Last Updated: September 18, 2014
Q R Thomas
President, Boeing India
Updated: June, 2014
SECTORAL REPORT | April, 2014
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.
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.
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:
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.
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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