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Indian Government Receives 100+ Bids For Regional Routes

SimpleFlying 7/15/2022 Gaurav Joshi
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The Indian government is going ahead with its next phase of the regional connectivity scheme, inviting bids from interested players for new routes. The reaction looked promising, with more than 100 bids received from several small airlines and established carriers such as SpiceJet.

100+ bids received

Several airlines in India, both big and small, are vying for the next set of regional routes to be distributed by the Government of India. The UDAN 4.2 scheme aims to improve last mile connectivity through smaller aircraft, which include up to 19-20 seaters, fixed-wing aircraft, seaplanes, and helicopters.

Around 370 routes are being put in under this program, of which 100 are seaplane routes, 60 for helicopter routes, and the remaining are fixed-wing routes. A government official told BusinessLine,

“In total, there are approximately 100 proposals. For fixed-wing alone, the ministry has received 78 proposals … for Fixed-wing routes, we will soon start the negotiations. At least 15-20 of the total routes will be awarded to airports which have been built but no operations had begun because airlines weren’t able to operate.”

The government has received more than 100 bids for the routes. Photo: ATR Aircraft

Some of the players that have come forward include Pawan Hans, FlyBig, SpiceJet, Alliance Air, and AirTaxi. If reports are to be believed, SpiceJet is likely to have bid for routes to the Lakshadweep and Andaman islands in the Indian Ocean.

Challenges remain

Many of these routes are to tertiary airports, which do not have the infrastructure and other factors to attract major airlines. However, the lack of competition can sometimes incentivize airlines to fly to these locations.

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Things can be tricky for some of the smaller airlines, which are not backed by either the government or private players. But the ministry is ready to infuse capital if it gives the smaller aircraft segments a push.

UDAn routes are subsidized by the government. Photo: Getty Images

India’s aviation minister Jyotiraditya Scindia explained to BusinessLine how the government is promoting these routes, saying,

“The fact that the leasing cost is extremely high which cannot be appropriated for smaller aircraft, so we looked at a third model where we take on the leasing cost as part of these aircraft as part of the subsidy.”

What is the UDAN scheme?

The Government of India unveiled the UDAN scheme in October 2016, aiming to connect small towns in India through subsidized air routes and developing regional airports. Support from the government comes at both the center and state levels.

Support from state governments comes in the form of a reduced Value-added Tax (VAT) to 1% or less for ten years to airports developed under the scheme, providing land for airports and other utilities at subsidized rates.

Big players are increasingly flying to regional airports in India. Photo: ATR

To boost regional flights, the scheme also calls for air caps from Rs 1,420 to Rs 3,500 ($17-43) for fixed-wing aircraft (based on distance and duration) for flights to unserved and underserved routes.

When implemented correctly, several small town airports in India have shown great promise, attracting even big players. IndiGo now has a dedicated fleet of ATRs for several such flights, and SpiceJet also has a significant hold on these routes.

What do you think about the Indian government’s UDAN scheme? Please let us know in the comment section below.

Source: BusinessLine

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