Draft Regional Connectivity Scheme (RCS)

Introduction

National Civil Aviation Policy 2016 - RCS Vision / Objectives To make flying affordable for the masses To promote tourism, increase employment and encourage balanced regional growth

Regional Air Connectivity Scheme (RCS) Guiding Principles Reviving un-served / under-served airports / heliports or routes Operators to assess demand on routes (both aircraft and heli) Submit proposals for operating / providing connectivity on such routes Earmarking a certain number of seats in each flight as RCS seats Passenger fares on RCS seats to be capped based on flight distance / time Operator to seek VGF in case there is gap in costs of operations and revenues Market based discovery of lowest VGF sought on a route and allocation of a route to such operator on such lowest VGF payment

Key definitions Implementing Agency –Designated entity responsible for implementation of the Scheme. ‘Unserved Airport’ - Any airport with no scheduled commercial flights during the last two (2) flight schedules ‘Underserved Airport’ - Any airport with no more than 7 scheduled commercial flights per week as per the latest schedule RCS route – pair of origin / destination points (atleast one RCS airport or heliport / no scheduled flights for last 2 schedules (heli -1) / stage length between 200 to 800 km except hilly / island /NE regions or for heli operations (60 min)) Regional Connectivity Fund - Fund/Corpus created through application of a levy on domestic flights ( other than CAT- II/ CAT IIA, RCS routes and small aircrafts below 80 seats)

Support from the Central Government Excise Duty @ 2% on Aviation Turbine Fuel (ATF) purchased at RCS Airports for an initial period of three (3) years from the date of notification of this Scheme. Concession on Service Tax – To be levied on 10% of the taxable value (abatement of 90%) of tickets for passengers on an RCS Flight for a period of 1 year Freedom to enter into code sharing arrangements with both domestic as well as international airlines. Permission to set-off / trade ASKMs for non-RCS seats as per existing RDG guidelines

Support from the State Governments VAT to 1% or less on ATF at RCS Airports located within the state for a period of 10 years; Minimum land, if required, free of cost and free from all encumbrances for development of RCS Airports Security and fire services free of cost at RCS Airports; Electricity, water and other utility services at concessional rates at RCS Airports; and Contribution (20% for States other than for North-Eastern States where the ratio will be 10%) to RCF

Support from the Airport Operators Exemption to RCS Flights from Landing Charges and Parking Charges. Exemption to RCS Flights from Terminal Navigation Landing Charges (TNLC) Discounts to RCS Flights on levy of Route Navigation and Facilitation Charges (RNFC) (@ 42.50% of Normal Rates) No levies by the Airport Operators for PSF, DF and UDF. Allowing selected airline operators to do self ground handling for operations under the scheme at all airports

Features of the Scheme

RCS Coverage & Applicability Routes or a Network of Routes satisfying RCS requirements RCS Operations through fixed-wing aircrafts. RCS Operations through helicopters, permitted only for remote / specified areas

Regional Connectivity Fund (RCF) and its allocation Inflows to RCF Levy or fee per departure on domestic routes as provided under NCAP 2016 Premium realized, if any, from the allotment of additional capacity entitlements on international routes Allocation of RCF To Regions – Capped up to 25% of the estimated inflows in 1st year (5 regions) To Underserved Airports – Capped up to 30% of the estimated inflows in 1st year To Airline operators – 50% for a region and 25% of the total fund

Period of Support under the Scheme (RCS) Tenure of the Scheme – 10 years Tenure of VGF Support – 3 years Proposals for provision of VGF under the Scheme will be considered until the end of 7th year from the date of notification of the Scheme

Minimum commitments from Selected Airlines Fixed-wing aircraft: 50% of seats offered on an RCS Flight (subject to a minimum and maximum of 9 seats and 40 seats respectively) to be sold at or below specified Airfare Cap Helicopters: 5 Seats to be sold at or below specified Airfare Cap Frequency: Minimum 3 Flights per week and Maximum 7 Flights per week

Airfare Caps under the Scheme All-inclusive airfare of ₹2,500 per RCS Seat will be applicable for: RCS Flights operated by fixed wing aircraft for stage length of 500 km; and RCS Flights operated by helicopters for flight duration up to 30 minutes Airfare Caps will be indexed to inflation as per NCAP 2016 and will be revised quarterly. 3. Airfare Caps have been specified for various stage lengths

VGF to be capped VGF Caps calculated on normative basis Caps with reference to a broad representative data set / potential cost and revenue for operations on a typical RCS Route for a particular stage length VGF Caps to be specified upfront to ensure transparency under this Scheme VGF Caps as well as VGF support for respective routes indexed to inflation & ATF prices; such indexation to be reviewed on a periodic basis

Airfare Caps – Fixed Wing Aircrafts (1/2) Stage Length (in km) RCS Airfare Cap (in ₹) VGF Cap (in ₹) 201 – 225 1,770 1,810 226 – 250 1,830 2,190 251 – 275 1,890 2,560 276 – 300 1,950 2,940 301 – 325 2,010 3,090 … – … – 426 – 450 2,330 3,610 451 – 475 2,370 3,720 476 – 500 2,500 3,750 501 – 525 3,790 526 – 550 2,760 3,820 676 – 700 3,540 4,040 701 – 725 3,670 4,070 726 – 750 3,810 4,100 751 – 775 3,940 4,130 776 – 800 4,170

Flight Duration (in minutes) Airfare Caps – Helicopters (2/2) Flight Duration (in minutes) RCS Airfare Cap (in ₹) VGF Cap (in ₹) 00 – 10 2,500 11 – 15 1,200 16 – 20 2,400 21 – 25 3,600 26 - 30 4,800 31 – 35 2,900 5,600 36 – 40 3,350 6,400 41 – 45 3,750 7,200 46 – 50 4,150 7.200 51 – 55 4,600 56 – 60 5,000

PLF Based Tapering of VGF support For annual average PLF exceeding 90%, VGF for the next year will be 50% of the applicable VGF for the next year. If annual average PLF for the subsequent year of operations continues to exceed 90%, VGF for the third year will be 25% of the applicable VGF. However, if it falls below 90%, VGF for the third year will be restored to 100% of the applicable VGF. Such VGF tapering will not be applicable for Category 1 aircraft and helicopter operations under the Scheme

Exclusivity to Selected Airlines on awarded routes During the exclusivity period, no other airline operators would be allowed to operate flights on the specific RCS Route Suggestions to be invited from stakeholders on the length of Exclusivity Period One Year (1 year); Two Years (2 years); Three Years (3 years)

Procedure for selecting an airline operator Reverse bidding mechanism will be followed for the selection of airline operator Two half-yearly cycles for inviting & evaluating proposals and identifying the Selected Airline Submission of Initial Proposal(s) Scrutiny of Initial Proposal(s) Invitation of Counter Proposal(s) Evaluation of Proposal(s) and Selection of Preferred Applicant

Evaluation of Financial Proposals Suggestions to be invited from stakeholders on the following bidding parameters VGF per RCS Seat Total VGF per week Combination of VGF per RCS Seat and Total VGF per week

Ease of Exit Mechanism for Selected Airline If a Selected Airline Operator ceases RCS Flight operations After completion of one year of operations: Performance Guarantee (PG) and Additional Performance Guarantee (APG) will be returned, provided there are no defaults by the Selected Airline Operator under the contract. Before completion of first year of operations: Both PG and APG to be encashed and retained by the Implementing Agency.

Draft Scheme will be available on the website- http://civilaviation Draft Scheme will be available on the website- http://civilaviation.gov.in Thank you