Aviation
India's civil aviation market is set to become the world’s third largest by 2020.

Indian Aviation Industry

Latest update: June, 2014

Aircraft movement in India

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

Aircraft movement in India

Freight traffic in India

Total freight traffic registered a CAGR of 6.6 per cent over FY06-13; it stood at 2.19 million tonnes in FY13.

Registered freight traffic in India

Freight traffic in India

Freight traffic is expected to be five times the current level by the end of the next two decades. It is expected to be11.4 million tonnes by 2032.

Expected freight traffic in India

Passenger traffic in India

Total passenger traffic stood at a 159.3 million during FY13.

Passenger traffic in India

Updated: June, 2014

SECTORAL REPORT | April, 2014

Brief Introduction

India’s aviation sector is enjoying a steady growth. Passenger output rose to 144 million in FY 2011 from 73 million in FY 2006, as per a joint study by FICCI–KPMG (2012). This positive growth path can be attributed to the 11th Five-Year Plan (2007–2012). This period witnessed the completion of four international airport projects through the public–private partnership (PPP) mode; it was also during this period that five Indian carriers began to function on international routes.

Air transport in India today supports 56.6 million jobs and produces over US$ 2.2 trillion of the global gross domestic product (GDP). Air passenger traffic is also increasing at a healthy rate, a development driven by modern facilities and infrastructure.

The Centre had set aside an investment of US$ 12.1 billion in the airports sector during the 12th Five-Year Plan period, of which US$ 9.3 billion is projected to come from India’s private sector for construction of new and low-cost airports and development of existing ones.

Market Size

India would be the third largest aviation market by 2020, as per Mr Ajit Singh, Minister for Civil Aviation, Government of India.

Passenger throughput increased to 159 million and cargo to 2.19 million metric tonnes (MMT) in FY 2013, a compound annual growth rate (CAGR) of 13 per cent and 10 per cent respectively over the period FY 2003–2013, as per data from the Airports Authority of India (AAI).

The Indian civil aviation industry is among the top 10 globally with a size of around US$ 16 billion, as per a KPMG report.

Investments

The foreign direct investment (FDI) inflows in air transport (including air freight) during April 2000 to March 2014 stood at US$ 495.24 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:

  • Tata-Singapore Airlines plans to launch its services in India from September 2014, with 87 weekly flights in its first year of operations, as stated in the airline’s application for an air operator’s permit to the Directorate General of Civil Aviation (DGCA). These flights will link Delhi with Ahmedabad, Bangalore, Chandigarh, Goa, Hyderabad, Jammu, Mumbai, Patna, and Srinagar.
  • Bengaluru-based GMR Infrastructure has won a contract to upgrade Mactan-Cebu international airport in the Philippines. GMR Infra and its partner, Philippine firm Megawide Construction will make an upfront concession payment of US$ 325 million and invest US$ 375 million over the next five years to build a new terminal and upgrade the current one.
  • The DGCA granted an air operator’s permit (AOP) to AirAsia on May 7, 2014, opening the path for the airline company to launch low-cost services in India. AirAsia India will launch services with three Airbus A320 aircraft, from its Chennai hub.
  • Trichy in Tamil Nadu has, over the past few years, become the fastest growing international airport in India. International passenger traffic in the town increased 382 per cent to 773,423 between 2006–07 and 2012–13. This year, it is expected to become the 10th biggest international airport in the country.
  • Low-cost airline SpiceJet is changing its network strategy in order to be more cost effective and have better yields. The airline signed a US$ 4.4-billion deal in March 2014, for 42 fuel-efficient Boeing 737 Max planes which would be delivered from 2018 onwards.

Government Initiatives

India’s Ministry of Civil Aviation revised the bilateral air traffic entitlements with Dubai in February 2014, permitting them a 20 per cent increase in seats to India. “We have allocated Dubai 11,000 seats in three phases till the summer schedule of 2015. Dubai has agreed to grant change-of-gauge facility for Indian carriers at the existing airport,” as per a senior official of the Ministry.

The Ministry has also signed a Memorandum of Understanding (MoU) with AAI for FY 2014–15, which lists targets to be achieved by AAI on some key performance areas during the fiscal. The main features of the MoU include parameters such as risk management, implementation of Enterprise Resource Planning (ERP) tools and development of disaster management plan.

Delhi Airport will soon become a zero-diversionary airport. The Committee set up by the DGCA to look into the matter, has presented its report with 27 recommendations. There were 57, 89 and 143 diversions in 2011, 2012 and 2013, respectively. Chances of diversions of flights at Delhi Airport are expected to come down drastically after the recommendations have been implemented.

Road Ahead

The aviation industry’s potential in India is massive. The market already caters to about 150 million passengers passing through its many airports, with the potential to grow further. By 2020, traffic at airports in India is anticipated to reach 450 million. The aviation industry presently supports about 0.5 per cent of the India’s GDP.

A KPMG report notes that the industry will continue to grow in India on the back of the performance of regional airports. Currently, there are about 450 used/un-used/abandoned airports and airstrips spread across India. Many Indian states, particularly in Eastern India, have begun taking steps to promote air connectivity. Still, more needs to be done. Today, many Tier II and Tier III cities are unconnected. The proposed Essential Air Services Fund (EASF) by the Ministry of Civil Aviation needs to be established as quickly as possible. All this will have a multiplier effect with regards to higher growth of tourism, employment and local economic activities in the country.

Exchange Rate Used: INR 1 = US$ US$ 0.0166 as on June 26, 2014

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

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

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