Regional connectivity flight set to take wings

The Airports Authority of India (AAI),the implementing agency, will issue Letter of Awards for 27 proposals received under RCS-UDAN. Key features of the proposals awarded by AAI include

- Airports to be connected: 27 currently served airports, 12 currently underserved airports and 31 currently unserved airports (for a total of 70 airports) will be connected through these 27 proposals.

- Geographical spread: There is a good geographical spread in the proposals: 24 airports in the western, 17 in north, 11 in south, 12 in east and 6 in north-eastern regions are proposed to be connected. 22 states and 2 Union Territories will be connected through these 27 proposals.

- Routes and network: 16 awarded proposals 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.

- VGF Outflow: 27 proposals will required a VGF of around Rs. 200 crores and will provide around 6.5 lakh RCS seats.

UDAN's rationale

Ministry of Civil Aviation (MoCA or the Ministry) is committed to providing air connectivity to currently underserved and unserved airports. As more citizens join the aviation network, the national aviation market, already one of the fastest growing markets in the world, is expected to welcome many first-to-fly customers. To make air travel accessible to citizens in the regionally important cities, the Ministry launched 'UdeDeshkaAamNaagrik' (UDAN) regional connectivity scheme in October 2016.

Extensive consultations with stakeholders

UDAN was developed through extensive consideration of various issues and consultations withstakeholders. This is a first-of-its-kind scheme globally to stimulate regional connectivity througha market-based mechanism. The diversity of these proposals indicates that a variety of businessmodels may thrive in India's aviation sector.

Key UDAN features

The airfare for a one hour journey of appx. 500 km on a fixed wing aircraft or for a 30 minutejourney on a helicopter would be capped at Rs. 2,500, with proportionate pricing for routes ofdifferent stage lengths / flight duration. The selected airline operator would have to provide 50%of the flight capacity (subject to a minimum of 9 and a maximum of 40) as RCS Seats for operationsthrough fixed wing aircraft and a minimum of 5 and a maximum of 13 RCS Seats on the RCS Flights for operations through helicopters and would be given a three years exclusivity ofoperations.To reduce the cost of operations of airlines on flying such routes, a financial stimulus in the form of concessions from Central and State government, airport operators and the Viability Gap Funding to the interested airlines would be provided to kick-off operations from such airports, so that the passenger fares are kept affordable.

Bidding process

UDAN is a key component of the National Civil Aviation Policy (NCAP) which was released bythe Ministry on 15th June 2016. AAI followed a transparent bidding process by inviting interested bidders/airline operators to submit theirInitial Proposals under the provisions of Regional Connectivity Scheme and subsequently inviting counter proposals against such Initial Proposals. This was followed by the opening and scrutiny of technical bids, and subsequentlyfinancial bids, for Initial Proposals as well as Counter Proposals. The routes / networks are awarded to bidders who submitted valid proposals and quoted the lowest viability gap funding(VGF) from the government for such routes / networks.

Effective implementation

To ensure effective implementation of the Scheme and quick commencement of operations, MoCA and AAI, in parallel, are also undertaking a number of activities such as coordinating with various regulatory agencies like Directorate General of Civil Aviation (DGCA), Bureau of Civil Aviation Security ofIndia (BCAS) and the State Governments for various facilitating actions.