In order to enhance connectivity between Tier II and Tier III cities, the government on 9 August 2007 announced a new policy for regional airlines, which will operate primarily between airports of any of the four regions classified as North, South, West and East/North-East.

Under the policy, which will cover both aircraft and helicopter operators, the airports of one particular region will be designated by the Airports Authority of India.

However, the new policy does not offer any sops to regional carriers. Incentives like total exemption from navigation and airport charges, and a lower 4 per cent sales tax on ATF are available to both regional as well as pan-India carriers as long as the size of the aircraft used is less than 40,000 kg.

The regional airlines will get a scheduled operators' licence, which is different from the one given to a scheduled operator having pan-India operations. An airline in a particular region will be able to operate from one metro (e.g. Delhi for the north region) to all the non-metros in the region. It will also be able to operate to other regions provided it does not operate into a metro.

However, the airlines which have taken a licence to operate in the southern region can operate flights between the three metros in the region - Chennai, Bangalore and Hyderabad. The new carriers under the policy also do not have to follow route dispersal guidelines like the pan-India scheduled carriers which have to fly non-profitable routes, like in the North-East.