• November 30, -0001

Brief Introduction

It is a very well known fact that aviation sector not only brings immense benefits to communities and economies around the globe, but also is a key catalyst of economic growth, social development and tourism. It facilitates connectivity and access to international markets. Air transport currently supports 56.6 million jobs and accounts for over US$ 2.2 trillion of the global gross domestic product (GDP).

Air passenger traffic in India is increasing on a tremendous pace. The sub-continent’s airport infrastructure is undergoing modernisation with the induction of most advanced facilities. It includes setting up of new Greenfield airports and installation of security, surveillance and air traffic navigation systems.

India is currently the 9th largest aviation market handling 121 million domestic and 41 million international passengers. Today, more than 85 international airlines operate to India and 5 Indian carriers connect over 40 countries.

Market Size

• Total domestic passengers carried by the scheduled domestic airlines between January and May 2013 were 25.998 million, as against 25.808 million during the corresponding period of previous year thereby registering a growth of 0.74 per cent, revealed the statistics from Directorate General of Civil Aviation (DGCA).
• No-frill carrier IndiGo lead in terms of market share with 29.7 per cent of the pie, followed by Jet Airways-Jet Lite combine at 25.3 per cent, Air India Domestic at 19.2 per cent, Spice Jet at 17.5 per cent, and Go Air at 8.3 per cent for the month of July 2013.
• The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 456.84 million from April 2000 to July 2013, as per the data released by Department of Industrial Policy and Promotion (DIPP).

Key Developments and Investments

• Jet has become the first Indian airline to place an order of fuel-efficient 737 Max aircraft with the plane-maker Boeing. Boeing and Jet have recently inked a purchase agreement wherein Jet has agreed to buy 50 such planes at a cost of around US$ 5 billion. The agreement is still under negotiation (for discounts).

The service of 737-Max is expected to commence by 2017.

• India's first ever aviation university, the Rajiv Gandhi National Aviation University at Rae Bareli in Uttar Pradesh, will start imparting training to aspiring pilots, aircraft engineers and cabin crew in September 2014. The educational entity is a Government organisation that has been developed to acknowledge the industry's chronic talent shortage.

The university will induct 1, 000 students by 2018 and eventually, all flying schools in India will get affiliated to this university.

• The Government of Haryana plans to establish a cargo airport in the state by taking up Public Private Partnership (PPP) mode for the green-field project at Meham in Rohtak. The Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) will be the equity partner for bearing the cost of land acquisition for the project.
• India's first indigenous aircraft carrier (IAC), being developed at the Cochin Shipyard, has been launched in August 2013. The 40, 000 tonne-warship machinery is expected to be operational by 2018. It is done with major fittings and underwater work. Now the superstructure, the upper decks and out-fittings are to be worked upon.

Government Initiatives

The Indian Government is intensely dedicated for the development of the Indian aviation industry and has introduced several policies and regulatory reforms to boost private participation and investments in the same. Recently, the Government allowed 49 per cent FDI by foreign airlines in the sector.

• The Government has finally given its nod to the US$ 900 million-Jet-Etihad deal, embarking on the biggest FDI in Indian aviation sector. The Foreign Investment Promotion Board (FIPB) has asked for certain amendments in the deal though. Once the modified deal is approved by the Cabinet Committee on Economic Affairs, Etihad would be eligible to become the owner of 24 per cent stake in Jet for US$ 379 million.
• Not only that, Jet Airways has also been allowed to go for code-sharing with five airlines — American Airlines, Malaysian, Garuda of Indonesia, Vietnam Airlines and Kenya Airways – by the aviation ministry. The nod would enable Jet expand its global footprint and become the biggest Indian carrier in terms of network.

A code-share enables two or more airlines share the same flight. Passengers will buy ticket from one airline and take a flight operated by another airline, allowing partners to enhance their reach across the global sky.

• Furthermore, Mr K.C. Venugopal, Minister of State for Civil Aviation, has recently informed Rajya Sabha that 17 new airports have been proposed for construction during the 12th Five Year Plan.

The details of the proposals have not been disclosed yet.

• The Indian Government has also been visionary in terms of the talent requirement for the flourishing aviation industry in future. In order to address the shortage of skilled, managerial and operational personnel in aviation, the bill to establish the aviation university (which has been already discussed above), has been forwarded to the Lok Sabha Secretariat. The university will offer and endorse aviation studies, teaching, training, research and extension work with focus on emerging areas of studies such as aviation management, aviation regulation and policy, aviation science and engineering, transportation of dangerous goods and other related fields, according to the proposal. The Indian Government has calculated the project outlay of Rs 202 crore (US$ 31.92 million) for the institution until 2019.

Road Ahead

Indian aviation market is poised to become the third largest across the globe by 2020, according to industry estimates. The sector is expected to handle 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion. Indian Aviation Industry that currently accounts for 1.5 per cent of the GDP, has been instrumental in the overall economic development of the country, said Mr Ajit Singh the Minister for Civil Aviation. He further stated that given the huge gap between potential and current air travel penetration in India, the prospects and possibilities of growth of Indian aviation market are enormous.

Exchange Rate Used: INR 1 = US$ 0.01580 as on September 17, 2013

References: Media Reports, Press Releases, Press Information Bureau, Department of Industrial Policy and Promotion (DIPP), Directorate General of Civil Aviation (DGCA)