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

Indian Aviation Industry

Latest update: October, 2019

Growth

 

Last Updated: October, 2019

Indian Aviation Industry Report  (Size: 1.44 MB ) (October, 2019)

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 199.60 million in FY20 (April-October 2019) where domestic passenger traffic reached 160.16 million and International passenger reached 39.43 million.

In FY20 (April-October 2019), domestic freight traffic stood at 0.80 million tonnes, while international freight traffic was at 1.20 million tonnes.

India’s domestic and international aircraft movements reached 1.24 million and 0.25 million in FY20 (April-October 2019), 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 of Industrial Policy and Promotion (DIPP), 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:

  • 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:

  • 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.
  • In November 2018, the Government of India approved a proposal to manage six AAI airports under public private partnership (PPP). These airports are situated in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru. AAI received 32 technical bids from ten companies.
  • 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.

Achievements

Following are the achievements of the government during FY18:

  • 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.
  • Number of Operational Airports crossed 100 in FY19.
  • 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 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 September 2019, Re 1 = US$ 0.014019

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), Interim Union Budget 2019-20

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

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