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India Aviation Report says country to become third largest aviation market by 2020

Business Standard:  March 17, 2016

Hyderabad: The FICCI-KPMG India Aviation Report launched on the second day of India Aviation Show here said the country is well on its way to become the third largest aviation market by 2020.

With 81 million trips, India's domestic aviation market grew at over 20.3% during Janurary-December 2015, the highest ever growth rate recorded in the world.

"In January, 2016, the passenger growth is 22%. Some people attribute this growth to fall in crude prices, but no other country in the world had achieved this kind of growth during the period," R N Choubey, secretary, Ministry of Civil Aviation, said at the launch event.

According to the report, the Indian civil aviation industry has exhibited tremendous resilience to the global economic slowdown and ranks ninth in the global civil aviation market. This is largely attributed to the growing economy, increased competition among airlines, especially among low cost carriers, modern airports, greater use of technology, foreign direct investment and increased emphasis on regional connectivity.

The report observed that the National Civil Aviation Policy (NCAP 2016), which is likely to be out by next month, would provide a significant fillip to the industry. The various fiscal and monetary incentives, liberal policies focused on ease of doing business and enhanced push for regional and global connectivity are extremely positive, it says.

Stating that the growing competition among the states would provide a further fillip to the growth of India as well as its aviation sector, Union Civil Aviation Minister Ashok Gajapathi Raju said the task in front of them was to make India also economically great as it had already achieved greater heights in terms of culture and heritage. Earlier, the minister launched the India Aviation report.

The report suggests that aspects such as increasing disposal incomes, fall in prices of aircraft turbine fuel (ATF), increase in tourism, visa reforms, etc have placed India in a unique position. This brings the country closer to achieving its vision of becoming the largest aviation market by 2030, it said.

Steps taken to revive and operationalise around 160 airports in India, if chosen carefully, will improve air connectivity to regional and remote areas. Public-private partnerships in the sector will get substantial support from the state in terms of financing, concessional land allotment, tax holidyas among other incentives, the report suggests.

"Enormous growth in domestic passenger traffic, substantial strengthening through government initiatives, decrease in global crude oil prices and airlines showing profits indicates a significantly positive transformation for the Indian civil aviation market. The close partnership between the government and the industry in ongoing and future projects will further improve regional connectivity. I am certain that the sector will take complete advantage of the positive momentum and help sustain the growth," said Harshvardhan Neotia, president of FICCI.

According to Amber Dubey, partner and India head of aerospace and defence at KPMG, the positive impact of NCAP 2016, rise in disposable incomes and the fall in ATF prices are likely to help India leapfrog into the top three of the world.

India registered a growth of 17.1% in total passengers throughput financial year 2015-16 till January, 2016, standing at 184 million. Passenger throughput is expected to reach around 370 million by 2020, with domestic traffic constituting around 80% of the total throughput

According to International Air Transport Association, passenger traffic on international routes showed an increase of 6.5% in 2015 compared to 2014.  In comparison, during April-December 2015, international passenger throughput at Indian airports grew at 7.7%.

The report strongly suggests that in order to ensure high-geared growth, it is imperative to broaden the base of domestic flyers through greater air connectivity in Tier-2 and Tier-3 cities. Many Indian states have taken positive initiatives, largely in the field of development of airports, reduction in sales tax rates on ATF and direct subsidy to airlines for improvement of connectivity, according to the report.

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