The Sky’s the Limit: India's Growing Aviation Industry
India is the world's third-largest domestic air passenger market. The domestic aviation market in India is predicted to reach US$ 30 billion by 2024, making it the third-largest industry globally. A growing share of middle-income households, strong competition among low-cost carriers, infrastructure expansion at major airports, and a supportive governmental environment have given the aviation sector a boost. India runs a vast network of international flights in addition to domestic travel and currently has air services agreements with 116 nations. The number of domestic passengers increased by more than doubled, from 120 million to nearly 275 million, over the course of the six years between FY14 and FY20, at a CAGR of 14.5%. Indian airlines are predicted to increase capacity by at least 25%, making India the fastest-expanding aviation market with 7% annual growth by 2040. The air passenger traffic in India climbed by 47% to 123.2 million passengers in 2022, indicating a positive rebound from the Covid meltdown in 2020 and 2021. Moreover, domestic air traffic is predicted to reach 97% of pre-covid levels in FY23. India's domestic revenue passenger kilometres increased 32.3% on a y-o-y basis in March 2022.
The Government of India has unveiled some ambitious policy visions that can have a long-term impact on the aviation industry. The country's aviation connection has significantly improved over the past eight years. The government has constructed double the number of Airports in the last 8.5 years increasing from 74 in 2014 to 148 presently, ensuring air connection to numerous Tier-2 and Tier-3 cities. Metropolitan airports are estimated to handle just about 57% (they currently handle around 62%) of the projected travel by 2033, accounting for approximately 959 million people, while traffic in smaller towns/cities is likely to nearly triple over the following decade. The Indian government announced a goal to double the nation's airport capacity to 220 by 2025. There is also a plan to build 33 new domestic cargo ports and 15 new flying schools, as well as a greater emphasis on unmanned aircraft systems.
Indian Aviation Industry
India is the ninth-largest market for civil aviation around the globe and has been predicted that the Indian civil aviation market will experience exponential growth in the upcoming years. India's civil aviation sector, which has a market of US$ 900 million and a rapid development trajectory, is one of the nation's fastest-growing businesses. Domestic traffic in India accounts for more than 65% of all traffic in the South Asian region. Airports in major cities currently handle more than 60% of the traffic of more than 340 million people. India currently has a fleet of 713 commercial aircrafts and is on track to become the world's third largest buyer, with an order book of over 1000 commercial aircrafts. Indian carriers are expected to double their fleet capacity to around 1,100 aircraft by 2027. Airports Authority of India (AAI) operates 137 airports (24 international, 80 domestic, 23 domestic defence airfields, and 10 customs). There are currently 450 airstrips in India, however only 100 are completely operational. Metro airports like Delhi, Mumbai, Kolkata, Chennai, Hyderabad, and Bangalore have dominated the aviation business, accounting for 62% of the country's total aviation market.
Subsectors of the Indian Aviation Sector
Maintenance, Repair, and Overhaul (MRO)
The ecosystem for maintenance, repair, and overhaul (MRO) consists of original equipment manufacturers (OEMs), airline operators, service providers, vendors, and manufacturers of components and spares. India's expanding aircraft fleet will necessitate an expansion in maintenance services and MRO facilities. Since the government has decreased GST by 25%, there has been a huge increase in MROs (from 113 to 140 MROs approved by DGCA today). The sector has a turnover of close to US$ 2 billion, but the activity is confined to 15-20% of the market. Given India’s favourable geographic location between Europe and Southeast Asia, as well as its proximity to the Middle East, efforts are ongoing to establish India as a global hub for MRO services. Local capabilities are in their early stages, but they have the potential to grow significantly. This segment will grow by US$ 4 billion by 2031.
Navigation and Air Traffic Management Systems
AAI is constantly upgrading and modernising air navigation services. India became the fourth country in the world to use satellite-based navigation systems with the launch of the GPS-Aided GEO-Augmented Navigation system and began using satellite-based Automatic Surveillance-Broadcast services in 2019.
Human Resource Development
The Indian civil aviation industry is full of potential for providers of education and training services, and there is untapped demand for cutting-edge training simulators. The Rajiv Gandhi National Aviation University, India's premier aviation educational institution, is looking into collaboration with both global and domestic partners. The Indira Gandhi Rashtriya Uran Akademi, the country's principal flight training institution, is continuing its efforts to improve commercial pilot flight and ground training.
The Indian government recently released its "Policy for Promotion of Helicopter Operations," which encourages opportunities to expand fleet size and usage outside of the conventional short-haul travel, tourism, disaster management, and emergency response sectors. This policy aims to increase demand for and usage of helicopters in the civil aviation sector. India has roughly 90 helicopter operators, including non-scheduled operators, private corporations, state governments, and public sector utility firms, with a combined fleet of 280 turbine helicopters - a fraction of the 14,000 helicopters in operation in the United States.
Unmanned Aircraft Systems (UAS) The Indian government issued "Drone Rules 2021," with the goal of making India a global centre for R&D, testing, production, and operations. Furthermore, the government provides benefits to stimulate local production of drones and their components through a variety of incentive schemes. The online Digital Sky Platform system was modified to improve data analysis linked to registering drone pilots, gadgets, and service providers. By 2026, the UAS industry in India is anticipated to be worth US$ 1.8 billion.
General and Business Aviation
India has a small fixed-wing aircraft fleet for public and commercial usage. International private and business jet operations have reportedly experienced a surge in demand during the pandemic. This may be due to a greater requirement for health measures, such as social distancing. Experts predict that the segment may see a growth in the number of domestic carriers' charter flights as well as a rise in the need for aircraft.
PPP airports in India
India has 5 PPP airports, one each at Mumbai, Delhi, Cochin, Hyderabad and Bengaluru, which together handle over 55% of the country’s air traffic. The Delhi airport accounts for 46% and the Mumbai airport accounts for 39% of the gross revenue with the government.
Source: Association of Private Airport Operators
Major Domestic Airlines
The below pie chart represents the market share of Scheduled Domestic airlines in March 2023. The below bar graph represents the Passenger Load Factor.
Air India, the national carrier of India, has announced the purchase of 470 passenger planes from the two industrial global behemoths, French Airbus and American Boeing. The transaction includes 210 A320/321 Neo/XLR, 40 A350-900/1000, 190 737-Max, 20 787s, and 10 777s, and is regarded as one of the biggest airline orders in the international history of aviation. The airline has placed orders with Airbus and Boeing for up to 840 aircraft, including 370 optional purchases. The Tata-owned company appears to be shooting for the top spot in the Indian aviation market share.
Six international airports completed under PPP. The sector is expected to witness investments worth US$ 25 billion by 2027.
Navi Mumbai airport is being developed under PPP by GVK Group subsidiary, Mumbai International Airport (MIAL), and City and Industrial Development Corporation of Maharashtra Ltd (CIDCO), with an investment of US$ 2.22 billion.
Zurich Airport International signed the concession agreement for the development of Jewar Airport on the outskirts of Delhi.
In October 2022, Prime Minister Mr. Narendra Modi laid the foundation stone of C-295 Aircraft Manufacturing Facility in Vadodara, Gujarat.
AAI plans to invest Rs. 25,000 crore (US$ 3.58 billion) in the next five years to augment facilities and infrastructure at airports. The Indian Government is planning to invest US$ 1.83 billion for the development of airport infrastructure along with aviation navigation services by 2026.
The National Civil Aviation Policy (NCAP) 2016
The National Civil Aviation Policy (NCAP) was published by the Ministry of Civil Aviation in 2016. It includes goals such as promoting the sector's rapid expansion, improving the ease of doing business, advancing regional connectivity, and allowing additional market actors to meet India's largely unmet and growing demand. The policy covers 22 areas of the civil aviation sector. Airlines can commence international operations and will have to deploy 20 aircrafts or 20% of their total capacity (whichever is higher) for domestic operations.
The Regional Connectivity Scheme- Ude Desh ka Aam Naagrik (RCS-UDAN)
To solve the supply-demand gap in India, a crucial component of the NCAP is "Ude Desh ka Aam Naagrik," an effort that comprises a Regional Connectivity Scheme to make air travel more affordable and expand routes and flights for unserved and underserved airports. Following the completion of the four rounds of bidding, 154 (unserved & underserved) airports, including 14 water-aerodromes and 36 Helipads/Heliports, have been identified under UDAN for the operation of RCS flights by 2023-24.
Greenfield Airports Policy
The Greenfield Airports (GFA) Policy, 2008 was created by the Government of India (Gol), and it outlines the requirements, process, and rules for the construction of new Greenfield Airports in the nation. So far, the Government of India has given 'in-principle' approval for the establishment of 21 Greenfield Airports across the country, including Mopa in Goa, Navi Mumbai, Shirdi and Sindhudurg in Maharashtra, Kalaburagi, Vijayapura, Hassan and Shivamogga in Karnataka, Dabra (Gwalior) in Madhya Pradesh, Kushinagar and Noida (Jewar) in Uttar Pradesh.
Despite the challenges posed by the Covid-19 pandemic, India is currently the third-largest domestic civil aviation market in the world, which is a testament to both the vitality and potential of this market as well as to the inherent strengths of the Indian aviation industry: adaptability, agility, and innovation. But presently the legitimate goal of India is to be the largest global aviation market. Although many of the existing brown-field airports and greenfield airports in tier 2 and tier 3 towns and cities are likely to drive the sector's future expansion and are expected to grow into major airports. Public Private Partnership (PPP) models that are appropriately structured and policy-level interventions will be of utmost importance in maximising the enormous potential of these airports. Some of the interventions include continued funding for airports under the UDAN scheme, as well as flexibility in capital investments and regulatory measures.