Regional carrier Star Air is charting an ambitious growth path, projecting its revenue to soar to approximately ₹1,100 crore in the financial year 2025-26 (FY26). This target represents a sharp increase of nearly 70% compared to the ₹650 crore it reported in the previous fiscal year (FY25). The airline, owned by Ghodawat Enterprises Pvt Ltd (GEPL), is scaling up its operations, expanding its fleet, and raising fresh capital to deepen its presence in India's smaller cities.
Expansion Fueled by Capital and UDAN Scheme
To fund its aggressive expansion, Star Air recently secured ₹150 crore in fresh capital. The company plans to raise an additional ₹200–250 crore in the next year, taking the total equity mobilisation over two years to around ₹350 crore. A significant portion of this growth is underpinned by the government's UDAN (Ude Desh ka Aam Naagrik) regional connectivity scheme.
Shrenik Ghodawat, Executive Director of the group, revealed that in FY25, nearly one-third of the airline's ₹650 crore revenue, about ₹200 crore, came from viability gap funding (VGF) provided under UDAN. This subsidy is designed to ensure commercial viability on select unserved or underserved routes for a period of three years. Currently, roughly 65% of Star Air’s network operates under UDAN, with the remaining 35% running on a purely commercial basis. The airline maintains healthy load factors between 70% and 75%.
Navigating Subsidies and Building a Sustainable Model
The reliance on VGF is a defining characteristic of Star Air's current business model. Rating agency India Ratings and Research (Ind-Ra) noted in an April report that the airline has a high dependence on UDAN support to sustain operations. In FY24, VGF contributed ₹130 crore, or 36% of its total revenue of ₹360 crore. However, with subsidies tapering off after three years on each route, the airline is focused on building a sustainable model.
Ghodawat emphasized that Star Air has been EBITDA-positive for four consecutive years from FY21 to FY24 and turned net profitable in the last fiscal year without relying on one-off gains. He attributes growth to disciplined expansion, stating, "Our growth is coming from disciplined expansion, not chasing capacity for the sake of scale. We are building routes where there is willingness to pay for time."
The airline's strategy capitalizes on connecting tier-3, tier-4, and tier-5 cities directly, with over 60% of its passenger base comprising business travellers. Routes like Belgaum–Ahmedabad and Hyderabad–Nanded cater to passengers seeking alternatives to long road or train journeys. "There are people who are happy to pay for a 40-minute flight instead of a six-hour road journey or an overnight train," Ghodawat explained.
Fleet Growth and Future Plans
Star Air, founded in 2019, currently operates a fleet of eight Embraer aircraft with 50 to 80 seats, serving 31 cities. It plans to induct four more aircraft over the next six months and aims to eventually connect 50 cities. Its long-term vision involves scaling the fleet to 40–50 aircraft over the next four to five years using a mix of operating leases, finance leases, and selective purchases.
Part of the newly raised capital, around ₹50 crore, has been earmarked to establish a maintenance, repair, and overhaul (MRO) facility in India for Embraer aircraft. This move is aimed at managing rising dollar-denominated costs associated with lease rentals and maintenance.
Aviation expert Mark D Martin of Martin Consulting commented, "Sticking to an all-Embraer fleet for regional connectivity is a good move... Star Air has to ensure commercial viability beyond the three-year subsidy period." While competition from other regional players like Fly91 and Alliance Air exists, Star Air benefits from operating on many routes where larger airlines find it uneconomical to deploy jets.
As it navigates the dynamics of capped fares on UDAN routes and the eventual phasing out of subsidies, Star Air's journey will be a key indicator of the sustainability and scalability of regional air connectivity in India.
