HEADLINES:
September 23 2018
Centre moots overseas UDAN
22 August 2018

Scheme will enable States to choose routes, provide subsidy to airlines

State governments will be able to encourage tourism on preferred international air routes by offering subsidy to domestic airlines for a period of three years. The Ministry of Civil Aviation has prepared a draft scheme document for “UDAN International” and invited comments from stakeholders till September 4.

The scheme is designed for State governments that are keen to promote air connectivity on international routes identified by them and for which they are willing to provide subsidy to airlines.

As per the draft, a State will identify international routes for which the Airports Authority of India (AAI) will determine a subsidy amount per seat and invite bids from domestic carriers. This will be followed by airlines submitting their proposals, which will include the routes they wish to connect as well as the subsidy needed by them.

The airlines will bid on the percentage of flight capacity for which they require financial assistance, provided that the figure doesn’t exceed 60% of the flight capacity. The entity that quotes the lowest amount will be awarded subsidy for a particular route.

However, the government will grant financial aid only for the actual number of passenger seats that are unsold, even if the airline had sought subsidy for a higher percentage of seating capacity at the time of bidding.

No cap on fares

An airline that is awarded a particular route will have exclusive rights to a subsidy on that route for a period of three years. The key difference between this scheme and the regional connectivity scheme (RCS) for domestic routes is that there is no capping of fares. Under RCS, fares are capped at ₹2,500 for one hour of flight on a fixed wing aircraft in order to make air travel affordable, which was why the scheme was called Ude Desh Ka Aam Nagrik (UDAN).

“When we look at international connectivity, we are looking at people with disposable incomes looking to undertake air travel for the purpose of tourism,” a source said, explaining the rationale behind not capping fares. The financial assistance to an airline will be offered from the International Air Connectivity Fund (IACF), which will be created through the contributions made by the State government.

The scheme is meant for domestic airlines. Only fixed wing aircraft with more than 70 seats can be operated under the scheme and airlines will have to conduct a minimum of three and a maximum of seven departures on a given route on three days in a week.

The Centre has allowed airlines to enter into a code-sharing arrangement with international and domestic airlines for UDAN international. The AAI may also offer additional discounts at its own discretion such as landing, parking and housing charges at airports owned by it.

So far, Assam has proposed to offer ₹100 crore per year for flights to Kathmandu, Dhaka, Singapore, Bangkok, Kuala Lumpur and Yangon. Andhra Pradesh has also expressed its keenness to the Civil Aviation Ministry to encourage tourism.

At present, the low-cost carrier AirAsia operates daily flights to Kuala Lumpur from Bhubaneshwar with a subsidy from the State government on a per-flight basis.

 

 

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