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Indian aviation, flying high

India remained the fastest growing domestic aviation market globally for the third straight year in 2017. India has 86 scheduled international airlines comprising of 5 Indian carriers and 81 foreign carriers, which ensure that India is well connected with most major countries. Revenue per kilometre (RPK) in domestic air travel rose by 23.3% in 2016-17.Indian carriers reported a combined profit of USD 122 mn in 2015-16.

  •   India aims to become the third-largest aviation market globally by 2020
  •   Indian carriers plan to increase their fleet size to 800 aircrafts by 2020
  •   Freight traffic on Indian airports is expected to cross 11.4 MT by 2032
  •   Government agencies projects requirement of around 250 brownfield and green-field airports by 2020

 

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.

India has 464 airports and airstrips, of which 125 airports are owned by Airport Authority of India (AAI). These 125 AAI airports manage close to 78% of domestic passenger traffic and 22% of international passenger traffic.

Domestic airlines carried 75.4 mn passengers during January-August 2017 compared to 64.4 mn during the previous corresponding period. 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%).

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

Maintenance, repair and overhaul (MRO) industry is expected to grow to USD 2 bn by 2020 from USD 800 mn currently.

Growth Drivers

Aviation GD
  • Domestic Passenger traffic growth (2017)

    21.5%

  • Foreign Tourist Arrival (CAGR 2001-14)

    8.9%

  • Total freight traffic (MMT) in FY 16

    2.9

  • Air craft movement growth (FY16)

    16%

Key policies

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.

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.
 

FDI Facts

  • FDI allowed in both greenfield and brownfield projects for Airports

  • FDI allowed in ground handling and maintenance and repair organizations

  • 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

  • February 2018 - Mahindra Aerospace and Canada’s Viking Air have signed a memorandum of understanding to form a strategic alliance for making smaller aircraft to support regional air connectivity in India.

  • 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.

  • February 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