E-Paper
‘2nd Covid-19 wave to delay 100 UDAN airports by 2 years’
The second wave of Covid-19 has not only led to operational losses for airlines and airports but also has impacted future developments in the aviation sector
The second wave of Covid-19 has not only led to operational losses for airlines and airports but also has impacted future developments in the aviation sector. According to ratings agency ICRA, the target of operationalising 100 airports under Ude Desh Ka Aam Naagrik (UDAN) will see a delay of two years from 2024 to 2026 due to the impact of the pandemic.
The Ministry of Civil Aviation (MoCA) had launched the UDAN scheme in 2016 as a regional connectivity scheme (RCS) to enhance regional connectivity. However, as per ICRA, only 47% of the total routes and 39% of airports (unserved and underserved) have been operationalised under UDAN as on May 31.
The number of new RCS routes which started operations increased at a healthy pace and stood at 102 in financial year (FY) 2019-20 and 120 routes in FY2020-21. They have, however, declined on 77 new routes in FY2021-22 due to the Covid-19 pandemic. ICRA said that during FY2018-19 to FY2021-22, ₹3,350 crore has been incurred by the Central government towards the UDAN scheme, while the budgeted outlay for FY21-2022 is only ₹1,130 crore.
Moreover, the slow progress of UDAN implementation is not only attributable to delayed upgradation of infrastructure at some of the RCS airports, delays in securing necessary regulatory approvals, low demand on few routes awarded but also to the adverse and unpredictable weather conditions that lead to inconsistent operations and also resulted in closure of operations by airlines in a few cases.
“The second wave of the pandemic, which started from mid-March will further impact the UDAN scheme going forward, with aviation being one of the worst-hit infrastructure sectors,” said Shubham Jain, senior vice-president and group head, corporate ratings, ICRA.
The civil aviation ministry set a target of operationalising 100 unserved and underserved airports and starting at least 1,000 RCS routes by 2024. Off this, 52 unserved and underserved airports and 357 routes are operationalised as on May 31. To improve RCS network and achieve its target by 2024, the Airports Authority of India (AAI) even launched UDAN 4.1 as a special bidding round under UDAN 4.0 in March to award 392 routes.
“The award and implementation of UDAN 4.1 may get delayed significantly due to the second wave of the pandemic in India and its effect on the Indian aviation industry. We expect the target of operationalising 100 airports under UDAN by 2026, with a delay of two years,” Jain said.
He added, “The weak credit profile of domestic airlines is expected to have an impact on the existing routes under UDAN scheme, particularly for smaller airlines given the stretched liquidity position, low utilisation in some of the routes and will also impact future bidding of routes under the scheme.”
Moreover, there has been a significant impact on financial health of airline operators due to Covid-19 pandemic.
According to ICRA’s estimates, Indian airlines will report a significant net loss of approximately 210 billion in FY 2021-22 and estimated net loss of ₹127 billion in FY2021-22, with the industry debt level increasing to around ₹500 billion in FY2021-22.
“While some airlines have sufficient liquidity and/or financial support from a strong parentage, which will help them sustain over the near term, there are other airlines, which are already in financial stress. Until the cash inflows improve, the airlines will require funding support to meet their expenses,” ICRA said.
