Trade Analytics
Aviation
India is expected to become the third largest aviation market by 2020 and is expected to be the largest by 2030.

Indian Aviation Industry

Latest update: April, 2018

  • Total freight traffic registered a CAGR of 7.08 per cent over FY06-17
  • During FY06-17, domestic freight traffic increased at a CAGR of 7.95 per cent, while international freight traffic grew at a CAGR of 6.58 per cent during the same period.
  • In FY17, domestic freight traffic stood at 1,123.18 million tonnes, while international freight traffic was at 1,855.06 million tonnes.
  • During FY17, domestic freight traffic increased at 7.39 per cent while international freight traffic increased at 11.86 per cent in comparison with FY16.
  • By 2023, total freight traffic is expected to touch 4.14 million tonnes exhibiting growth at a CAGR of 7.27 per cent between FY2016 and FY23. In addition, international freight traffic is expected to grow at a CAGR of 7.13 per cent while domestic freight traffic is expected to grow at a CAGR 7.50 per cent between FY2016 and FY23.
Growth

Notes: 1From April to February 2018, *CAGR is calculated as sum of international and domestic traffic till FY17
Source: Airports Authority of India

  • Witnessing a growth of 18.5 per cent over the previous year, total passenger traffic stood at a 264.97 million in FY17, which was recorded at 223.62 million in FY16 in India.
  • Growth in passenger traffic has been strong since the new millennium, especially with rising incomes and low-cost aviation; during FY06-17, passenger traffic grew at a CAGR of 12.39 per cent in the country.
  • By 2036, India is estimated to have 480 million flyers, which will be more than that of Japan ( just under 225 million) and Germany ( just over 200 million) combined.
  • 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 2025.
Growth

Notes: CAGR – Compound Annual Growth Rate, FY – Indian Financial Year (April – March), 1April 2017 to February 2018, *CAGR is till FY17, *Air passenger – Domestic + International
Source: Association of Private Airport Operator, Airports Authority of India

Last Updated: April, 2018

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 is expected to become the world’s largest domestic civil aviation market in the next 10 to 15 years, as per Mr Jayant Sinha, Union Minister of State for Civil Aviation, Government of India.

According to International Air Transport Association IATA, India will displace the UK for the third place in 2025.

The Civil Aviation industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity.

Market Size

Air traffic in India rose 15.80 per cent year-on-year to 280.24 million during April-February 2017-18. Witnessing a growth of 18.50 per cent over the previous year, total passenger traffic stood at a 264.97 million in FY17. India’s passenger traffic grew 15.80 per cent y-o-y to 280.24 million during April-February 2017-18.

As of March 2018, there are nearly 550 commercial aircraft in operation in India.

Investment

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in air transport (including air freight) between April 2000 and December 2017 stood at US$ 1,608.51 million.

India is estimated to see an investment of US $25 billion in the next decade in the airports sector, and traffic growth of 13 per cent, according to Morgan Stanley. According to them, the share of air travel in air and rail travel combined in India will grow to 15.2 per cent by 2027 from 7.9 per cent now.

Capex plans to the tune of Rs 65,000 crore (US$ 10.08 billion) have been finalised by the Airports Authority of India with Rs 17,500 crore (US$ 27.13 billion) for the next five years and around Rs 22,000 crore (US$ 3.41 billion) for brownfield expansion in Delhi, Mumbai, Hyderabad and Bengaluru by private operators and around Rs 21,000 crore (US$ 32.55 billion) for greenfield airports.

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

  • 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.
  • The Airports Authority of India (AAI) will undertake new development works at Lucknow, Deoghar, Rajkot and Allahabad airports. The objective is to improve and develop airport infrastructure to meet growing traffic demands. AAI plans to construct new integrated passenger terminal building at Chaudhary Charan Singh International Airport, Lucknow at an estimated cost of Rs. 1,230 crore (US$ 190.65 million). The new terminal will be able to handle 4000 passengers during peak hour and 6.35 million passengers per annum.

Government Initiatives

Some major initiatives undertaken by the government are:

  • Allocation to Civil Aviation Ministry has been tripled to Rs 6,602.86 crore (US$ 1,019.9 million) under Union Budget 2018-19.
  • In February 2018, the Prime Minister of India launched the construction of Navi Mumbai airport which is expected to be built at a cost of US$ 2.58 billion. The first phase of the airport will be completed by end of 2019.
  • Under the second round of Regional Connectivity Scheme (RCS 2) the government has awarded 325 routes to airlines as well as helicopter operators with the objective of enhancing flight services to hilly and remote areas. Under the scheme airline operators have to offer half of their seats at discounted rates and helicopter operators can offer up to 13 seats at lower fares with the government providing Viability Gap Funding (VGF) or subsidy to airlines and helicopter operators.
  • Constructing 17 highways-cum-airstrips are the government's priorities and it will start work on them this year, Union Minister Nitin Gadkari has said. The projects are designed in such a fashion that the roads will double up as airstrips and traffic will be stopped when an airplane lands or takes off. The road and air connectivity will also provide better access to remote areas.
  • Airport building and modernization projects worth over Rs 19,300 crore (US$ 2.99 billion) have been recommended green clearance, in line with the Government of India’s focus on improvement in regional air connectivity.

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 2025.

In the coming 20 years, Indian companies will buy 2,100 new planes worth US$ 290 billion. Also, domestic air traffic in India is expected to cross 150 million in FY19, on the back of unprecedented capacity induction by airlines*.

Exchange Rate Used: INR 1 = US$ 0.0154 as of March 01, 2018.

Note: *According to Centre for Asia Pacific Aviation (CAPA)

References: Media Reports, Press Releases, Press Information Bureau, Directorate General of Civil Aviation (DGCA), Airports Authority of India (AAI), Union Budget 2018-19, Boeing

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

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