Aviation
India is the world's ninth largest civil aviation market.

Indian Aviation Industry

Latest update: October, 2014

Aircraft movement in India

Total aircraft movement recorded a CAGR of 8.4 per cent over FY06-13.

Aircraft movement in India

Passenger traffic in India

Total passenger traffic stood at a 154.5 million in FY14.

Passenger traffic in India

Freight traffic in India

Freight traffic is expected to be 11.4 MT by 2032.

Freight traffic in India

International freight traffic

International freight traffic rose 6.2 per cent during FY06-13.

International freight traffic

Updated: October, 2014

SECTORAL REPORT | October, 2014

Introduction

The Indian civil aviation industry is on a high growth trajectory. India has a vision of becoming the third largest aviation market by 2020 and is expected to be the largest by 2030.

The civil aviation industry in India has ushered in a new era of expansion driven by factors such as low-cost carriers (LCC), modern airports, foreign direct investments (FDI) in domestic airlines, cutting edge information technology (IT) interventions and a growing emphasis on regional connectivity. Simply going by the market size, the Indian civil aviation industry is amongst the top 10 in the world with a size of around US$ 16 billion.

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

Market size

In India, air traffic in terms of aircraft movement and passenger traffic has increased during the last three years. The total aircraft movements and passengers have registered a compound annual growth rate (CAGR) of 3.3 per cent and 5.6 per cent respectively during FY11 to FY14. In the April-May period of the current financial year, aircraft movements and passengers have increased by 5 per cent each over traffic handled during the corresponding period of FY14. The freight traffic during April-May, FY15, also grew by 9.9 per cent over traffic handled during the same period of the last fiscal.

Airports Authority of India (AAI) has estimated that aircraft movements, passengers and freight at all Indian airports are expected to grow at the rate of 4.2 per cent, 5.3 per cent and 5 per cent, respectively, for the next five years.

The aviation job market is expected to improve in FY15 with two new airlines entering the industry. One is AirAsia's joint venture with the Tatas, a low-cost carrier which began in June, 2014. The other, a full-service carrier to be formed separately by the Tatas and Singapore Airlines (SIA), is likely to begin in the fourth quarter of 2014.

Investment

The foreign direct investment (FDI) inflows in air transport (including air freight) during April 2000 to July 2014 stood at Rs 2,348.12 crore (US$ 383.63 million), as per data released by Department of Industrial Policy and Promotion (DIPP).

The following are some of the major investments and developments in the Indian aviation sector:

  • IndiGo has signed a US$ 2.6 billion agreement with the Industrial and Commercial Bank of China (ICBC) under which the latter will finance the airline's plan to purchase 30 aircraft.
  • SpiceJet Airlines has signed a contract with GE aviation to use GE's Flight Efficiency Services (FES) to support its fleet of 52 Boeing 737 and Bombardier Q400 aircraft.
  • Air Costa has made capital expenditure plan for about Rs 600 crore (US$ 98.04 million) to acquire new aircraft to strengthen its fleet and expand its network.
  • L&T Technology Services has bought 74 per cent equity stake in Thales Software India Pvt Ltd, to strengthen its avionics business. This collaboration will enhance L&T's expertise in high-end avionics software.
  • The Tata Group and Swiss aerospace and defence firm Ruag Aviation plans to set up an aircraft manufacturing facility in Hyderabad, Telangana.
  • Tata-Singapore Airlines is ready to conduct a demonstration in September to prove that it can operate passenger flights, to the Director General of Civil Aviation (DGCA).
  • Hindustan Aeronautics Ltd (HAL) has entered into a collaboration with IIT Kharagpur to establish a Faculty Chair to give thrust on research and development (R&D) and academic work in new and emerging technologies in the aerospace industry. This initiative is to conduct applied research and tackle multi-disciplinary problems in the field of aerospace technology and its applications.

Government Initiatives

The Government of India has played a key role in promoting the Indian aviation sector. Some of the major initiatives taken by the government are as follows:

  • The Government of India has approved the construction of five budget airports to improve regional connectivity and work on them will start from FY15.
  • The Foreign Investment Promotion Board (FIPB) has given conditional approval to Indigo's FDI proposal, which will allow the airline to have access to fresh FDI.
  • The Government of Odisha has signed a Memorandum of Understanding (MoU) with the Airports Authority of India (AAI) for developing an airport at Jharsuguda in western Odisha at a cost of Rs 210 crore (US$ 34.31 million).
  • The Government of India plans to start development of the five no-frills airports and award management contracts of four airports to private operators in FY15.
  • Mr Ashok Gajapathi Raju Pusapati, Union Minister for Civil Aviation, directed the officials at the Chennai Airport to take all possible measures to improve the conditions and bring them up to international standards within a month.
  • The Ministry of Civil Aviation has assigned 18 new tourist destinations in India as part of the Air Services Agreement with Sri Lanka.
  • The Government of India plans to upgrade the Jaipur and Jodhpur airports. It plans to extend the runway of Jaipur airport with Cat-II approach lighting system and allocate land to the Jodhpur airport for the upgradation.

Road Ahead

There is large untapped potential for growth in the Indian aviation industry due to the fact that access to aviation is still a dream for nearly 99.5 per cent of its large population, nearly 40 per cent of which is the upwardly mobile middle class. It is critical for the industry stakeholders to engage and collaborate with the policy makers to come up with efficient and rational decisions that will shape the future of the Indian civil aviation industry. With the right policies and a 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$ 0.0163 as on September 25, 2014

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

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

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