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UDAN doesn't soar for regional airlines, three out of four close to shutting down

Zoom Air hasn't flown a single passenger since July

November 29, 2018 / 05:24 PM IST
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UDAN, the government's regional connectivity scheme, may have led to the development of new airports and the introduction of flights to hitherto unconnected destinations. But three out of the four airlines that were hoping to make the most of the new scheme, are close to shutting down.

The fourth one, TruJet, has managed to fly an average of 50,000 passengers a month.

While Zoom Air has not flown a passenger since July, Air Deccan and Air Odisha have managed 3,000 and 1,000 passengers, respectively, in these four months. The numbers are published by Directorate General of Civil Aviation (DGCA).

On  November 23, Airports Authority of India cancelled licenses of Air Odisha on two routes, Chhattisgarh and Chennai; and one route - Maharashtra - of Air Deccan. "Poor performance" has been the reason for these cancellations.

Introduced in 2017, UDAN aims at making air travel affordable, and connecting India's smaller towns and cities. As part of it, many new airports, and those that were lying idle are being developed.


And to make airlines operate flights in these destinations and make up for any losses, the government provides a viability gap funding.

But even as the smaller airlines struggle, their bigger peers like SpiceJet, IndiGo and Air India (through its unit Alliance Air) have gradually scaled up their network in destinations covered by the UDAN scheme.

SpiceJet operates 25 daily UDAN flights, connecting destinations like Porbandar, Kandla, Pakyong and Kanpur.

Earlier this month, IndiGo launched its sixth route, Allahabad-Bengaluru, under the regional connectivity scheme.

Industry experts had warned against small airlines operating flights on these routes.

"Regional routes can be sustainable if operated on a large scale.  If you don’t have economies of scale, it is very tough to do this business," said an executive from the industry.

"Your costs are different in running a five-aircraft operation, vis-a-vis a 50-aircraft operation, the smaller the plane, the more expensive it is on a per-seat basis. The cost of the pilot, crew — everything remains the same," added the executive.

While Zoom Air is based out of Delhi and has a fleet of five aircraft, Air Deccan operates out of Mumbai. Air Odisha is based in Bhubaneshwar.  TruJet operates out of Hyderabad.

Most of these airlines had bagged numerous routes, with Air Deccan and Air Odisha getting nearly 90 routes between them in the first phase of the scheme. But with these airlines now struggling to operate even a single flight, the future of UDAN is in question.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Nov 29, 2018 05:24 pm

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