Indian Aviation Industry

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 grew at 16.52 per cent year on year to reach 308.75 million in FY18. It grew at a CAGR of 12.72 per cent during FY06-FY18.

Domestic passenger traffic grew YoY by 18.28 per cent to reach 243 million in FY18 and is expected to become 293.28 million in FY20E. International passenger grew YoY by 10.43 per cent to reach 65.48 million in FY18 and traffic is expected to become 76 million in FY20E.

In FY18, domestic freight traffic stood at 1,213.06 million tonnes, while international freight traffic was at 2,143.97 million tonnes.

India’s domestic and international aircraft movements grew 14.40 per cent YoY and 9.40 per cent YoY to 1,886.63 thousand and 437.93 thousand during 2017-18, respectively.

During Apr-Nov 2018, passenger* traffic in India stood at 226.80 million. Out of which domestic passenger traffic stood at 181.72 million while international traffic stood at 45.08 million. Total freight traffic handled in India stood at 2.41 million tonnes during the same time.

During Apr-Nov 2018, domestic aircraft movement stood at 1.43 million while international aircraft movement stood at 0.30 million.

As of December 2018, India has 102 operational airports. As of May 2018, there are nearly 588 commercial aircraft in operation in India.

Investment

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in India’s air transport sector (including air freight) reached US$ 1,658.23 million between April 2000 and June 2018. 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:

• 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:

• 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.
• The Government of Andhra Pradesh is to develop Greenfield airports in six cities-Nizamabad, Nellore, Kurnool, Ramagundam, Tadepalligudem and Kothagudem under the PPP model.
• Regional Connectivity Scheme (RCS) has been launched under the policy
• As of October 2018, the Government of India has released a policy on biometric digital processing of passengers at airports called ‘Digi Yatra’, The policy will ensure uniform implementation and passenger experience across Indian airports through a connected ecosystem.

Achievements

Following are the achievements of the government during FY18:

• In September 2018, Jharsuguda Airport in Odisha and Pakyong Airport in Sikkim were inaugurated. Pakyong airport is Sikkim’s first ever airport and AAI’s first Greenfield airport construction.
• In December 2018, Kannur International Airport was inaugurated making Kerala the only state in India to have four international airports.

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.

Exchange Rate Used: INR 1 = US$ 0.0142 as of Q2 FY19.

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 2018-19

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