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Air Costa flights stay grounded despite airline plan to restart ops from 2 March

LiveMint logoLiveMint 03-03-2017 Tarun Shukla

New Delhi: Regional airline Air Costa, which suspended its flights earlier in the week amid a cash crisis, continues to remain grounded after saying it expected to restart operations on Thursday.

“All flights are being cancelled, We are accommodating passengers on other flights. Internal sources say that there financial issues with lessors; both of their aircraft are parked at Hyderabad Airport,” a Hyderabad-based travel agent said, requesting anonymity. Two Brazil-made Embraer jets of the airline have been impounded by GE Capital Aviation Services (GECAS) due to payment defaults. The airline has ordered 50 planes to be delivered starting next year.

Air Costa was founded in 2013 by LEPL Group, promoted by L P Bhaskar Rao, who has a background in property development, according to the airline’s website. An Air Costa spokesman confirmed there would be no operations until 5 March. The airline’s website is not accepting any bookings for up to 8 March.

The cash-strapped airline—which has 600 employees based in Vijaywada, its headquarters, apart from Jaipur, Ahmedabad, Hyderabad, Tirupati, Chennai, and Bengaluru—has not paid salaries for January. Regional airlines have been facing difficult times in India. Air Costa had once before suspended operations in August 2016 because of similar financial issues with its lessor, but restarted after a few days.

Religare Voyages Ltd, which operated Air Mantra, MDLR Airlines Pvt. Ltd and Paramount Airways Pvt. Ltd among others, have shut shop, in some cases following similar defaults with aircraft lessors followed by delays in payments to oil companies and airport operators.

Some of the smaller airlines came up after the civil aviation ministry introduced the so-called scheduled operator permits for regional airlines in August 2007 to increase air services to smaller cities.

In 2016, the ministry released a new regional policy called Udan. The difference this time is that the ministry is providing a monetary subsidy from a Rs500 crore corpus to smaller airlines.

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