. “The study will be undertaken by the authority indicating the best possible method to connect the region. The study will be completed in the next six months at a cost of Rs 108 lakh,” Lalthangzo said.
Alliance Air was set up in April 1996 as a separate company envisioned to function as a profit centre of the erstwhile Indian Airlines. It had taken a lease of four ATR-42 aircraft and commenced operations in the Northeast from January 2003.
These aircraft were deployed exclusively in the region in accordance with the terms of the MoU signed with the council. A budgetary support of Rs 175 crore was provided over five years (2002-07) by the council during the Tenth Plan under the agreement.
Operations in the Northeast are guided by the Centre’s Route Dispersal Guidelines, which entail that all Indian carriers fly to the region and other remote parts of the country as a social obligation. A major chunk of these operations are carried out by Air India and its subsidiary Alliance Air. When the guidelines were first formulated in 1994, there were only 28 flights a week flying in the Northeast, which has now increased to over 350 flights weekly.