Air Costa
Air Costa airline has not being paying salaries to its employees since June this year. Pictured: An Air Costa flight readies for takeoff.Wikimedia commons

Financial crunch is making it tough for regional airlines providing connectivity to smaller towns to conduct their operations. On Thursday, Air Costa became the second regional airline to halt its operations.

The Vijayawada-based carrier had received a licence to operate flights across the country last year. However, owing to non-payment of dues, its flights were cancelled for a day. "There are some payment issues with our lessor GE Capital Aviation Services (GECAS), which are being sorted out. Tomorrow i.e. on August 5, we will start our operations as scheduled," an Air Costa spokesperson said on Thursday.

The airline covers six Indian states — Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Rajasthan and Gujarat. It flies 24 flights daily to nine destinations and is reportedly planning to start operations from Varanasi and Delhi in the near future.

Air Costa is the second regional airline to cancel its operations after Bangalore-based Air Pegasus, which had cancelled its flights last month. 

Air Pegasus, which has a fleet of three aircraft, had suspended its operations for an indefinite period after its lessor took back the aircraft due to financial reasons.

The civil aviation ministry said on Thursday that it would examine the feasibility of any assistance if there is a request from the regional airlines.

"If they (Air Costa and Air Pegasus) approach us, we will examine...what is feasible and what is not. But as of now they have not approached us," RN Choubey, the Civil Aviation Secretary, was quoted as saying by Press Trust of India. 

The government's initiative to provide regional connectivity to every Indian was unveiled in the new civil aviation policy, which was released on June 15. Under the new guidelines, regional airfares will now be capped at Rs. 2,500 and Rs. 1,200 for one-hour and a 30-minute flights, respectively.