Five carriers, including Air Deccan, had won the rights to operate UDAN flights in the first round of bidding held in March. They were awarded 128 routes. Under the regional connectivity scheme (RCS), also known as UDAN ('Ude Desh Ka Aam Nagrik'), airfares are capped at Rs. 2,500 per person for an hour's flight to Tier-2 and Tier-3 cities in which the government will provide subsidy for keeping tickets at low prices. It is aimed at improving air connectivity to Tier-2 and Tier-3 cities.
The airlines that win rights to operate UDAN flights are required to offer half of their seating capacity at discounted rates in return for which they get government subsidy.
Clocking a high double-digit growth for more than two years, India's domestic aviation market is one of the fastest growing in the world. The outlook for the fastest growing Indian aviation market is "very good" but infrastructure and taxation issues could be detrimental for its growth, according to global airlines' grouping IATA chief Alexandre de Juniac.
Domestic airlines carried 954 lakh passengers during January-October 2017, as against 814 lakh during the corresponding period the previous year, registering a growth of 17.30 per cent.