Major airlines come on board in Udan 2; Uttarakhand biggest beneficiary

Major scheduled airlines stole the show in the second round of bidding for the regional connectivity scheme, winning 41 out of 67 bids.

Fifteen operators will operate on 502 routes and connect 70 airports and heliports, most of which are not well connected by airlines now. Operators include IndiGo, SpiceJet, Jet Airways, state-owned Alliance Air and helicopter company Pawan Hans.  Alliance Air won four bids and Pawan Hans 11.

“The biggest outcome of this round of bidding is that UDAN is slowly moving towards becoming a scheme that is not dependent on subsidy and one that attracts airlines without zero viability gap funding,” said Minister of State for Civil Aviation Jayant Sinha.

Among the states, Uttarakhand was the biggest beneficiary with 15 of its remote airports being connected. North-eastern states like Arunachal Pradesh and Assam will have eight and five of their unserved airports connected.

Civil Aviation Secretary Rajiv Nayan Choubey said the government had prioritised connectivity in remote areas, especially in the north-eastern region and hill states. “As most of these places lack airfields, we made the scheme attractive for helicopters. The result is that we have many airports from remote regions being connected,” he said. Kargil, famous for the India-Pakistan war in 1999, will be connected with Srinagar for the first time. Other remote places like Pasighat, Tezu (Arunachal Pradesh), Jiribam, Moreh (Manipur), Pakyong (Sikkim) will also be connected.

SpiceJet said it saw business potential in the scheme. “We see tremendous potential in the routes that we have been awarded today and look forward to beginning operations very soon,” said Ajay Singh, chairman and managing director, SpiceJet.

The Udan scheme offers 50 per cent subsidy to airlines on these routes, route monopoly for three years and a host of other concessions at landing airports. It expects the airlines to cap fares at Rs 2,500 a seat an hour on regional flights. The government imposes a levy of Rs 5,000 per flight on key metro routes, which translates into around Rs 50 per passenger.

The increase in participation by airlines put the civil aviation ministry in a fix as it faces a viability gap funding shortage. Choubey said there would be no increase in levy. “The finance ministry has permitted the Airports Authority of India to set aside Rs 2.5 billion from the dividend it pays to the government, it will be sufficient,” he said. The total requirement for the second round of UDAN was Rs 6.2 billion.