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India’s aviation market is expected to be world’s third largest by 2024.

Indian Aviation Industry

Latest update: March, 2020

Growth

 

Last Updated: March, 2020

Indian Aviation Industry Report  (Size: 983.55 KB ) (March, 2020)

Introduction

The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world. India has become the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger* market by 2024^.

Market Size

India’s passenger* traffic stood at 293.99 million in FY20 (till January 2020) where domestic passenger traffic reached 235.44 million and International passenger reached 58.55 million.

In FY20 (till January 2020) domestic freight traffic stood at 1.14 million tonnes, while international freight traffic was at 1.70 million tonnes.

India’s domestic and international aircraft movements reached 1.82 million and 0.37 million in FY20 (till January 2020), respectively.

To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. As of March 2019, India has 103 operational airports. India has envisaged increasing the number of operational airports to 190-200 by FY40.

Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. As of July 2018, there were nearly 620 aircraft being operated by scheduled airline operators in India. The number of airplanes is expected to grow to 1,100 planes by 2027.

Investment

According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows in India’s air transport sector (including air freight) reached US$ 1,904.37 million between April 2000 and June 2019. The government has 100 per cent FDI under automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49 per cent would require government approval.

India’s aviation industry is expected to witness Rs 35,000 crore (US$ 4.99 billion) investment in the next four years. The Indian government is planning to invest US$ 1.83 billion for development of airport infrastructure along with aviation navigation services by 2026.

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

  • In December 2019, AAI announced its plans to set up India's first three water aerodromes in Andaman & Nicobar.
  • In January 2020, IndiGo became first Indian carrier to have an aircraft fleet size of 250 planes and also became the first airline to operate 1,500 flights per day.
  • As of December 2019, France-based Safran Group is planning an investment of US$ 150 million in a new aircraft engine maintenance, repair and overhaul (MRO) unit in India to cater to its airline customers.
  • In November 2019, the Competition Commission of India (CCI) approves the acquisition of shareholdings in Mumbai International Airport Limited (MIAL) by Adani Properties Private Limited (APPL).
  • UK group to invest Rs 950 crore (US$ 135.9 million) in Turbo Aviation's new airline TruStar
  •  AAI is going to invest Rs 15,000 crore (US$ 2.32 billion) in 2018-19 for expanding existing terminals and constructing 15 new ones.
  • In June 2018, India has signed an open sky agreement with Australia allowing airlines on either side to offer unlimited seats to six Indian metro cities and various Australian cities.
  • The AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-regional hubs.
  • Indian aircraft Manufacture, Repair and Overhaul (MRO) service providers are exempted completely from customs and countervailing duties

Government Initiatives

Some major initiatives undertaken by the government are:

  • Under Union Budget 2020-21, government introduced Krishi Udan scheme on both domestic and international routes to help farmers in transporting agricultural products and improve the product value.
  • As per the Union Budget 2019-20, government will promote aircraft financing and leasing activities to make India's aviation market self-reliant.
  • In February 2019, the Government of India sanctioned the development of a new greenfield airport in Hirasar, Gujarat, with an estimated investment of Rs 1,405 crore (US$ 194.73 million).
  • As of January 2019, the Government of India is working on a blueprint to promote domestic manufacturing of aircrafts and aircraft financing within the country.
  • In January 2019, the government organised the Global Aviation Summit in Mumbai which witnessed participation of over 1,200 delegates from 83 countries.
  • In January 2019, the Government of India’s released the National Air Cargo Policy Outline 2019 which envisages making Indian air cargo and logistics the most efficient, seamless and cost and time effective globally by the end of the next decade.
  • Regional Connectivity Scheme (RCS) has been launched.

Achievements

Following are the achievements of the government:

  • Under RCS-Udan scheme, approximately 34,74,000 passengers were flown, and 335 routes awarded during the year 2019 covering 33 airports (20 unserved, 3 underserved, 10 water aerodromes).
  • As on October 2019, 55 AAI airports were declared as Single-Use Plastic Free Airport Terminals.
  • India is expected to have the largest number of aircraft flying by its scheduled airlines latest by December 2019.

 

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. The expenditure of Indian travellers is expected to grow up to Rs 9.5 lakh crore (US$ 136 billion) by 2021. Due to rise in demand in air travel, India will need 2,380 new commercial airplanes by 2038.

Note: Conversion rate used as on January 2020, Re 1 = US$ 0.01402

Note: * - International and Domestic, ^ - As per International Air Transport Association (IATA) forecasts

 References: Media Reports, Press Releases, Press Information Bureau, Directorate General of Civil Aviation (DGCA), Airports Authority of India (AAI), Union Budget 2020-21

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

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