Budget 2019 | UDAN scheme: Intent good but viability remains a concern

The scheme aimed at connecting major cities with tier-II and tier-III cities at a price of Rs 2,500 per one-hour flight.

Consequently, air connectivity soared with 128 new routes being awarded during the first round of bidding, bringing aviation options to 43 regional airports of which 31 were unserved.

Five airlines won the rights to fly on these routes. In the second round of bidding, 15 airlines, including those with helicopter operations, were awarded 325 routes. These included cities like Shimla, Agra, Pune, Gwalior, Kadapa, Ludhiana, Pathankot, Vidyanagar, Jamshedpur, Rourkela, Shillong, Bhavnagar, Kullu, Porbandar, Ambikapur, Bilaspur, and Mysore.

Within two years after the launch, Centre has added over 30 airports and identified close to 31 sites for helipads in all the cities.

The scheme has also enabled the government to connect various pilgrimages cities like Nanded, Shirdi and Varanasi with metro cities. Nanded has seen connectivity increase, with an Amritsar flight which serves the Sikh pilgrims moving between the cities. Shirdi saw the upgrade of its existing airport and new flights were launched to several large cities, serving the pilgrimage destination. Adampur and Pathankot in Punjab and Nashik in Maharashtra have also benefited.

The regional connectivity scheme (RCS) is now going international with the government now planning to connect smaller cities with near-by international cities.

In December 2018, the government invited bids for its international routes including from Guwahati to Kathmandu/Kuala Lumpur Dhaka/Bangkok/Singapore/Yangon etc.

With this, the government aims to make Guwahati as the gateway to southeast Asia.

However, the scheme has faced fair-share of turbulent times. According to data by DGCA, three out of four airlines flying under the RCS are on the verge of shutting down.

While Zoom Air failed to fly even a single passenger since July, Air Deccan and Air Odisha managed 3,000 and 1,000 passengers, respectively, between July and Oct.

In November, 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.

Smaller airlines have been unable to operate over these routes due to low profitability. Coupled with that, these airlines have faced high fuel prices and stringent competition from established players like SpiceJet.

While SpiceJet operates 25 flights under RCS on a daily basis, IndiGo added its sixted route under the scheme last year.

The government too faced criticism for the financing model it had adopted. A viability gap funding structure, where a surcharge was levied on tickets on existing routes, which would be used to refund part of the ticket costs for the airlines flying on UDAN route, was adopted which didn’t go down well with various quarters.

With airlines pulling out of the scheme and cost of operation for others going north, it is tough to say how far the scheme would go.