UDAN: Govt moots many changes in 2nd round even as most flights still on ground in first round

The second round of bidding comes even as only two airlines and a handful of flights have taken off under the promised connectivity under UDAN in round one

Sindhu Bhattacharya May 24, 2017 16:21:37 IST
UDAN: Govt moots many changes in 2nd round even as most flights still on ground in first round

New Delhi: India has close to 400 ghost airports, where not a single flights lands or takes off. Under UDAN, the ambitious regional connectivity scheme, the government claims to have sealed deals to operationalise 55 airports where there were either no landings till now or where not even seven flights landed weekly. The first round of reverse bidding for UDAN (Ude Desh ka Aam Nagrik) saw five airlines winning bids for 108 previously unviable routes (where at least one airport is either unserved or underserved) and thereby promising to add 13 lakh concessional seats across the Indian hinterland. This scheme envisages a viability gap funding (VGF) and a raft of concessions to airlines who agree to fly to ghost airports.

But without waiting for most of these dreams to become reality, the government has moved ahead with the second round of bidding under the UDAN scheme. This round should be completed by July, civil aviation secretary R N Choubey said today. But the interesting part is this: many of the assumptions which were made for the first round are up for discussion and may change. Also, except for two airlines and a handful of flights, all the promised connectivity under UDAN round one is yet to be seen.
Air Odisha and Air Deccan were awarded the maximum number of routes under the first round of reverse bidding in UDAN but neither has launched operations yet.

UDAN Govt moots many changes in 2nd round even as most flights still on ground in first round


And as this piece in Hindu Business Line points out, these two carriers have also not firmed up which aircraft they plan to operate. Then, SpiceJet, which was also awarded routes, has also not revealed its plans till date. The only two airlines that have taken off are Alliance Air (which is a subsidiary of Air India) and TrueJet. Given that airlines are required to start operations within six months of being awarded the bids, Air Odisha and Air Deccan have only till September to start operations under UDAN or risk losing their flying permissions.

Meanwhile, announcing the commencement of the second round of reverse bidding under UDAN, Choubey said many assumptions on which the first round was based, are now being re-examined. And that the government has sought stakeholder comments before amending conditions for the fresh bidding round.

1) The most important rethink is on the condition that at least one airport under UDAN must be either a ghost airport or an unserved airport and there should have been no active flights on such an airport in the last two schedules. Choubey gave the example of Lucknow-Varanasai where both the airports are operational but where airlines may be interested in mounting UDAN flights with concessions. In such cases, there may be no viability gap funding on offer, only concessions at airports.

2) Then, the current stipulation of minimum stage length of 150 km (the distance between two UDAN airports) may also be lowered in case of hilly terrain, after specific request from some state governments.

3) As of now, once an airline has won an UDAN route, it has exclusive rights over this route for three years. Under the new proposal, the government wants to know if this should be reduced to one year – so that competitors also get a chance to fly on a route. The VGF will continue for the original bidder for three years. Choubey gave the example of the Shirdi airport, which may interest more than one airline.

4) Also, the government wants to tweak the number of seats which are mandatorily to be offered at Rs 2,500 per hour of flying under UDAN. Instead of the caveat on the number of seats, perhaps the number of flights per week is a better criterion, since this allows airlines flexibility over which aircraft type to use. As of now, at least 9 seats on an aircraft must be under the specified fare cap.

5) Revised financial proposal for helicopters and whether some non-UDAN airports be also allowed under the scheme are also being discussed in the second round of bidding

The second round bidding will commence next month and bids will be awarded by July. Will the second round be as successful or better than the first round? Choubey said there is no way of knowing how much VGF is needed for the second round and how many more ghost airports will get connected, since all the airports which are currently lying unused are up for grabs. On whether the airlines which have won bids in the first round will be at a disadvantage after changes which are proposed in the fresh round are implemented, he said changes will be prospective and not impact existing operations.

It is interesting to see that apart from SpiceJet, which has won some bids in the first round, another big daddy of domestic aviation may also join the UDAN bandwagon. IndiGo, India’s largest airline by passengers, has just announced its decision to acquire 50 ATR-72 aircraft. Though the airline has been saying all along that one of the reasons for its healthy balance sheet is sticking to a single aircraft type, the reversal of this long-held belief could mean UDAN gets an unexpected boost some months down the line.

In the first round of UDAN, 24 airports in the western, 17 in northern, 11 in southern, 12 in eastern and 6 in north-eastern regions are proposed to be connected across 22 states and two Union Territories. Of the 27 proposals cleared, 16 are for single routes (connecting two cities) and 11 are for networks (connecting three or more cities). Six proposals have been bid with zero viability gap funding (VGF), reflecting the fact that there is potential latent demand.

So in the first phase, Delhi should get connected to Bikaner, Indore, Jaisalmer, Varanasi, Gorakhpur, Pantnagar, Pathankot, Kullu, Jalandhar and Shimla besides other tierII and tierIII towns. Mumbai to Jalgaon, Kandla, Porbandar, Sholapur, Jamnagar. Chennai to Puducherry, Neyveli, Salem, Kadapa, Vijaywada. Bhubaneshwar to Jharsaguda, Bilaspur, Jagdadlpur, Cooch Behar. Shillong to Dimapur, Sichar, Imphal, Agartala. And Kolkata to Jamshedpur, Aizawl and Rourkela.

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