With UDAN scheme taking wing, manufacturers of small aircraft see soaring market in Indian skies

The Centre’s flagship aviation scheme to encourage greater regional connectivity has spelt great news for manufacturers of smaller aircraft, particularly Toulouse-based ATR and Montreal-based Bombardier.

According to estimates made by ATR, India will need 200 aircraft in the next 10 years, which could have a value of over $5 billion.

The UDAN ( Ude Desh ke Aam Nagrik — or, let the common man fly) scheme aims to connect 70 under-served domestic airports in small towns and cities, with the airfare on half of all available sets capped at ₹2,500 for a roughly one-hour journey. The Centre will offer subsidies to airlines to make these routes viable.

The first round of auctions for UDAN routes that the government held earlier this year saw 128 routes being awarded to five operators — Alliance Air, Air Deccan, Air Odisha, Trujet and SpiceJet. IndiGo, the country’s largest domestic carrier, has expressed interest in participating in round two of route auctions.

Since the number of seats on these routes are limited, airlines have been placing a slew of orders with manufacturers of small-body aircraft to deploy on these routes. Franco-Italian maker ATR, a part subsidiary of Airbus, already has over 35 aircraft flying in India, of which 17 are the smaller-bodied 68-78 seat capacity ATR 72-600s.

Currently, the ATR 42 and 72 are being flown by Jet Airways, Alliance Air and Trujet. Alliance Air plans to introduce a further five ATR 72-600s with the support of leasing firm DAE, and will become one of the largest ATR operators with 20 aircraft. Meanwhile, IndiGo has signed a term sheet with ATR for 50 ATR 72-600s in a deal valued at $1.3 billion.

Last month, SpiceJet confirmed an order for 50 Q400s from Bombardier at a list price of $1.7 billion. This was the largest ever order for the aircraft from a single airline. SpiceJet will be the launch customers for the 90-seater Q400, some of which will be deployed in the 11 routes the airline won under the first UDAN auction.

Air Odisha and Air Deccan, which won 50 and 34 routes respectively, will be flying the 19-seater Beechcraft B-1900D aircraft on these routes. These are significantly smaller than the single-aisle aircraft that airlines fly on the more well-established routes. For instance, many airlines fly the Airbus A320 on the high-traffic Delhi-Mumbai route, with a varying configuration of 140-160 seats.

In an email exchange with BusinessLine , Guillaume Huertas, ATR’s Head of Sales – South Asia, said : “Our predictions state that India will need 200 aircraft in 10 years, which could have a value of over $5 billion. If you consider that the Asian market, including China, will require 1,050 aircraft, the Indian market should account for roughly 20 per cent of it. This shows that India is clearly one of the key markets globally, along with China, in terms of regional aviation.

“The ATR 72-600s operate in all types of environment and are particularly adept at accessing remote areas, challenging airports with short runways or limited infrastructure. Certainly, if there is a need to connect Delhi to Kullu and Shimla or Kochi to Agatti then our ATRs are part of the solution. The 70-78 seat ATR 72-600 has the lowest seat mile cost and the 50-seat ATR 42-600 the lowest trip cost in their respective segments.”

When IndiGo placed the ATR order, Aditya Ghosh, President, said: “The ATRs low operating costs will help us build a large regional air travel network with reasonable fares. The ATR’s outstanding operational versatility, along with its capabilities to land in remote airports with limited infrastructure, will help us manage our operations efficiently.”

A recent study by the International Air Transport Association forecast that India will have the third fastest growing aviation market by 2036, with 337 million new fliers taking the country’s total passenger count to 478 million.

For this to happen, aviation analysts believe more and more aircraft will be required to satisfy the growing market and replace ageing in-service aircraft.

With this, and the creation of new routes under programmes like UDAN, aircraft manufacturers are going to see their Indian order books swell.