Thursday, May 04, 2017

UDAN: First common man's flight to cost govt Rs 6.6 crore annually

The government will have to foot an annual bill of Rs 6.6 crore just for the first sector under Udan (Ude Desh ka Aam Naagrik) regional connectivity scheme on the Delhi-Shimla route that took off last week.

This is apart from the exemption from airport charges, fuel and other taxes.

Alliance Air, which has been allotted the route, has chosen ATR42 type aircraft due to regulatory and safety restrictions of flying to Shimla.

Out of the total 48 seats, only 35 passengers could be carried while travelling from Delhi to Simla and just 15 passengers on return flight due to payload restrictions. The flights are scheduled five times a week.

As per the agreement, the Central government is paying Rs 3,440 for 24 seats (50% of capacity) covered under viability gap funding or Rs 82,560 per flight on Delhi-Shimla route. The rest 11 seats can be sold at an average Rs 5,000 per seat, according to an internal calculation done by Alliance Air. On the return Shimla-Delhi flight, the central government subsidy is Rs 51,500 (3,440 x 15 seats) while none of the seats can be sold at the market rate.

A back-of-the-envelope calculation shows that there is a loss of Rs 141,950 per flight (projected cost minus revenue (Rs 406,000-254,040). This loss has to be borne by the Himachal government. So the Central and state government will collectively be paying Rs 6.6 crore per year to the airline in order to keep the scheme floating.

On the projected cost by the airline and the compensation paid by the government, Jitendra Bhargava, former Air India executive director and author of the book 'The Descent of Air India', said the seats under the sale category (non-RCS) were reportedly sold at Rs 18,000-20,000. "So if the those who booked well in advance irrespective of their economic background will get to fly at Rs 2,000 while those who booked late, irrespective of their background will be forced to shell out Rs 20,000 odd fares," he said. "So, in case if a 'common man wearing chappal' wants to fly in an emergency then he will still be shelling exorbitant fares. Then how will it spur the growth in aviation? It will be like 'first-come-first-serve basis?" he asked.

Bhargava said instead the low fares should be based on certain parameters, the way it is like in income tax and a lot of fine-tuning needs to be done to make it better.
04/05/17 Shahkar Abidi/DNA