The Ambitious Dream of UDAN
Launched in 2016, the Ude Desh ka Aam Nagrik (UDAN) scheme was a landmark initiative designed to make air travel affordable and accessible to the masses. The goal was to connect India’s vast number of unserved and underserved airports, particularly in Tier-2
and Tier-3 cities, boosting local economies and national integration. The model was built on Viability Gap Funding (VGF), a subsidy provided by central and state governments to airlines for operating on commercially unviable routes. This support, combined with capped airfares for a portion of seats, was intended to give airlines a three-year window to develop a route until it could sustain itself. In its initial years, the scheme saw a flurry of activity, with hundreds of new routes connecting dozens of previously isolated towns.
A Reality Check on the Tarmac
Despite the initial momentum, the story has taken a turbulent turn. According to recent data, out of 669 routes made operational since the scheme began, only 336 remain active. This means nearly 50% of the routes that were launched with much fanfare are no longer in service. A 2023 CAG report noted that of the routes awarded up to the third phase of UDAN, only 7% were able to sustain operations beyond the three-year subsidy period. Several smaller airlines that were key players in the regional scheme have shut down or scaled back operations due to financial distress. This high rate of failure comes after the government has spent thousands of crores on both VGF subsidies and developing infrastructure at remote airports.
Why Did So Many Routes Fail?
The reasons for the widespread discontinuations are multifaceted. The primary challenge has been the lack of sustainable passenger demand on many routes. Once the three-year subsidy period ended, airlines found that many routes were simply not commercially viable without government support. Low passenger load factors made operations unprofitable. This was compounded by high operating costs, including volatile Aviation Turbine Fuel (ATF) prices. Furthermore, significant hurdles remained in infrastructure. Many airstrips selected for the scheme faced long delays in becoming fully operational due to regulatory issues and high compliance costs. Regional airlines also struggled with a shortage of small aircraft, poorly maintained fleets, and difficulties in getting prime landing and parking slots at major metro airports, which are critical for creating a viable network.
Changing the Conversation: From Supply to Sustainability
The high failure rate has forced a critical shift in the planning conversation. The initial approach was largely supply-driven: build airports and launch routes with the hope that demand would follow. The new conversation is pivoting towards a more demand-aware and sustainable model. Experts and airline executives now emphasize the need for a more rigorous assessment of a route's commercial potential before it is launched. The focus is shifting from simply connecting dots on a map to building a robust and economically sound network. This includes considering competition from other modes of transport, such as the expanding network of Vande Bharat trains, which can be a cheaper alternative for short distances. The consensus is that future planning must prioritize economic viability over rapid, and often unsustainable, expansion.
Enter 'Viksit UDAN': A Reboot with New Rules
In response to these challenges, the government recently launched a revamped scheme, dubbed 'Viksit UDAN', with a significantly larger outlay of nearly ₹29,000 crore for the next decade. This new phase acknowledges the shortcomings of the original model. Key changes include extending the Viability Gap Funding support for airlines from three years to five, providing a longer runway to establish a route. There is also a greater focus on developing infrastructure, with plans to develop 100 existing airstrips into full-fledged airports and build 200 modern helipads to improve last-mile connectivity in remote and hilly areas. By providing longer financial support and addressing infrastructure gaps more directly, the government hopes to create a more resilient foundation for regional aviation to succeed where it previously faltered.
