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 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 341.05 million in FY20. It grew at a compound annual growth rate (CAGR) of 11.13% during FY16-FY20. Domestic passenger traffic stood at 274.50 million in FY20, growing at a CAGR of 12.91% over FY16. International passenger traffic stood at 66.54 million, growing at a CAGR of 5.01% during FY16-FY20.

Freight traffic grew at a CAGR of 5.32% during FY16-FY20 from 2.70 million tonnes (MT) to 3.33 MT. Freight Traffic is expected to grow at a CAGR of 7.27% to reach 4.14 MT in FY23.

Aircraft movement grew at a CAGR of 9.56% from 1.60 million in FY16 to 2.59 million in FY20. During FY16-FY20, domestic aircraft movement increased at a CAGR of 9.83% and international aircraft movement expanded at a CAGR of 3.57%. India’s domestic and international aircraft movements grew to reach 2,155 thousand and 433 thousand during FY20, 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 had 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. The number of airplanes is expected to reach 1,100 planes by 2027.

Investment

According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflow in India’s air transport sector (including air freight) reached US$ 2.79 billion between April 2000 and June 2020. The government has allowed 100% FDI under the automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49% 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 October 2020, Zurich Airport International signed the concession agreement for the development of Jewar Airport on the outskirts of Delhi. The agreement has granted Zurich Airport International the licence to design, build and operate Noida International Airport (NIAL) for the next 40 years.
• In October 2020, the Airports Authority of India (AAI) announced plan to upgrade runways at seven airports across the country by March 2022.
• In January 2020, IndiGo became first Indian carrier to have an aircraft fleet size of 250 planes and became the first airline to operate 1,500 flights per day.
• In December 2019, AAI announced its plans to set up India's first three water aerodromes in Andaman & Nicobar.
• As of December 2019, France-based Safran Group planned 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) approved the acquisition of shareholdings in Mumbai International Airport Limited (MIAL) by Adani Properties Private Limited (APPL).
• AAI plans to invest Rs. 25,000 crore (US$ 3.58 billion) in next the five years to augment facilities and infrastructure at airports.
• UK group to invest Rs. 950 crore (US$ 135.9 million) in Turbo Aviation's new airline TruStar.

Government Initiatives

Some major initiatives undertaken by the Government are:

• The government is planning to start 14 more water aerodromes across the country, after the successful launch of seaplane service by Prime Minister, Mr. Narendra Modi, between the Statue of Unity near Kevadiya in Gujarat's Narmada district and Sabarmati Riverfront in Ahmedabad in October 2020.
• In November 2020, the Government of India announced that it is likely to increase the total number of allowed domestic flights to 75% of the pre-COVID-19 levels, as it expects a rise in passenger numbers due to the festive and holiday season.
• In September 2020, the Government of India sanctioned Rs. 108 crore (US $ 14.73 million) for Jagdalpur, Ambikapur and Bilaspur airports in Chhattisgarh under the UDAN scheme for upgrade and development.
• In August 2020, the government approved 78 new routes under UDAN 4.0 to enhance connectivity to remote and regional areas of the country.
• In April 2020, the government introduced ‘Lifeline Udan’ flights to transport essential medical cargo to remote parts of the country to support India’s war against COVID-19. Under this scheme, 588 flights were operated by Air India, Alliance Air, IAF and private carriers as of May 31, 2020.
• 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 Union Budget 2019-20, the 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).
• In January 2019, Government of India released its National Air Cargo Policy Outline 2019, which envisaged making Indian air cargo and logistics the most efficient, seamless and cost and time effective globally by the end of next decade.
• Regional Connectivity Scheme (RCS) has been launched.

Achievements

Following are achievements of the Government:

• Under RCS-Udan scheme, approximately 34,74,000 passengers were flown and 335 routes were awarded during 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 was 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% 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.

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

Note: Conversion rate used in December 2020, Rs. 1 = US$ 0.01357

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

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