As the war in West Asia smoulders on, the Indian aviation sector is feeling the pinch. The Federation of Indian Airlines has written to the government that operations are becoming unsustainable due to rising aviation fuel prices and need immediate remedies for them to maintain their network.
However, one segment of the industry remains hopeful, that is regional aviation. This is because of the modified UDAN scheme announced by the central government last month.
Among other measures, it has increased the viability gap funding (VGF) period. Also, the government will support airport operation and maintenance costs for three years at some airports to aid early-stage traffic.
It has allocated Rs 28,840 crore to connect 120 new destinations and cater to 40 million passengers over the next 10 years. The new scheme transitions from a connectivity-first model to an ecosystem-driven approach focusing on developing aviation infrastructure.
“The modified UDAN framework provides greater stability for airlines to build and maintain regional connectivity” Manoj Chacko MD & CEO, FLY91.
The reinvention comes at a time when the West Asia conflict has badly impacted the aviation sector, with domestic airlines expected to post huge losses in FY26 due to the adverse operational environment. Higher ATF prices and capacity reduction are adding to their woes.
Captain Simran Singh Tiwana, CEO of regional air carrier Star Air, says the modified UDAN framework marks a shift from sim ply connecting cities to integrating India’s most remote geographies into the national aviation network.
“With a substantial outlay of Rs 28,840 crore and a long-term vision extending to FY35–36, the modified UDAN Scheme is poised to deepen connectivity across underserved and unserved regions of the country. By focusing on infrastructure development, operational sustainability, and last-mile connectivity, it creates a robust foundation for the next phase of aviation-led economic growth,” Tiwana tells Business Today.
Published on: Apr 29, 2026 4:41 PM IST
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