ICRA reports on stressed financial health of airline operators

The Ministry of Civil Aviation (MoCA) had launched the UDAN (Ude Desh Ka Aam Naagrik) scheme in 2016 as a Regional Connectivity Scheme (RCS) to enhance regional connectivity through fiscal support and infrastructure development. However, as on May 31, 2021, only 47% of total routes and 39% of airports (unserved and underserved) have been operationalised[1] under UDAN. The number of new RCS routes which started operations increased at a healthy pace and stood at 102 and 120 routes in FY2019 and FY2020 respectively, but have declined to 77 new routes in FY2021 due to the Covid-19 pandemic. During FY2018 – FY2021, a total of Rs. 3,350 crores have been incurred by the Central Government towards the UDAN scheme and the budgeted outlay for FY2022 is Rs. 1,130 crores.
Giving more insights, Shubham Jain, SVP & Group Head, Corporate Ratings, ICRA, says, “The slow progress of UDAN implementation is attributable to delayed upgradation of infrastructure and readiness of airports, due to lack of adequate right of way (including insufficient runway lengths) at some of the RCS airports and delays in securing necessary regulatory approvals. Low demand on few routes awarded, adverse and unpredictable weather conditions leads to inconsistent operations and have also resulted in closure of operations by some airlines in a few cases. The second wave of the pandemic, which started from mid of March 2021 would further impact the UDAN scheme going forward with aviation being one of the worst-hit infrastructure sectors.”