Saturday, October 22, 2016

UDAN explained: Will fare cap, subsidy woo 'everyone in hawai chappal' to fly?

Regional airlines, carriers which connect capital cities of states with smaller cities within a region, have never really flourished in India. The most recent example of how these airlines are floundering is Air Pegasus. India's safety regulator DGCA has already de-registered all the aircraft of the airline after financial troubles forced it to suspend flights indefinitely.
Some other regional airlines also seem to be struggling to continue operations. In this backdrop, the launch of UDAN, a regional air connectivity scheme, is a significant milestone in India's quest for bringing more aam aadmis on to the aviation map.
This ambitious scheme offers subsidy to airlines to mount flight to those of India's airports where either no scheduled flight operates today or where the frequency of flights is very limited. It also mandates that any airline availing of the government's subsidy should cap fares on identified routes to Rs 2,500 per hour of flying. For helicopters, this cap is Rs 5,000 for an hour of flying.
It is likely that air passengers departing from bigger metro airports are asked to fund this ambitious regional connectivity scheme through a small levy on tickets, which will be collected in a fund. States governments and airport operators are also required to chip in with incentives to make the scheme work.
An Air Pegasus, which under the current scheme of things, gets no subsidy to mount flights to less lucrative routes, may find it more viable to operate regional flights under UDAN.
21/10/16 Sindhu Bhattacharya/F.Business