Budget's revamp plan set to send UDAN air connectivity scheme soaring

The government aims to expand the regional air connectivity scheme UDAN, or Ude Desh ka Aam Nagrik, to 120 airports in the next 10 years. The scheme, launched in October 2016, covers 88 airports in underserved areas and has operationalised 619 routes. This number is set to swell to 739 operational routes.

In her budget speech for FY26 on Saturday, finance minister Nirmala Sitharaman said, “Inspired by the success, a modified UDAN scheme will be launched to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years.”

At least 1.5 crore passengers have benefited from the UDAN scheme since it was launched more than 8 years ago to make air trave affordable and help develop regional airports for economic growth. The government’s enhanced vision for UDAN will boost air connectivity to helipads and smaller airports in hilly, aspirational, and North East region districts.

The budget allocation for the improvised UDAN scheme appears to fall short of the government's aspirations. In FY26, the allocation for UDAN scheme has been trimmed to ₹540 crore, far lower than the ₹800 crore in the revised estimate (RE) of FY25. The FY25 budget had initially earmarked ₹502 crore for the scheme.

For FY26, the Union civil aviation ministry has been allocated ₹2,400 crore, which is slightly higher than the allocation of ₹2,357.14 crore last year. 

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The aviation industry welcomed this announcement and feels this can change the aviation landscape in India. StarAir & FLY91 are the two major regional carriers that are active in the UDAN scheme.  

“The success of this expansion will depend on the seamless execution of new routes and a stronger focus on helping airlines manage operational costs more efficiently. Ensuring sustainability in regional connectivity is essential for long-term success.” said Captain Simran Singh Tiwana, CEO of StarAir. 

Manoj Chacko, MD and CEO of FLY91, called FM’s announcement as a transformative step that will accelerate air travel accessibility and drive growth across India. 

“Investment in developing world-class airports, enhancing regional connectivity, capacity upgrades, procedures, regulatory framework and streamlined visa facilities, will all play a critical role in bringing this vision of developing India into a global aviation hub to life,” said Pieter Elbers, CEO of IndiGo. 

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Ajay Singh, CMD of SpiceJet, believes that UDAN has been the most successful scheme of the government. He said, “The aviation landscape in India is set for a transformative shift. This initiative will not only make air travel more accessible to remote regions but will also drive economic growth and tourism, further empowering local economies.” 

Analysts that track the aviation industry are of the view that the renewed focus on regional connectivity should aid regional players. They also believe that this can act as a hub-and-spoke model benefiting the industry as a whole.  

“The continued expansion of UDAN scheme is likely to give a fillip to new and existing regional airline operators. This can also act as an important feeder to larger airlines for the profitable international routes. These are positive developments for the industry, which will give wings to the ambitions of a Viksit Bharat,” said Ashish Chhawchharia, partner - aviation industry, Grant Thornton Bharat. 

“With a vision to facilitate the transportation of 40 million passengers under the regional connectivity scheme, this move will establish dynamic hub-and-spoke air corridors, making air travel more affordable and accessible for regional India,” said Bhavana Yerrumreddy, partner - aviation, EY India.

On the other hand, while the consultants in the industry have welcomed the move, they believe that the industry needs more sops which can benefit the sector as a whole.  

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Sanjay Lazar, CEO, Avialaz Consultants, told Mint that regional aviation in India is the next big thing which will give a boost to the sector. The new airports under UDAN and the 10-year plan are very positive.  

“While there are two new regional airlines that are set to fly soon, we will have to wait and see whether this will lead to the birth of more regional carriers or not. Merely announcing expansion to more destinations might not make the scheme attractive for any newer players to enter the market as the government needs to give other sops to the industry,” said Lazar. 

He also believes the established aviation players will need to invest in regional jets or smaller aircraft to take the benefits of UDAN. “Unless there is a concerted effort by the government to bring ticket prices down, through lower taxes, ATF rationalization or greater incentives for lower ticket prices, the consumer will not get relief, and the domestic growth may not be explosive.” 

 The civil aviation ministry is expected to soon make a detailed announcement about the revamped UDAN scheme.