India’s Aviation Market
India’s Aviation Market
INDIA’S AVIATION MARKET
IS EXPECTED TO BE WORLD’S THIRD LARGEST BY 2024.
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.
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.
In FY21 (from May 2020 to March 2021), airports in India pegged the
domestic passenger traffic to be 53.4 million, a y-o-y decline of
62% over the fiscal ended March 31, 2020. The average number of
passengers per flight in February 2021 was 121, against an average
of 136 passengers per flight in February 2020. 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 2020, India had 153 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.
In March 2021, on the launch of the
‘Azadi Ka Amrit Mahotsav (India@75)’ by the Government of
India, the Ministry of Civil Aviation has proposed 392 routes
under the UDAN 4.1 bidding process.
The Airport Authority of India plans to abolish royalty and
offer steep discounts in lease rent to encourage MRO units to set up
facilities at its airports.
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 for
Jagdalpur, Ambikapur and Bilaspur airports in Chhattisgarh
under the UDAN scheme for upgrade and development.
Under Union Budget 2021-22, the government lowered the custom duty
from 2.5% to 0% on components or parts, including engines, for
manufacturing of aircrafts by public sector units of the Ministry of
Defence.
Under Union Budget 2021-22, the Indian government expanded the
scope for ‘Krishi Udaan’ in convergence with Operation Green
Scheme, wherein air freight subsidy of 50% for agri-perishables
would be provided to North East states and 4 Himalayan states/UTs.
The expansion of product-coverage will boost the ‘Krishi Udaan’
scheme and improve air cargo transportation from these states.
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.
Regional Connectivity Scheme (RCS) has been launched. 3,13,668
domestic passengers flew on February 28, 2021—the highest number
since resumption of domestic flights on May 25, 2020. 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 of December 31, 2020, 31 lakh Indians have been repatriated
under the Vande Bharat Mission. The Vande Bharat Mission has so far involved 6,373 Air India flights and 474 flights
by private Indian carriers. About 1,035,471 Indian nationals have
been repatriated by Air India, whereas 74,675 Indian nationals have
been brought back by private carriers.
In April 2020, the government introduced the
‘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, about 600 flights flew more than 5 lakh
kms and transported about 1,000 tons of essential cargo.
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$ 2.88 billion
between April 2000 and December 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
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
In March 2021, the Indira Gandhi International (IGI) Airport in
Delhi announced a key expansion project to increase its passenger
handling capacity. The expansion project includes a new terminal,
advanced facilities, an additional runway and improved capacity to
handle more passengers.
In March 2021, the government announced plan to set up two water
aerodromes in Assam and four water aerodromes in Andaman &
Nicobar Islands this year to boost tourism and connectivity.
In March 2021, the government submitted a proposal to develop a
water aerodrome project at the Ujjani Dam, under the Ministry of
Civil Aviation’s UDAN-RCS (regional connectivity scheme).
On March 25, 2021, Union Minister of Civil Aviation Hardeep Singh
Puri inaugurated the Kurnool Airport, Orvakal, Andhra Pradesh, in a
virtual ceremony. The flight operations at Kurnool airport will
commence on March 28, 2021 under the Regional Connectivity Scheme –
Ude Desh Ka Aam Nagrik (RCS-UDAN).
On February 25, 2021, the Airports Authority of India (AAI) issued
tenders for construction of the first phase of an international
airport at Dholera in Gujarat, entailing an investment of Rs. 987
crore (US$ 135.07 million). The new facility is being set up in
greenfield city under the Delhi–Mumbai Industrial Corridor (DMIC)
project at Dholera.
On January 19, 2021, the Airport Authority of India (AAI)
signed a concession agreement with
Adani Group for three airports—Jaipur, Guwahati and
Thiruvananthapuram.
The concession period is 50 years from the date of commercial
operations.
On December 21, 2020, IndiGo announced that it has collaborated
with Urban Drive car rental company to offer self-driven and
chauffeur driver services across 60 Indian cities.
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.
AAI plans to invest Rs. 25,000 crore in next the five years to
augment facilities and infrastructure at airports. UK group to
invest Rs. 950 crore in Turbo Aviation's new airline TruStar.
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 by 2021. Due to rise in demand in air travel, India will need 2,380 new commercial airplanes by 2038.
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.
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