• SpiceJet shuns UDAN subsidies

    No-frills carrier SpiceJet will fly without subsidies to unserved airports from three of India’s biggest urban centers, helping achieve the federal goal of boosting regional aviation connectivity in a country that relies on crowded railroads and rickety roads to link its cities to the hinterland.

    Among eleven airlines applying for regional flights under the plan patronized by Prime Minister Narendra Modi, SpiceJet has offered to operate regional flights out of Mumbai, Kolkata and Delhi without cash support from the government, according to two government officials.

    The program, Ude Desh ka Aam Nagrik or UDAN, aims to enhance grassroots adoption of aviation as a transportation medium and offers carriers cash subsidies for selling up to 40 seats at Rs 2,500 for each hour of flight.

    “SpiceJet would earmark 20 out of 70 seats as regional seats on flights operated to these destinations. Of the 20 seats, 10 seats would be sold at Rs 2,500/ hour of flight. Barring these ten, the rest would be sold at market rates,” said an aviation ministry official, who did not want to be identified. An email sent to SpiceJet did not elicit any response until the report went to print.

    All other airlines have opted for subsidies under the plan that offers the carrier cash.

    The regional connectivity program will also witness the return to commercial aviation by G R Gopinath, considered the father of low-cost flying in the country. Deccan Aviation, owned by Gopinath, has applied for flights in the Northeastern states.

    “They plan to make Shillong their base and connect destinations in Northeast with 14-seater aircraft,” said one of the officials quoted above.

    About eleven airlines, including AI, have bid to connect 43 regional airports in the country in the first phase, said an Airports Authority of India (AAI) official. Apart from Alliance Air, SpiceJet, and Deccan Aviation, other carriers that have applied include India Fly Safe (Sajjan Jindal Group), TurboMegha (Trujet Brand), Air Odisha (flights within Odisha), Airlines Allied Services Ltd (flights within Rajasthan) and Bharat Aviation (flights within Maharashtra).

    “This is in the first phase. But we will keep adding flights in the future as we aim to provide connectivity to all 600 airports across the country,” said the official, referring to the Regional Connectivity Scheme (RCS).

    Analysts said many regional airports may make sense for airlines with a pan India network as they may pick passengers from these airports to feed their network.

    “We believe that many RCS routes have significant profit potential especially for 48 and 78 seater aircraft. This is further enhanced when a pan India carrier links it up to its national and international grid. Putting up a bare minimum seats under RCS and seeking zero cash subsidy is a smart strategic move. It enhances the pan-India operator’s chances of winning the bid since smaller players may find it difficult to offer higher number of RCS seats at zero cash subsidy. The operator would enjoy all the fiscal and monetary benefits of RCS, no airport charges and a three year exclusive operating rights on that route,” said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.

    “It helps the govt too. The subsidy saved can be used to revive other non-operational regional airports. By showcasing success in the very first round of bidding, more airlines may get interested in the second round of RCS bids which will happen in a few months from now. This will give a fillip to investments, tourism and job creation in the interiors of India, which is the broader objective of RCS,” he added.

    The government, which expects the first regional flight to start in a month, expects the subsidy outgo during the first year of regional operations to be about Rs 350 crore. Linus Ullmark Womens Jersey

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