When the Ude Desh ka Aam Nagrik (Udan) scheme was launched in 2016, it aimed to widen access to air travel by connecting smaller towns through subsidised routes. Nearly a decade later, the government has unveiled Modified Udan with an outlay of Rs 28,840 crore, extending viability gap funding (VGF) and targeting 100 new airports and 200 helipads over the next decade.
The expanded allocation marks a shift in approach. Unlike the first phase, which focused largely on route-based subsidies and fare caps, the modified scheme allocates 42% towards airport development, 35% to VGF, and introduces dedicated support for airport operations and maintenance, helipads and indigenous aircraft acquisition, according to Crisil Intelligence. The redesign signals a move from a connectivity scheme to a broader aviation infrastructure programme.
Udan drives airport growth across India
The first phase did deliver measurable expansion. The number of operational airports rose to 163 in FY26 from 77 in FY16, with Udan airports accounting for 58% of the total, up from 21% a decade ago, according to Crisil. Connectivity improved across the North-East, hill states and parts of eastern India, bringing several remote locations onto the aviation map.
However, this expansion has not translated into proportional traffic or route sustainability. Udan airports account for only 2–3% of domestic passenger traffic, with the share moderating to 2.3% in FY25 after peaking during the pandemic, as per Crisil data. Of 663 routes launched since 2017, 327 have already been discontinued, according to data presented in Parliament. A review by the Comptroller and Auditor General of India had earlier found that only 7–10% of routes remained viable once subsidies ended.
The gap between infrastructure creation and sustained operations is also visible at the airport level. Of 95 airports revived under the scheme, at least 15 are currently non-operational. While physical connectivity has expanded, operational continuity remains uneven.
Industry experts attribute this to weak demand anchors and route selection. “There is no scientific study conducted before selecting routes. Strong economic activity and a careful assessment of alternative transport modes are essential, because for short distances with good rail and road connectivity, regional flights often become redundant,” Mark D Martin, CEO, Martin Consulting, said.
At the same time, cost economics of regional aviation remain challenging. Smaller aircraft deployed on these routes have higher per-seat costs and limited tolerance for low load factors. There is also no binding obligation on airlines to continue services on unviable routes. “There should also be accountability for airlines to maintain operations for the full ten years of the scheme,” Martin added.
The experience of Udan 1.0 suggests that traffic growth alone does not ensure viability. While several regional airports have recorded strong post-pandemic growth — with Agra, Hindon and Tezpur reporting 7–10 times increase in traffic between FY20 and FY25, and others such as Jalgaon, Bhuj and Diu growing 3–5 times — this has come on a low base and remains dependent on capacity deployment and subsidies, according to Crisil.
Only a few airports such as Hindon and Kannur have crossed the one million annual passenger mark, largely due to their larger catchment areas and higher airline capacity, according to Crisil data. Most Udan airports continue to see limited flight frequency and low utilisation.
Modified Udan still faces viability concerns
Modified Udan attempts to address some of these constraints by funding airport operations, with assistance of up to Rs 3.06 crore per airport. However, industry participants say the allocation may be insufficient to sustain continuous operations. “Airport maintenance is a regular, ongoing activity that cannot be neglected. Continuous upkeep and support for other essential services are critical, and the current allocations may not fully cover these needs,” an airline executive said.
Participation trends also remain uneven. While airlines such as IndiGo, SpiceJet and Alliance Air have operated Udan routes, the absence of Air India, Air India Express and Akasa Air in recent rounds has limited competition and network depth.
Analysts say the redesigned scheme addresses infrastructure gaps but does not fully resolve demand-side and cost challenges. Without stronger alignment between regional economic activity, airline economics and route planning, airlines are likely to continue focusing on commercially viable sectors while exiting weaker routes once subsidies taper off.
The first phase of Udan expanded the aviation footprint and improved last-mile connectivity. The second phase increases financial commitment and widens scope. Whether it can convert infrastructure gains into sustained traffic and viable routes will determine if the scheme evolves into a self-sustaining regional aviation network or remains dependent on continued state support.