Overview

Indian aviation sector has witnessed a remarkable growth story in the last decade with robust growth in passenger and cargo traffic, huge jump in the number of aircrafts operating in the country, an impressive increase in the non scheduled operators, surge in investment in the airport infrastructure, rapid rise in the number of operational airports, modernization and augmentation of capacities at various metro and non-metro airports and much more.

Rapidly expanding air transport network and opening up of the airport infrastructure to private sector participation have fuelled the growth of the air traffic in the country. India is likely to be the fastest growing aviation market in the world in the next 20 years. Indian airport system is poised to handle 336 million domestic and 85 million international passengers by 2020, from the current level of 121 million domestic and 41 million international passengers, making India the third largest aviation market. According to International Air Transport Association’s (IATA) Airline Industry Forecast 2012-2016, India’s domestic air travel market would be among the top five globally, experiencing the second highest growth rate at CAGR of 13.1%.

The second phase of growth in Indian aviation is expected to come from Tier-II and Tier-III cities. The non-metro airports presently account for only about 30% of the total air traffic, which is expected to rise to 45% in the next few years, representing vast untapped future market potential. With smaller cities set to lead the air traffic growth in the country, the government is planning to build nearly 200 low-cost airports in the next 20 years to meet the demand for air travel. Accordingly, Min of Civil Aviation is toying with the idea to use Scheduled, Regional and Non Scheduled Airlines in a manner that they compliment each other.

With metro routes now being highly competitive and well served, airlines are looking for new market opportunities beyond metros. In an endeavor to strengthen the air connectivity domestically, Government has taken significant measures for providing affordable air connectivity to remote and interior areas of the country – the North Eastern Region and Tier-II & III cities of India. Apart from the development of low-frill airports and modification of Route Dispersal Guidelines, Government is in the process of formulation of a policy for the promotion of regional and remote-area connectivity, incentivizing Indian airlines to operate on these routes, by code-sharing and seat-credit mechanism.

Furthermore, Government is planning to construct 15 additional airports in the country under the Greenfield Airport Policy, by identifying the most suitable low cost viable model for development of small airports. These airports are expected to improve connectivity with underserved and unserved regions of India. Moreover, Airports Authority of India plans to invest INR 1500 crore in the development of non metro airports during the 12th plan.

In pursuit of stimulating the air connectivity, India is planning to invest over US$ 120 billion in the development of airport infrastructure (construction of new airports, expansion and modernization of existing airports) & development of low cost airports to keep the tariff at its minimal at smaller airports; improvement in connecting infrastructure(road, metro, sea, link etc.); development of world class Air Navigation Services (ANS) infrastructure; enhancing the present operations of helicopters to improve connectivity of remote/smaller places with bigger cities; modernizing security & surveillance at airports; and skill augmentation through a vibrant, world class aviation education & training mechanism.

Market Opportunities

  • Indian airports require an investment of over USD 12 billion in the next 5 years
  • Additional 30 airports required to handle the growing passenger and cargo traffic in the next 5 years
  • Airlines are expected to add around 370 aircrafts(worth USD 27.5 billion) to their fleet by the year 2017
  • Investment to the tune ofUSD 4 billion required for General Aviation in the next 5 years
  • Air Navigation Services (ANS) requires investment worth USD 7 billion in the next 5 years
  • USD 5 billion required for developing ground handling, cargo, and logistic facilities at major airports
  • FDI up to 49% allowed in domestic airlines by foreign carriers
  • Foreign equity up to 100% allowed in airport development
  • Domestic and International passenger traffic are expected to grow at annual average rate of 12% and 8% in the next five years
  • Annual average rate growth of domestic and international cargo are estimated to be 12% and 10% during the next five years
  • MRO industry to triple in size from INR 2250 crore in 2010 to INR 7000 crore by 2020
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