Saturday, October 22, 2016

Rs. 2,500 For One-Hour Flights: Government's New UDAN Aviation Scheme

To boost air travel between smaller cities, fares for one-hour flights will be capped at Rs. 2,500 in the new UDAN scheme that is likely to launch in January.

The UDAN scheme (an acronym for Ude Desh Ka Aam Naagrik or "helping the average Indian fly") has been devised to increase connectivity.

Here's how the scheme works. The government has identified airports that are either unused or under-utilised, even though they have infrastructure like a terminal building and air traffic control towers. It has also committed to spending Rs. 4,000 crore ($598 million) to reopen 50 disused airports within four years.

The UDAN-vetted airports include Bikaner and Jaisalmer in Rajasthan, Bhavnagar and Jamnagar in Gujarat, Bhatinda and Pathankot in Punjab, Allahabad in Uttar Pradesh, and Lakhimpur and Jorhat in Assam.

Airlines will be asked to bid for routes that connect small towns to cities. Fares for one-hour flights will be capped at Rs. 2,500 and taxes will be kept very low. If the airline's cost of a seat exceeds this amount, the government will pay the difference - by collecting more from airlines operating on profitable routes. In technical terms, this is Viability Gap Funding. So far, two options have been discussed: either the government charges a 2 per cent cess from passengers flying on profitable routes, or it asks airlines to pay Rs. 8,000 every time they land at an airport in a major city or metro.
21/10/16 Sandeep Phukan/NDTV

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