Aviation


Overview

India's civil aviation industry is on a high-growth trajectory. India aims to become the third-largest aviation market by 2020 and the largest by 2030.


The Civil Aviation industry has ushered in a new era of expansion‚ driven by factors such as low-cost carriers (LCCs)‚ modern airports‚ Foreign Direct Investment (FDI) in domestic airlines‚ advanced information technology (IT) interventions and growing emphasis on regional connectivity. India is the ninth-largest civil aviation market in the world‚ with a market size of around US$ 16 billion.India is expected to become the third largest aviation market by 2020#.


“The world is focused on Indian aviation – from manufacturers‚ tourism boards‚ airlines and global businesses to individual travellers‚ shippers and businessmen. If we can find common purpose among all stakeholders in Indian aviation‚ a bright future is at hand” said Mr. Tony Tyler‚ Director General and CEO‚ International Air Transport Association (IATA).




Market Size

In May 2016, domestic air passenger traffic rose 21.63 per cent to 8.67 million from 7.13 million during the same month of last year. Passenger traffic during FY 2015-16 increased at a rate of 21.3 per cent to 85.57 million from 70.54 million in the FY 2014-15.


In March 2016, total aircraft movements at all Indian airports stood at 160,830, which was 14.9 per cent higher than March 2015. International and domestic aircraft movements increased 10.5 per cent and 16.0 per cent, respectively, in March 2016.


Indian domestic air traffic is expected to cross 100 million passengers by FY2017, compared to 81 million passengers in 2015, as per Centre for Asia Pacific Aviation (CAPA).


India is among the five fastest-growing aviation markets globally with 275 million new passengers. The airlines operating in India are projected to record a collective operating profit of Rs 8,100 crore (US$ 1.29 billion) in fiscal year 2016, according to Crisil Ltd.




Market Players

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in air transport (including air freight) between April 2000 and December 2015 stood at US$ 612.53 million. Key investments and developments in India’s aviation industry include:


  • Airbus SAS has signed an agreement with Karnataka-based Aequs Aerospace, an aircraft component maker, for the supply of over 100,000 titanium machined parts for its A320 new engine option (NEO) aircraft.

  • Lockheed Martin Corporation plans to make India a manufacturing base for its F-16V fighter jets, C-130J Super Hercules military transport planes and helicopters.

  • Auto components maker Bharat Forge Ltd (BFL), the flagship company of the US$ 3 billion Kalyani Group, has formalised agreement with Rolls-Royce Plc, under which BFL will supply critical and high integrity forged and machined components for a range of aero engines.

  • Boeing, has outlined the company’s long term commitment to investing in India in terms of funds as well as skills, capabilities, infrastructure and partnerships so as to help the aerospace sector build capacity and become one of the drivers of the Indian economy.

  • The Ministry of Civil Aviation has signed Memorandum of Understanding (MoU) with Finland, Kazakhstan, Kenya, Sweden, Norway, Denmark, Oman and Ethiopia for increased co-operation between the countries in terms of additional seats, sharing of airlines codes, increased frequencies and additional points of call, during the International Civil Aviation Negotiations (ICAN),2015 held in Antalya, Turkey.

  • Tata Advanced Systems (TASL) has signed a joint venture with American aircraft manufacturing major, Boeing, to establish a centre of excellence for manufacturing aerostructures for Apache helicopter initially and collaborate on integrated systems development opportunities in India in the long term.

  • US-based aircraft manufacturer Boeing plans to assemble one of its two helicopters namely, Chinook (heavy-lift) or Apache (attack type) in India, thus becoming yet another global company to invest in India encouraged by the ‘Make in India’ campaign.

  • Airbus, leading European aircraft manufacturer, plans to invest US$ 40 million to set up a pilot and maintenance training center in New Delhi, which will be operational by the end of 2017.

  • Airbus also expects India’s aviation industry to grow at over 10 per cent annually in the next decade, almost double the average growth rate of the global aviation industry.




Government Initiatives

Government agencies project that around 500 brownfield and greenfield airports would be required by 2020. The private sector is being encouraged to become actively involved in the construction of airports through different Public Private Partnership models, with substantial state support in terms of financing, concessional land allotment, tax holidays and other incentives.


In the Union Budget 2016-17, the government introduced various proposals for Maintenance, Repair and Overhaul (MRO) operations for airplanes. These include customs and excise duty exemption for tools and tool-kits used in MRO works. The government has also scrapped the one-year restriction for utilisation of duty free parts apart from allowing import of unserviceable parts by MROs for providing exchange. As per revised norms, the foreign aircraft brought in to India for MRO work would now be permitted to stay up to six months or as extended by aviation regulator Directorate General of Civil Aviation (DGCA). Such foreign aircraft would also be henceforth permitted to carry passengers in the flights at the start and end of its period of stay in India.


Some major initiatives undertaken by the government are:


  • The Ministry of Civil Aviation has finalised and put forward for approval to the Union Cabinet, the new aviation policy, which includes proposals such as allowing new airlines to fly abroad, introduction of more regional flights and a new formula for granting bilateral flying rights.

  • The Indian Space Research Organisation (ISRO) has signed a memorandum of understanding (MoU) with the Airports Authority of India (AAI), aimed at providing space technology for construction of airports.

  • Airports Authority of India (AAI) plans to develop city-side infrastructure at 13 regional airports across India, with help from private players for building of hotels, carparks and other facilities, and thereby boost its non-aeronautical revenues.

  • Directorate General of Civil Aviation (DGCA), India's aviation regulator, has signed an agreement with United States Technical Development Agency (USTDA) for India Aviation Safety Technical Assistance Phase II, aimed at bringing in systemic improvements in the area of operation, airworthiness and licensing.

  • The Government of India has given site clearance to Delhi Mumbai Industrial Corridor and Development Corporation (DMICDC) for setting up of a Greenfield Airport for public use near Bhiwadi in Alwar district of Rajasthan and has granted 'in-principle' approval to 13 other greenfield airport projects.

  • The Airports Authority of India (AAI) plans to revive and operationalise around 50 airports in India over the next 10 years to improve regional and remote air connectivity.

  • Gujarat is expected to get a second international airport at Dholera. The state government has formed Dholera International Airport Co. Ltd. and is obtaining approvals from the union government.

  • The Directorate General of Civil Aviation (DGCA) has given its approval to Air India’s maintenance, repair and overhaul (MRO) unit.

  • The Government of India has decided to award airports in Kolkata, Chennai, Jaipur and Ahmedabad on management contract. AAI has issued the ‘Request for Qualification’ document for these four airports.




Aerospace on a High

Airline operator Emirates plans to add new destinations in the US and Russia from Hyderabad via Dubai in the next few months. "Our market estimates are that there are about 1,500 passengers flying to Dubai and Seattle each every month from Hyderabad," according to K P Venugopal, Emirates Sales Manager, Andhra Pradesh


GippsAERO, the aircraft manufacturing division of Mahindra Aerospace, has signed an agreement with Rolls Royce to partner on engine technology for a new aircraft.
Air India will take delivery of its first Boeing 787 Dreamliner aircraft by the end of 2011, according to Dr Dinesh Keskar, President, Boeing India. Further, Boeing predicts that India will require 1,320 new aircrafts valued at US$ 150 billion over the next 20 years.
Air India Express has started operating direct flights from Muscat to three new destinations in Kerala, and have increase the number of flights from the Gulf to the country from October 31, 2011




Aviation - Recent Developments

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 per cent is the upwardly mobile middle class.


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 and the largest by 2030.


Exchange Rate Used: INR 1 = US$ 0.0149 as on May 16, 2016
References: Media Reports, Press Releases, Press Information Bureau, Directorate General of Civil Aviation (DGCA), Airports Authority of India (AAI), Union Budget 2016-17 Notes: # - According to the FICCI-KPMG ‘India Aviation Report 2016’