A year on, UDAN is yet to soar

• UDAN scheme has recently completed one year. The UDAN (Regional Connectivity Scheme) was launched in 2016 aims to develop the regional aviation market and provide connectivity to un-served and under-served airports of the country through revival of existing air-strips and airports.

Analysis:

• The promise of cheap flights between smaller cities still eludes many. A year since the Centre unveiled the regional air connectivity scheme (RCS) with the aim to connect tier-2 and tier-3 cities and make flying affordable for the masses, a mere 15% or 70 of the total 453 routes awarded to various airline and helicopter operators have taken off.
• None of the 75 helicopter routes connecting hilly terrain and islands have commenced yet.
• Out of the 56 unserved airports that the government planned to add to the aviation map in a year, only 16 are ready, and 10 of the 25 under-served airports have been developed.
• Two rounds of bidding have ended for routes under the scheme, also known as Ude Desh Ka Aam Nagrik (UDAN), in the past year. Operators are offered a subsidy by the Centre and the State governments to keep airfares low.
• Airlines have to set aside half the total seats in an aircraft at a discounted rate of ?2,500 each per hour of flight and helicopters need to offer a maximum of 13 seats for ?2,500 each per 30 minutes of flight. Operators get exclusive rights to fly on a route for three years, to protect them from competition.
• In March last year, after the first round of bidding, five operators were awarded 128 routes, which had to be opened by September-end. A year later, less than half of these routes are operational.
• While established players such as Air India subsidiary Alliance Air, budget carrier SpiceJet and regional airline TruJet have been able to deliver on most or all the routes awarded to them, smaller players like Air Odisha and Air Deccan, which won 65% of the routes, have only been able to service less than 15% of the total routes awarded in round one. Air Odisha has commenced flights on eight of the 50 routes it was awarded and Air Deccan has started flying in 10 of 34 it won.
• While we are two months away from the deadline to start operations for routes awarded in the second round, three of 15 operators have commenced services on 10 routes of the total 325 routes awarded. Jet Airways and IndiGo have announced that they will be starting flights on some of the routes in June and July, respectively.
• In fact, smaller players like Air Odisha and Air Deccan have struggled to raise sufficient capital for their operations, hire trained manpower and lease planes, and have slowed down the implementation of the scheme. The two started their operations with a combined fleet of four 19-seater Beechcraft B-1900D aircraft.
• Services had been irregular, often due to lack of trained pilots or when the few planes they have were grounded due to technical issues. The cancellation rates of flights for Air Odisha and Air Deccan have been as high has 80% for some of the months.
• When UDAN scheme was started , entry barriers were low to attract more players. But there is always a downside that they will take time to build efficient operations.
• The success of the scheme largely depends on interest from bigger players such as IndiGo, SpiceJet and Jet Airways. Significantly, SpiceJet and IndiGo have not sought any government subsidy for most of their routes.

By: Vishal