On September 1, Karnataka’s Industries and Infrastructure Development (IID) Minister MB Patil announced that the Karnataka government was exploring the idea of starting its own airline to enhance connectivity within the State. This move is significant because this is the first time a State is contemplating launching an airline.

Air Kerala, erroneously quoted by some sections of media as a “state owned” enterprise, was actually being planned by Cochin International Airport Limited (CIAL), which is a public private partnership with NRIs holding 74 per cent share.

First mooted in 2005, Air Kerala never took off and currently a Dubai-based businessman is trying to revive the idea as a private venture. It may be mentioned here that, while Air Kerala’s objective was connectivity between Kerala and the Middle East, Karnataka’s focus is on regional aviation.

Karnataka’s civil aviation policy is yet to be promulgated but the intent of successive State governments is to promote regional connectivity.

In 2012 it tried to start flights from Bidar (an Indian Air Force training base) but ran into headwinds as the Operation, Management and Development Agreement (OMDA) between GMR Hyderabad International Airport (GHIAL) and Airports Authority of India (AAI) stipulated that no other airport could operate within 150 km of Hyderabad airport; Bidar fell within that distance.

Tripartite agreement

Finally, a tripartite agreement was signed between the Karnataka government, GMR and the IAF under which the State government undertook that it would use Bidar only for regional flights and not those that GHIAL wished to fly. Shivamogga airport, which was inaugurated in February this year, saw its first commercial flight on August 31.

The Chief Minister has said that Vijayapura airfield will be operationalised before the end of this year and the State government will develop airstrips in Raichur, Bellary, Karwar, Hassan, Dharmasthala, Kodugu and Chikkamagaluru and a heliport in Hampi in the near future. The emphasis appears to be on the State running these airports as contrasted to AAI managing them.

Thus, it makes sense for the State to have an airline too so it can reap the benefits of airport and airline related revenues. The IID Minister has mentioned a three aircraft fleet as a start. However, the airline business is a capital intensive one and the State’s budget for 2023-24 does not support the airline ambition. The total expected expenditure for the year is ₹2,50,933 crore of which around ₹52,000 is the cost of the Congress’ five poll guarantees. As a result, the current year Budget Estimate for ‘Transport’ is ₹15,023 crore, which is 20 per cent lower than the Revised Estimate of the previous year of ₹18,868 crore, which does not encourage much hope for the investment needed to start and sustain an airline.

According to International Air Transport Association (IATA), the expected net profit margin for the airline industry as a whole is just 1.2 per cent. The recent disinvestment of Air India suggests that a State ought to think twice about investing in an airline.

But for now, Karnataka appears keen on starting an airline. One hopes that the enterprise succeeds and serves as a model for other States wanting to boost regional connectivity, something the New Civil Aviation Policy (NCAP) 2016 and the UDAN scheme have so far failed to do.

The writer is an IAF veteran and a former COO of an airline