The Indian Government has decided to provide higher a subsidy to airlines that operate flights between two regional airports under the Regional Connectivity Scheme.
The subsidy amount provided to airlines that operate between two unserved or underserved airports will be 10% higher than sum offered to airlines that connect only one regional airport.
The subsidy will be provided under the UDAN (Ude Desh ka Aam naagrik) scheme for three-years so that the route would become viable. It will be provided to airlines to fund their losses to enable them to offer airfares at Rs. 2,500 for an hour’s flight on half the seats under the Regional Connectivity Scheme.
The subsidy amount for airlines connecting to one regional airport will vary between Rs. 2,350 and Rs. 5,100 per seat depending upon distance covered between two destinations. Besides, the Indian Government has also reduced the bank guarantee to be provided by airlines to fly on each regional route. Now, Airlines will be required to submit a bank guarantee equivalent to 5% of the total subsidy amount.
The subsidies in aviation is pertinent to strengthen the aviation value chains, hope the move will reinforce the domestic connectivity.