July 29, 2021

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Only half of UDAN routes operational, Covid-19 to hit scheme further: ICRA

Only 47 per cent of the awarded routes have been operationalised under the government’s regional air connectivity scheme and the second wave of Covid-19 pandemic will impact the scheme further, rating agency said in its report on Tuesday.

The civil aviation ministry launched the UDAN ( Ude Desh Ka Aam Nagrik) scheme in 2016 to connect unserved and underserved airports. The first flight under the scheme took off in April 2017.

The number of new RCS routes which started operations increased at a healthy pace and stood at 102 and 120 routes in FY19 and FY20, respectively, but have declined to 77 in FY21 due to the (Covid-19) pandemic, said. Only 39 per cent of unserved and underserved airports have been operationalised, it said.

The scheme is funded through a Rs 50 levy on flight tickets on major routes. The levy contributes to 80 per cent of viability gap funding provided to the airlines and the balance 20 per cent is provided by state governments.

Shubham Jain, SVP & group head, Corporate Ratings, ICRA, said, “The slow progress of UDAN implementation is attributable to delayed upgradation of infrastructure and readiness of airports, due to lack of adequate right of way (including insufficient runway lengths) at some of the RCS airports and delays in securing necessary regulatory approvals. Low demand on few routes awarded, adverse and unpredictable weather conditions leads to inconsistent operations and have also resulted in closure of operations by some airlines in a few cases. The second wave of the pandemic, which started from mid of March 2021 would further impact the UDAN scheme going forward with aviation being one of the worst-hit infrastructure sectors.”

The civil aviation ministry has set a target of operationalising as many as 100 unserved and underserved airports and starting at least 1,000 RCS routes by 2024 (of this, 52 unserved and underserved airports and 357 routes are operationalised as on May 31, 2021). To improvise the RCS network and achieve its target of developing 100 RCS airports by 2024, the Airport Authority of India decided to bid out 392 routes under UDAN 4.1

“The award and implementation of UDAN 4.1 may get delayed significantly due to the second wave of the pandemic in India and its effect on the Indian aviation industry. expects the target of operationalising 100 airports under UDAN by 2026, with a delay of two years from revised schedule (of 2024 from earlier 2019). The weak credit profile of domestic airlines is expected to have an impact on the existing routes under UDAN scheme, particularly for smaller airlines given the stretched liquidity position, low utilisation in some of the routes and will also impact future bidding of routes under the scheme,” Jain added.

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