Mumbai: The promoters of VRL Logistics Ltd plan to start a regional airline and may sell as much as 2% in the logistics company to fund their entry into civil aviation.
Promoters Vijay Sankeshwar and Anand Sankeshwar will, however, continue to own a majority stake in VRL Logistics after the stake sale, they said.
“We have taken this in-principle decision after a lot of study and inputs from industry experts,” the promoters of VRL Logistics said in a statement on Monday.
VRL was founded in 1976 by Vijay Sankeshwar in Gadag, a small town in north Karnataka with a single truck. The company gradually expanded its services to Bengaluru, Hubli and Belgaum.
VRL currently has a fleet of 4,107 vehicles (including 368 passenger transport vehicles and 3,739 goods transport vehicles amongst others), according to its website.
The company said it is internally deliberating on the mode of financing its entry into civil aviation.
“We may seek to dilute a portion of our present day holding in VRL Logistics in order to provide us with liquidity to enable our investment for the aviation venture,” the promoters told the stock exchanges. “Subsequent to the same, we will continue to hold a majority stake in the company.”
Sunil Nalavadi, chief financial officer of VRL Logistics, clarified that the promoters’ plan to enter civil aviation has no connection with the logistics company.
“This is purely a venture by promoters. Promoters many dilute up to 2% stake of the company to start the regional airline,” Nalavadi said.
The ministry of civil aviation had introduced so-called scheduled operator permits for regional airlines in August 2007, to increase air services to smaller cities.
Regional airlines are required to operate in small towns within one of the designated regions—north, south, west, east and the north-east region.
But they are not allowed to connect to more than one major city, except those licensed to fly in the southern region.
On 31 March 2013, Mint reported that Religare Voyages Ltd, which runs Air Mantra, stopped operations of the regional airline eight months after its start because of poor bookings.
Religare Voyages is promoted by brothers Malvinder Singh and Shivinder Singh.
Air Mantra started operations in July 2012 with daily flights connecting Amritsar and Chandigarh.
It became the first regional airline to be launched in India in five years.
MDLR Airlines Pvt. Ltd, the only regional carrier that started operations in 2008, stopped flying on 1 October 2009.
Apart from MDLR Airlines, several companies, including Star Aviation Pvt. Ltd, ZAV Airways Pvt. Ltd, Jagson Airlines Ltd and King Air Pvt. Ltd, were licensed to fly as regional carriers, but none of them could start because of high jet fuel prices and the economic slowdown of 2008.
Significantly, Paramount Airways Pvt. Ltd, a scheduled airline that had a substantial southern focus, suspended operations after the aviation regulator cancelled its operating licence when it fell short of the minimum five aircraft requirement.
To be sure, promoters of VRL Logistics said that the commencement of such regional airline service is subject to a number of approvals from governmental and regulatory authorities and promoters’ intent to the board should not be considered as a eventual certainty of regional airline venture.
Currently, India has 10 airlines, including scheduled and regional airlines. They are IndiGo (run by InterGlobe Aviation Ltd), Jet Airways (India) Ltd, Air India Ltd, GoAir (Go Airlines (India) Ltd), SpiceJet Ltd, AirAsia (India) Pvt. Ltd, Vistara (TATA SIA Airlines Ltd), regional airlines Air Costa Aviation Pvt. Ltd, Air Pegasus (Decor Aviation Pvt. Ltd) and TrueJet (Turbo Megha Airways Pvt. Ltd).