Vijayawada-based Air Costa suspended operations on Thursday because of financial troubles. Air Costa is the second regional airline to halt flights, after Air Pegasus a week ago.
An Air Costa spokesperson confirmed operations had been suspended and said they would resume on Friday.
According to a source, the airline has delayed rent payments on its three E-190 planes to leasing company GECAS. "Air Costa has not inducted a fourth E-190 plane because of a dispute with the lessor. There was also a dispute over re-delivery of an E-170 aircraft," the source said.
Air Costa operates 24-28 flights a day to nine destinations. The airline, promoted by Décor Aviation, started flying in April 2015.
"We are resolving issues with lessors. We are positive about our operations and future expansion. There are absolutely no issues regarding salaries. We have also taken care of the passengers scheduled to fly today," the Air Costa spokesperson added.
A Directorate General of Civil Aviation official said the airline had cited technical reasons for suspending operations.
Air Costa has been trying to raise money for some time. Managing Director Shyson Thomas had said the airline would raise 200 crore rupees through angel investments or foreign loans.
The crisis among regional carriers is coming to light as the government is in the final stages of unveiling a regional connectivity scheme. Civil Aviation Secretary Rajiv Nayan Choubey said regional carriers should be able to configure their business model to meet their financial commitments.
"They now operate in a market environment. Under the regional connectivity scheme, they will operate in a protected environment," he added.
"Overheads will always be on the higher side for small players. A minimum of six aircraft are required to break even. Expertise and capital are needed to survive," said aviation expert Anurag Jain.