[Representational image]Reuters File Photo

Four airlines have won bids to start plying under the UDAN scheme in which low-cost tickets will be sold with fare capped at Rs 2,500 for one-hour flights. The airlines are Deccan Charter, Air Odisha, Alliance Air, Turbo Megha Airways and SpiceJet.

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What are UDAN flights?

UDAN, which stands for Ude Desh ka Aam Nagrik [translation: The country's common man takes flights] has been touted as a scheme that offers budget regional flights. This regional connectivity scheme (RCS) was unveiled by Prime Minister Narendra Modi himself in October last year, and is expected to be funded by the levying of a fee on aircraft that land at bigger airports. 

However, there is a silver lining for carriers here. They may have had to run at a loss if they had been forced to ply their trade at rates set by the Central government. But at the time of the launch of UDAN, the government had explained that the RCS had been tweaked in such a way that it would not lead to losses for carriers. 

Balance between affordability and profitability

In order to keep the UDAN scheme affordable for the masses and profitable for carriers, the government had announced three steps. The first was that any airline that won a bid in a specific circle would get exclusive rights to routes they had won for three years. Second, an UDAN flight from a smaller city to a metropolitan city would not have to pay any levy at the bigger airport. 

And finally, the aviation ministry had eased the rules so that entrepreneurs could lease planes in small numbers in order to run small, regional airlines. The leasing had not been allowed in the initial rules. 

As for affordability, while the fare cap has been kept at Rs 2,500 per hour of flight time, it will be revised as per the existing rate of inflation, with fares initially beginning from around Rs 1,400 and going up to around Rs 3,500.