The UDAN (Ude Desh ka Aam Naagrik) scheme, launched in 2016 to promote regional air connectivity and make air travel more affordable, has yet to reach its full potential, according to ICRA analysts. Despite efforts to connect underserved airports, the scheme faces increasing competition from other transport modes, particularly the semi-high-speed Vande Bharat Express trains, which offer more affordable fares for short-distance travel.
ICRA’s Kinjal Shah emphasized that the penetration of UDAN routes remains low, with air travel on these routes constituting only 1-4% of total air travel. Factors contributing to this include limited viability gap funding (VGF) for airlines, which is available only for three years, and challenges in sustaining passenger traffic after subsidies end. Additionally, the scheme’s capped airfare of Rs 2,500 for routes up to 500 km is often still more expensive than train fares, further pushing passengers toward rail options. The lack of awareness about UDAN’s benefits and limited route expansions each year have also hindered its growth. While the scheme offers government subsidies, including lower airport charges, airlines struggle with low passenger load factors (PLFs), leading to under-commercialized routes. This combination of factors, coupled with rail competition, has made it difficult for UDAN to achieve its intended impact on regional connectivity.
