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Indian aviation, flying high

India is one of the fastest growing civil aviation markets in the world for two years from 2015 to 2017 in a row. Domestic air travel demand in 2016 has been twice that of China, commanding a lion’s share of 69% of total airline traffic in the South Asia region. India has 86 scheduled international airlines comprising 5 Indian carriers and 81 foreign carriers which ensure that India is well connected with 55 countries through more than 300 routes. In 2016-17 Revenue Per Kilometer (RPK) rose by 23.3% in domestic air travel. India’s airlines reported a combined profit of USD 122 mn in FY 2016.

  •   By 2020, Indian carriers plan to increase their fleet size to reach 800 aircrafts 
  •   By 2020, Government agencies project that around 250 brownfield and greenfield airports would be required
  •   By 2020, India aims to become the third-largest aviation market
  •   By 2032, Freight traffic on airports in India is expected to cross 11.4 MT

 

Up to 100% FDI is permitted in Non-scheduled air transport services under the automatic route.

Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic route.

Up to 100% FDI is permitted in MRO for maintenance and repair organisations; flying training institutes; and technical training institutes under the automatic route.

Up to 100% FDI is permitted in Ground Handling Services subject to sectoral regulations & security clearance under automatic route.

for more details refer FDI Policy 2017

HIGHLIGHTS

  • Ninth largest civil aviation market in the world
  • Fastest growing domestic air market in the world
  • India’s air transport sector currently supports 8 mn jobs

Industry Scenario

India’s air transport sector currently contributes USD 72 bn to GDP.

Passengers carried by domestic airlines during January-August 2017 were 75.4 mn as against 64.4 mn during the corresponding period of previous year, thereby registering a growth of 16.9%. Also for the corresponding period, IndiGo held a market share of 38%, followed by Jet Airways (18.3%), SpiceJet (14%), Air India (13.2%), GoAir (8%), AirAsia India (4.3%), Vistara (3.7%) and Trujet (0.5%). India has 464 airports and airstrips, of which 125 airports are owned by AAI. These 125 AAI airports manage close to 78% domestic passenger traffic and 22% of international passenger traffic.

However, the share of international freight traffic is much higher (62%) in comparison with 38% of domestic freight traffic.

  •  By 2020, Maintenance, Repair and Overhaul (MRO) industry is expected to grow to USD 2 bn from current USD 800 mn

Growth Drivers

Aviation GD
  • Domestic Passenger traffic growth (2017)

    21.5%

  • Foreign Tourist Arrival (CAGR 2001-14)

    8.9%

  • Total freight traffic (Lakh MT) in FY 16

    29.8

  • Air craft movement growth (FY16)

    16%

Key policies

Regional Connectivity Scheme (RCS)

The Ministry of Civil Aviation (MoCA), Government of India released the National Civil Aviation Policy 2016 (NCAP 2016). One of the objectives of NCAP 2016 is to “enhance regional connectivity through fiscal support and infrastructure development”.
The primary objective of RCS is to facilitate / stimulate regional air connectivity by making it affordable.
 

National Policy on Civil Aviation 2016

Major objectives:
i) Establish an integrated eco-system which will lead to significant growth of civil aviation sector, which in turn would promote tourism, increase employment and lead to a balanced regional growth.
ii) Ensure safety, security and sustainability of aviation sector through the use of technology and effective monitoring.
iii) Enhance regional connectivity through fiscal support and infrastructure development.
iv) Enhance ease of doing business through deregulation, simplified procedures and e-governance.
v) Promote the entire aviation sector chain in a harmonised manner covering cargo, MRO, general aviation, aerospace manufacturing and skill development.
 

Policy on Regional and Remote Area Air Connectivity

With a view to achieving better air regulation of air transport services and taking into account the need of air transport services to different regions in the country, the govt. issued Route Dispersal Guideline in March 1994.

FDI Facts

  • FDI allowed in Greenfield Projects

  • FDI allowed in Brownfield projects

  • FDI in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air Transport Service under automatic route.

  • FDI in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air Transport Service under government route

Recent Investments

  • June 2017 - IndiGo, having 42% of the Indian aviation market has entered into a partnership with global distribution system services operator Travelport, to expand its global presence by distributing its ancillary products to the portal’s customers across 180 countries.

  • March 2017 - Airbus, leading European aircraft manufacturer, plans to invest USD 40 mn to set up a pilot and maintenance training center in New Delhi, which will be operational by the end of 2017. It will be setting up a greenfield training facility in Aerocity, close to Delhi's Indira Gandhi International Airport. This training facility is being set up to cater to the growing demand of skilled people in the domestic aviation space.

  • Feburary 2017 - GVK Power & Infrastructure Ltd., which operates the existing airports in Mumbai and Bangalore, has won the right to build Mumbai’s second airport in Navi Mumbai, which will require an investment of USD 2.4 bn to build the airport with a capacity to handle 10 mn passengers annually in the first phase, expected to be operational by 2019 and 60 mn passengers a year by 2030.

Major Investors