Aviation
India is expected to become the third largest aviation market by 2020 and is expected to be the largest by 2030.

Indian Aviation Industry

Latest update: August, 2015

Healthy Growth of Passenger Traffic

•Total passenger traffic stood at a 190.1 million in FY 2015  

•Passenger traffic increased by 12.47 per cent in FY 2015 

•Growth in passenger traffic has been strong since the new millennium, especially with rising incomes and low-cost aviation; passenger traffic expanded at a CAGR of 11.16 per cent over FY2006–15 

Passenger Traffic in FY15

Increase in Freight Traffic

•Total freight traffic registered a CAGR of 6.7 per cent over FY 2006-15

•Domestic freight traffic increased at a CAGR of 8.23 per cent over FY 2006-15 while international freight traffic rose 5.9 per cent over the same period

•In FY 2015, domestic freight traffic was 0.98 million tonnes, while international freight traffic was at 1.5 million tonnes

•During FY 2015, domestic freight traffic at 0.98 million increased by 17.38 per cent while international freight traffic at 1.5 million increased by 7.08 per cent compared to FY 2014

International freight traffic was 61 per cent of the total in FY15

 

Last Updated: August, 2015

SECTORAL REPORT | August, 2015

Introduction

India’s civil aviation industry is on a high-growth trajectory. India aims to become the third-largest aviation market by 2020 and the largest by 2030. 

The Civil Aviation industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity. India is the ninth-largest civil aviation market in the world, with a market size of around US$ 16 billion.

 “The world is focused on Indian aviation – from manufacturers, tourism boards, airlines and global businesses to individual travellers, shippers and businessmen. If we can find common purpose among all stakeholders in Indian aviation, a bright future is at hand,” said Mr. Tony Tyler, Director General and CEO, International Air Transport Association (IATA).

Market Size

In the second quarter of 2015, domestic air passenger traffic surged 19.2 per cent to 20.3 million from 17 million in the corresponding period a year ago. Total passenger carried in June 2015 increased 13 per cent Y-o-Y to 8.8 million from 7.8 million in June 2014. International and domestic passenger traffic grew 5.3 per cent and 16 per cent, respectively, in  June 2015.

In June 2015, total freight carried rose 5.4 per cent Y-o-Y to 222,990 tonnes vis-à-vis 211,590 tonnes in June 2014. International freight movement witnessed higher growth (7.1 per cent) compared with domestic freight movement (2.6 per cent).

In June 2015, total aircraft movements at all Indian airports stood at 141,620, which was 8 per cent higher than June 2014. International and domestic aircraft movements increased 6.5 per cent and 8.4 per cent, respectively, in June 2015.

Over the next five years, domestic and international passenger traffic are expected to increase at an annual average rate of 12 per cent and 8 per cent, respectively, while domestic and international cargo are estimated to rise at an average annual rate of 12 per cent and 10 per cent, respectively.

The airlines operating in India are projected to record a collective operating profit of Rs 8,100 crore (US$ 1.29 billion) in fiscal year 2016, according to Crisil Ltd.

Investment

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in air transport (including air freight) between April 2000 and May 2015 stood at US$ 573.18 million.

Key investments and developments in India’s aviation industry include:

  • Airbus, the world’s leading aircraft maker, expects India’s aviation industry to grow at over 10 per cent annually in the next decade, almost double the average growth rate of the global aviation industry.
  • Eyeing large orders from Indian airlines, Airbus has committed to source products worth US$ 2 billion cumulatively over the next five years from India; the company plans to provide customised maintenance and other services closer to the base for all its airline customers in India.
  • French drone-maker LH Aviation signed a Memorandum of Understanding (MoU) with India’s OIS Advanced Technologies on June 19, 2015to manufacture tactical drones in India through an industrial license.
  • Mahindra Group expanded its partnership with GE Aviation by signing an agreement to manufacture aero structures at the Group’s new aerospace facility in Bengaluru.
  • IndiGo plans to file documents for an initial public offering within the next two months to raise US$ 400 million by selling 10 per cent stake.
  •  SpiceJet plans to enter a deal with Boeing Co. and Airbus Group SE to buy 80-120 jet airplanes which would help to expand their fleet and rebuild its business..
  • Air India, India’s national airline, has started to shift its IT operations to cloud and is exploring the use of iPads for work, as it plans to upgrade its technology to maintain pace with the competition.
  • The Airports Authority of India (AAI) and Kannur International Airport Ltd. (KIAL) signed a MoU for 26 per cent equity in the greenfield airport worth Rs 1,892 crore (US$ 295.62 million) being built at Mattannur in Kannur.
  • Hindustan Aeronautics Ltd. (HAL) signed an agreement with French engine manufacturer Turbomeca for maintenance, repair and overhaul (MRO) of Shakti helicopter engine, which would power a fleet of 1,000 Indian military choppers over the next 10 years.

Government Initiatives

Government agencies project that around 500 brownfield and greenfield airports would be required by 2020. The private sector is being encouraged to become actively involved in the construction of airports through different Public Private Partnership models, with substantial state support in terms of financing, concessional land allotment, tax holidays and other incentives.

Some major initiatives undertaken by the government are:

  • Gujarat is expected to get a second international airport at Dholera. The state government has formed Dholera International Airport Co. Ltd. and is obtaining approvals from the union government.
  • The Directorate General of Civil Aviation (DGCA) has given its approval to Air India’s maintenance, repair and overhaul (MRO) unit.
  • The Government of India has decided to award airports in Kolkata, Chennai, Jaipur and Ahmedabad on management contract. AAI has issued the ‘Request for Qualification’ document for these four airports.
  • The Government of India plans to form a committee comprising bankers, aviation experts and technocrats to help turn around and privatise the national airline, Air India.
  • The Government of India approved a proposal to set up a second airport in the National Capital Region.
  • The Government of India expects to finalise the new aviation policy and revised international flying norms for domestic carriers soon; the government may remove the ‘5/20’ norms for domestic airlines in this new policy.

Road Ahead

India’s aviation industry is largely untapped with huge growth opportunities, considering that air transport is still expensive for majority of the country’s population, of which nearly 40 per cent is the upwardly mobile middle class. 

The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2020 and the largest by 2030.

Exchange Rate Used: INR 1 = US$ US$ 0.016 as on July 8, 2015

References: Media Reports, Press Releases, Press Information Bureau, Directorate General of Civil Aviation (DGCA), Airports Authority of India (AAI) 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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