Analysis | Seven years on, RCS-UDAN still faces same issues; only 45.6% of all routes still operational

Empty flights

The government's regional air connectivity scheme (RCS)—UDAN, or Ude Desh ka Aam Naagrik—celebrates its seventh anniversary on October 21.

However, is still facing the same issues--low occupancy, closure of operational routes, lack of infrastructure--it struggled with at birth as only 45.6 percent of all "operationalised routes" awarded under the scheme are still serviceable.

As of October 3, 2023, after five rounds of bidding under UDAN, 493 routes had on paper commenced operations connecting 70 destinations, including two water aerodromes and nine heliports, according to the latest Airports Authority of India (AAI) report.

However, an analysis of all operationalised routes awarded by the government under UDAN, based on the flight schedules of all airlines, and data from online travel agents and local booking agents, shows that only 225 routes remained operational till October 2023.

228 routes have been stopped by airlines due to lack of infrastructure, low passenger demand, the shutdown of airlines to which UDAN routes were operationalised, no benefit of cheaper tickets seen by passengers, and lack of awareness about the UDAN scheme amongst passengers looking to book flights, or a combination of any of the above.

The data was shared with the Ministry of Civil Aviation by Moneycontrol on October 11, and at the time of publishing this story, no response from the ministry had been received.

While Moneycontrol could not verify the status of all 40 routes operated by Pawan Hans, as the government-owned helicopter service operator's flight schedule and booking data were not available.

A senior company executive on condition of anonymity said, "Pawan Hans operates flights on 28 routes under the UDAN scheme. However, some routes are seasonal in nature and have limited booking and regular service on those routes is not available."

Status of UDAN routes

Under UDAN, routes are awarded after a bidding process, and the winning airlines are given certain incentives, along with viability gap funding equivalent to 50 percent of the seating capacity on their aircraft.

In return, the airlines sell 50 percent of their seats at a flat rate of Rs 2,500 per hour of flight, in order to make air travel accessible to those who could not hitherto afford to fly.

The cost of the subsidy is borne by Indian airlines flying on non-RCS routes, which pay an RCS levy of Rs 15,000 per departure, as per the latest revision that came into effect in April 2023. The airlines pass the levy on to their passengers on non-RCS flights. A total of Rs 2,038 crore has so far been collected as RCS levy.

In a statement to Moneycontrol, regional airline FlyBig, which had operationalised 22 routes under UDAN, cited infrastructural shortcomings for stopping operations on six of the aforementioned 22 routes.

"These routes were stopped due to lack of infrastructure, i.e.,  an approved instrument approach system at Gondia Airport (in Birsi, Maharashtra) due to which we faced a very high percentage of delays and cancellations/diversions," the airline said in a written response.

Similarly, SpiceJet, which had operationalized 92 routes under UDAN, said it has stopped operations on some awarded routes due to a lack of infrastructure and low passenger demand.

"We could not operate 12 routes as the airport was not ready for operations like in Tanjore (Thanjavur, Tamil Nadu), Moradabad, Saharanpur, Ayodhya (all in Uttar Pradesh), etc," SpiceJet said. The airline added that it did start flights on some routes but these were discontinued due to low passenger demand," the airline said.

Reasons why UDAN routes shut down

Furthermore, only 21 percent or 103 routes operationalised under UDAN have more than one flight per week, and only 18 percent or 89 routes have more than one operator flying.

In August, the office of the Comptroller and Auditor General (CAG) of India in its latest report on the Ministry of Civil Aviation's RCS-UDAN scheme had also pointed out that 52 percent (403 out of 774 routes) of the awarded routes were unable to commence operations.

"Out of the 371 commenced routes, only 112 routes (30 percent) successfully completed the full concession period of three years," the CAG said in its report.

Also Read : UDAN needs more support to be viable

Failure to create regional airlines

Launched in 2016 to get smaller towns and cities on the country’s aviation map, the scheme was aimed at making flights cheaper for citizens and creating a new category of airlines—scheduled commuter airlines (SCAs)—with a fleet of small aircraft that would fly on unserved and underserved routes.

The government was hoping to create many regional carriers or SCAs in the country that would specialise in servicing local geographies and tap the potential customer base in those areas. The SCAs were provided with viability gap funding according to a predetermined formula and, in turn, they were required to sell a certain number of seats per week at a subsidised rate.

However, as of October 11, 2023, only 54 routes under UDAN were active and operated by four regional airlines—StarAir, FlyBig, IndiaOne Air and Air Taxi. Others like Trujet, Zoom Air, Deccan Air and Heritage Aviation have either shut down or have not started operations yet.

While upcoming regional carriers Fly91 and Jettwings Airways are looking to operate on routes under the UDAN scheme, both airlines are looking to offer "premium services" on regional routes.

Large operators like SpiceJet, IndiGo, Alliance Air, and Pawan Hans have operationalized a total of 331 routes under UDAN, with SpiceJet accounting for 92 routes, Alliance Air for 103, IndiGo for 96, and Pawan Hans on 40 routes.

Alliance Air, IndiGo, and SpiceJet have stopped operations on 51, 23, and 46 routes, respectively, as per data verified by Moneycontrol.

Also Read: UDAN achieves middling success amid turbulence in aviation

No real cost savings for passengers

Another objective of the UDAN scheme was to provide a cheaper alternative to travel and open up the aviation market for those who could not afford regular flight tickets. However, after seven years, the scheme is still struggling to attract customers.

In the first quarter of the financial year 2023-24 (Q1FY24), the busiest travel period in India’s aviation history, only 5.5 lakh passengers took to the air under the RCS-UDAN scheme.

During this time, domestic carriers carried around 3.86 crore passengers, as per government data seen by Moneycontrol.

A senior AAI official told Moneycontrol that around 24 lakh fliers opted for the RCS-UDAN scheme in 2022-23.

"Flights operated under the UDAN scheme have fallen by nearly 25 percent in the last year, as private airlines are deploying their capacity on more profitable routes," the official said.

He added that due to capacity constraints following the grounding of planes of both SpiceJet and StarAir last year, flights under the RCS-UDAN scheme took a further beating.

In terms of prices as well, the scheme has failed to provide customers with a cheaper alternative to regular tickets. While the government enjoins that airlines sell a certain number of subsidised seats per week under UDAN, it does not verify whether seats were sold at the reduced rate or not.

The CAG in its report also asked airlines to develop a transparent system of booking seats on RCS flights which should be monitored by the aviation ministry to ensure that seats under the scheme are sold on priority against seats not covered by the scheme.

Regarding the collection and remittance mechanism of the Regional Air Connectivity Fund (RCF) levy, the audit report criticised the absence of clear rules.

It suggested the ministry establish a monitoring mechanism to ensure that collected RCF levy from passengers does not exceed the amount to be remitted to the government or become a profit source for airlines.

It also asked the ministry to overhaul the system of booking seats on flights under the UDAN scheme.

"The system of booking of seats on RCS routes needs to be revamped to ensure that airline operators do not charge airfare more than the airfare cap as stipulated in the Scheme," the CAG said in its report.