Monday, March 20, 2017

Centre makes a Rs 4,500-crore bet on regional air connectivity, but is it viable?

Even as the union cabinet plans to spend Rs 4,500 crore in developing 50 airports under the regional air connectivity scheme Udan (Ude Desh Ka Aam Naagrik), the reality is that regional airlines such as Air Costa and Air Pegasus have ceased operations—since February 2017 and July 2016, respectively—due to financial issues. This raises doubts on whether there is a viable regional air connectivity model that can be tapped.

Captain GR Gopinath, founder of the erstwhile low-cost airline Air Deccan, says only five percent of India’s 1.25 billion population travels by air. “Out of that, 90 percent travels between metros and 60 percent of the passenger traffic is between Delhi and Mumbai,” he tells Forbes India. Precisely the reason behind the Udan scheme—to stimulate growth in Tier 2 and 3 cities.

Under the scheme, the government plans to cap air fares at Rs 2,500 for an hour-long flight of about 500 kilometres as well as provide tax sops to airlines and give them concessions on electricity, water and other utilities at the upcoming regional airports. According to reports that quote government sources, at least 11 airlines, including Air India, SpiceJet and TruJet, have bid to operate regional flights under Udan. However, it is doubtful whether all would take off under Udan.
20/03/17 Anshul Dhamija/Forbes India