At a time when national airlines are struggling, what is making smaller players reach for the sky?

Before starting fly91 out of Goa, founder Manoj Chacko’s team studied the cases of two dozen failed airlines from around the world to get a fix on what works and what doesn’t in aviation, a dicey business at the best of times.

Chacko says he found the same depressing story repeat itself— a lack of sufficient emphasis on the fundamentals of aviation. “It was not a lack of enthusiasm or effort or hard work. They never got the fundamentals right. You need cost leadership, ability to set up a network and the right financial structure,” he says.

Chacko is determined to avoid getting the fundamentals wrong. Fly91, which started operations in March 2024, aims to break even by FY26.

It isn’t the only regional carrier to take to skies. Star Air, run by Maharashtra-based Godhawat group, posted a profit in FY25, even as major Indian carriers have been facing financial and operational challenges. Ahmedabad-based IndianOne Air, the first scheduled airline in India to operate a single-engine aircraft, recently signed a letter of intent with aircraft manufacturer De Havilland Canada to acquire up to 10 Twin Otter Series 300-G aircraft. That is not all. A few more entities eyeing last-mile air connectivity—Shankh Air, Alhind, FlyExpress and Air Kerala—are preparing for take off. The government recently awarded no-objection certificate to three of them.

This is in sharp contrast to the fate of the bigger airlines. IndiGo, with the largest market share, saw a meltdown in December 2025 due to rostering and pilot issues leading to mass flight cancellations. It reported a loss of Rs 2,582 crore in the second quarter of FY26, 161% up from Rs 986 crore in the same period last year. The Air India crash in Ahmedabad in June 2025 has slowed the carrier’s revival plan. It is also facing a delay in aircraft delivery and supply chain issues. The second-biggest airline reported a loss of Rs 3,976 crore in FY25. Even Akasa and Spicejet reported losses in FY24

India’s tryst with regional airlines, small carriers that connect short-haul routes, began in 1981 with the launch of Vayudoot, a government of India company that connected over 100 regional destinations with Dornier aircraft. After being operational for over a decade, it shut owing to deteriorating finances.

After decades, regional operators are taking a leaf out of the operational book of Vayudoot to prioritise their regional strategy. But with a difference. They are giving top priority to financial prudence, something that the country’s first regional airline lost midway, leading to its collapse.

Star Air, India’s largest private regional aviation player, and the newbie, Fly91, have a clear model—build the right financial structure, choose the right sectors and look at aviation as a transportation business—to sustain themselves in a business that has been the nemesis of tens of biggies, right from Jet to GoAir and Kingfisher.

In FY25, only two Indian airlines made a profit. The first one was IndiGo and the second was Star Air, run by Kolhapur, Maharashtra-based Godhawat group. It has been operating since 2018 with connectivity to 31 cities and plans to scale up to 50 destinations by 2030.

Does regional air connectivity makes business sense? Experts reply in the affirmative. The US has over 6,000 airports for a population of 300 million, while India has less than 200 for 1.5 billion people, providing immense potential for expansion to smaller towns, where incomes are rising faster than ever.

All these airlines are banking on first-time flyers from non-metro cities where rail and bus journey to key destinations takes longer than seven hours.

One of the biggest pull factors is the government’s UDAN (Ude Desh Ka Aam Nagrik) Scheme, launched in 2016, which offers financial support and subsidies to hedge operational losses from flying non-profitable routes in the initial years of operations.

The true challenge for regional players will be spreading their wings beyond UDAN routes and becoming self-sustainable in air transport, where past failures outweigh successes. Besides Jet Airways, Kingfisher and Air Deccan, several regional players, Truejet, Costa, Paramount and Pegasus, among others, have had to shut operations because of financial losses.

Growth Centres

India’s aviation sector is poised for significant growth with domestic air passenger traffic set to double by 2030, reaching 300 million annually. Indian airlines have an order book of 1,500 new aircraft.

The massive aviation boom is expected to be fuelled by passengers from Tier II/III/IV cities, with people willing to fly from smaller cities to metros, state capitals and key business centres. The airports in some of these cities cannot accommodate bigger aircraft. This is where regional players, with 70-80 seat aircraft, are trying to make a mark.

Shrenik Ghodawat, MD of the Ghodawat Group, says regional aviation is here to stay. He expects the emergence of two-three more regional airlines considering the size of the country.

“Air travel is a necessity now. Look at the new generation. Everybody values their time more than anything else and there is a change in consumer sentiment. So, even an interstate or intrastate airline can work if cost is optimised and it is planned and run well,” Ghodawat tells BT.

Star Air has identified about 50 cities in India and more than 200 city pairs with a potential to fill 75-150 seats per flight in the next five years. It currently flies Embraer 145 (50 seaters) and E175 (88 seaters) to 31 destinations and plans to add another 40-45 aircraft (both jets and helicopters), including advanced E2 jets, by 2030-31 from the present 11 fixed-wing planes and four helicopters.

It has also applied for a national licence in order to operate jets with higher capacity. Star Air has also started operations from the recently opened Navi Mumbai International Airport.

“When we started Kolhapur-Bombay, we used to fly on a 50-seater aircraft. Today we have a 76-seater aircraft at a 95% load factor. Now, it has the potential to take an 88-seater or an 114-seater aircraft also. If we price it well, we will be able to fill these numbers of seats,” he says.

About 60% of its routes are monopolies and 40% have one, or maybe two, competitors.

Fly91 founder Chacko says non-metros offer lucrative financial opportunities for regional aviation players. It currently flies four ATRs and plans to take the number to 30 by 2030.

“Almost 20% of 140 functional airports in the country cannot accommodate the narrow-body aircraft (flown by national carriers), either due to technical reasons or lower load factors from those markets. That is where the regional space starts coming in,” Chacko, who earlier worked with Kingfisher Airlines and Emirates, tells BT.

Chacko says any city pair that is more than seven hours by road is a classic opportunity for regional aviation. The airline’s ATR service from Jalgaon airport in Maharashtra has expanded to 21 weekly flights.

“It has high load factors and good yields. If you walk onto one of those aircraft, you’ll be surprised; you will find better-dressed people than people from Mumbai and Delhi. You will possibly see more Louis Vuitton and Gucci bags on that flight. You will see more gold on that flight, and when they come to places like Goa, they’re being picked up by the Taj Exoticas and the ITCs. These are cities where there is real wealth. There’s a niche spot. We got to go after the niche,” he says.

Profitability

The big question is: Will these airlines be able to scale up? Star Air started its operations in 2019 and aims to become a full-scale national airline focusing on regional connectivity. It acknowledges competition will increase, even in smaller markets, with bigger airlines such as IndiGo, Air India and Akasa also keeping Tier II/III cities on their radar.

“Our strategy is to keep identifying new city pairs and new avenues with 200 new airports coming up over the next 15 years,” he says.

Keeping the cost of ownership low and fixed cost discipline are the key to survival for this regional player. The company made its first profit of Rs 68 crore in FY25. Its net worth jumped over 4X to over Rs 91 crore during the year. It expects 40-50% growth in revenue and Earnings Before Interest Tax, Depreciation And Amortisation (EBITDA), a measure of operating profitability, this financial year.

Star Air recently raised Rs 150 crore in a Series B round. “The most important thing for us to remember is that we are in the business of transportation from point A to point B and we should not look at it like a seven-star or a five-star hotel. We’ve tried to keep our costs in control by trying to run a tight ship and bring a differentiated product,” says Ghodawat.

On future growth, the company plans to narrow operations to just two types of fleet—a feeder network that flies smaller aircraft and larger aircraft focusing on point-to-point connectivity.

Chacko lists a few fundamental aviation survival principles—commit to one type of aircraft, don’t mix your fleet, and keep operations simple.

“We call ourselves an air transportation company, with a plan to have five bases over the next five years. So, 30 aircraft, five years, build a pan-India network, a simple point-to-point service. Our plan is to connect district capitals to Tier II, Tier III cities, and state capitals. You take people from these cities into mainstream cities,” he says.

Regional airlines have adopted innovative ways to lower administrative and allied costs. Fly91, for instance, doesn’t have a call centre and has a fully automated bot that responds to customer queries. If they have more queries, customers can leave their phone number to get a return call from the airline. Star Air intentionally decided not to hire “very expensive” top management figures. It consciously looks for personnel who, it says, can promote team spirit.

Man and the Machine

One of the challenges facing aviation is the availability of trained pilots and supply chain shortage.

India would need 30,000 pilots in the next 15 years with 1,500 new aircraft on order. Currently, there are around 8,000 pilots for the commercial passenger fleet of over 800 aircraft, but 2,000-3,000 of them are not active aviators.

India’s pilot training infrastructure is inadequate and a majority its pilots are trained abroad.

Khushbeg Jattana, General Manager of Simaero India, a leading provider of pilot training on full flight simulators, says India needs to expand the number of flight schools from the current 37, which is just one-third of what the country requires.

“We will need flight schools with some 100 aircraft doing training. We do not have flight schools with more than 50 aircraft right now. So we need massive expansion on the aircraft side in the flight schools. Then comes the second part where you have to do the simulator training,” he says.

French aviation training company Simareo has announced a $100 million investment in India for setting up world-class pilot training centres.

The first simulator is expected to be up and running by March next year. The company is in talks with regional players to set up simulators for training on smaller aircraft.

“We expect that another 40 simulators will be required in the next five years in India, at least to cater to the five-year expansion, and beyond that, I believe we'll need around 100 simulators in total in the next 10 years,” it says.

Regional airlines have been slowly building their teams of captains and logistics support to end dependence on foreign pilots and overseas training.

“We started with a lot of foreign pilots coming in, but we are now seeing a lot of Indian pilots also getting trained. In order to support our 50-fleet dream, we will require anywhere more than 500 to 600 pilots in total, which will be almost five times our current strength at this point,” says Ghodawat.

Growth of regional players will also depend on availability of aircraft given the sizeable order backlog from suppliers. Star Air agrees that maintaining its existing fleet and adding new aircraft portends to be a challenge.

Fly91 sees no challenge in accessing the number of ATR aircraft and is set to get two brand new aircraft from lessors. On the supply chain side, it is trying to cope.

“We started to build out our own pilot pool. Today. We have 51 pilots with Fly91, out of which 24 are captains. I only have three foreign pilots with me. We have three aircraft examiners, about five check pilots and three synthetic instructors. We have a better training infrastructure than a lot of mid-sized airlines,” he adds.

The Survival

Financing assets and acquisition of planes will also not be easy.

Chacko says the biggest challenge today is that the banking and financial system in India still does not appreciate that an aircraft in an asset and buying aircraft is not a smart option.

“The day we have banks in India supporting asset purchases, giving good loans to asset values, the game will change. The Irish leasing business will literally come to a grinding halt because 1,500 aircraft are on order in India. We got a brilliant Gift City put up and hope that the finance ministry solves this problem faster,” he says.

Ireland is the global leader in aircraft leasing and financing, managing 60% of the d aircraft. To ensure that India has more India registered d aircraft, the government is planning to extend the tax holiday on profits earned by aircraft leasing firms in Gift City in Gujarat, its newest finance hub, to 15 years from the present 10 years.

Indian aviation is riddled with instances where airlines went out of business and lessors had to fight a long legal battle to regain control over their aircraft.

This has led to global lessors tightening leasing norms, making it difficult for new airlines to find aircraft. According to reports, the newly announced Alhind, Air Kerala and Shankh haven’t been able to aircraft.

For regional airlines, UDAN has been a game-changer. It ensured operationalisation of smaller airports in cities by providing financial support to airlines.

Godhawat says a lot of airports are being built, but a shortage of critical manpower required to operate these aircraft is biting. Bringing aviation fuel under the Goods and Services Tax is a long-pending demand of aviation companies, which say it will reduce cost.

Post-UDAN survivability is another red flag. Airlines may be forced to shut operations if the routes on which they operate prove to be unviable without government subisidies. The government is working to extend the UDAN Scheme for another 10 years beyond 2026 to continue its push for regional connectivity.

“Almost 60% of the routes even post-UDAN continue to work today without any assistance and we are profitable on those segments as well,” says Ghodawat.

Fly91 says its business plan was never purely on viability gap funding, although it is helpful because it supports the cost structure, but the airline’s long-term aim is to be able to fly on its own.

“A lot of the successful regional sectors, such as Solapur, Kolhapur, Manali and Leh, were built when there was no UDAN. These flights made good money. We aim to build every sector that we start to be able to stand without UDAN,” says Chacko. 

@richajourno