Flight of the common man

From the current figure of 10 crore, UDAN aims to increase air passenger strength to 30 crore by 2022

What is UDAN?

A regional connectivity scheme, UDAN (Ude Desh ka Aam Naagrik/Let The Common Man Fly) is aimed at reviving dormant airstrips in the country and helping passengers in Tier-II and Tier-III cities fly by air. At the heart of UDAN is the government’s decision to cap airfares at affordable levels — ₹2,500 for an hour’s flight — aimed at attracting people from the hinterland.

Recently, five airlines — Air India, SpiceJet, Turbo Megha, Air Odisha and Air Deccan — won bids for 128 routes connecting 70 cities under the scheme.

Why is it important?

 

Almost 10 crore domestic air tickets were sold in 2016, showing a robust growth of 23% compared to 2015. The government expects the number of tickets sold to go up to 30 crore by 2022 with the help of UDAN. Minister of State for Civil Aviation Jayant Sinha said recently that under the first phase of the scheme, 12 underserved airports and 50 unserved airports will be covered.

How does the scheme work?

 

Airfare for a one-hour journey (covering approximately 500 km) is to be capped at ₹2,500 per seat. The airlines will be provided subsidy for three years in the range of ₹2,470-₹5,100 depending on the type of aircraft and distance covered.

To ensure that they are able to retain business, airlines will get exclusive rights to fly on a regional route for the first three years. Routes are awarded through a reverse bidding auction, so the airline that asks for the least subsidy support gets the exclusive right to fly.

Who is funding the subsidy?

Airlines’ losses will be funded by passengers flying on national routes, and State governments. The Centre has set up a regional connectivity fund, to be financed by levying a cess of ₹7,500-₹8,500 on each departing domestic flight on major national routes. So, each passenger flying on a domestic route — apart from those in the Northeast — will be charged an additional amount of ₹50 (approximately).

What about the airfares?

Airfares may range from ₹1,420 to ₹3,500 for flights covering a distance of 150 to 800 km. Airlines will provide lower airfare on 50% of the seats — for a maximum of 40 seats on a fixed-wing aircraft — and will be free to charge market price for the rest of them.