Tuesday, January 08, 2019

Financial concerns keep airlines from competing hard for UDAN routes

New Delhi: The financial headwinds in the airline industry have caused turbulence in the Centre’s flagship regional connectivity scheme UDAN, in which the third version of the bidding saw interest for only one network with zero viability gap funding (VGF) sought from the government. Compared to this, in UDAN 2.0, there were bids for 48 routes, from India’s two largest budget carriers IndiGo and SpiceJet, with nil funding sought to operate on the routes. This, a senior civil aviation ministry official pointed out, indicated a slack in competitiveness from the airlines for whom cash flow has become a concern.
Notably, while there were 111 bids from 15 airlines for the third version of UDAN, there were 107 unique bids, indicating lack of competition on most routes.

“Airlines are not doing very well and there is a lot of turbulence in the industry. The airlines only want to take up comfortable routes now, don’t want to venture into various other routes and don’t want to bid zero (VGF). Earlier, the feeling was very buoyant and we saw competition among major players including IndiGo and SpiceJet who bid with zero VGF because they thought that they will manage with only exclusivity and some tax concessions. Now, cash flow has become very important (for airlines). Everyone is saying that if cash flow is not available from (a particular flight), it is not viable,” the official said.
08/01/19 Pranav Mukul/Indian Express