Aviation


 

OVERVIEW

Aviation sector in India, recorded the fastest domestic market growth for the fourth year in a row (18.6%), followed by China, as per International Air Transport Association (IATA) 2018 data. India has the ninth largest civil aviation market in the world. The sector currently supports 8 million jobs in the country. The air transport market in India employs more than 390,000 people and supports another 570,000, in the supply chain. Overall the industry contributes an average of US$30 billion annually to India’s GDP. Growing trade augurs well for airports as they handle about 30% of India’s total trade (by value).

Exports

During the first nine months of FY 2019, freight traffic growth in India stood at 7% on-year, led by 12% growth in domestic freight while international freight growth remained subdued at 4%.

Passenger Traffic Unit 2016-17 2017-18 % Change
Domestic Passengers Departing Passengers 103.75 million 123.32 million 18.86
Domestic Airline Demand RPK (Revenue Passenger Kilometer) 98.64 billion 117.04 billion 18.65
Domestic Airline Capacity ASK (Available Set Kilometers) 116.94 billion 134.54 billion 15.05
International Passengers Departing and Arriving Passengers 54.68 million 60.58 million 10.79
Total (Domestic and International) 158.43 million 183.90 million 16.08
Source: Handbook of Civil Aviation statistics 2017-18
Note: ASK is calculated as the sum of products obtained by multiplying the total number of seats that are available in each flight stage by the corresponding stage distance and RPK is calculated as the sum of the product obtained by multiplying the number of revenue passengers carried on each flight stage by the corresponding stage distance.

The international and domestic passengers traffic recorded an increase of 6.8% and 15.7% respectively resulting into overall increase of 13.8% in total passenger traffic during the period (April- January) 2018-19 as compared to (April- January) 2017-18.

Freight traffic in India increased from 1.40 million MT in FY 06 to 3.36 million MT in FY 18, recording a CAGR of 7.56 %, during this period. During April 2018 to January 2019, total freight traffic handled stood at 2.9 million tonnes. The aircraft movements, passenger and freight traffic have increased by 9.8 percent, 8.4 percent and 4.2 percent respectively at all Indian airports taken together during January 2019 over January 2018.

Category APRIL- JANUARY % Change
Aircraft Movements (in ‘000) 2018-19 2017-18  
International 379.28 365.25 3.8
Domestic 1812.72 1554.42 16.6
Total 2192.00 1919.67 14.2
General Aviation 220.79 232.22 -4.9
Passengers(in million)      
International 57.99 54.32 6.8
Domestic 231.00 199.58 15.7
Total 288.99 253.90 13.8
Freight(in ‘000 ton)      
International 1838.31 1780.93 3.2
Domestic 1142.68 1011.27 13.0
Total 2980.99 2792.20 6.8
Source: DGCA

Foreign Direct Investments

Up to 100% FDI is permitted in Non-scheduled air transport services, helicopter services and seaplanes under the automatic route. 100% FDI is permitted in MRO for maintenance and repair organizations, flying training institutes and technical training institutes under the automatic route. Ground Handling Services subject to sectoral regulations & security clearance under the automatic route are also permitted for 100% FDI.

FDI in air transport including air freight was US$1820.6 million during April 2000- December 2018.

Outlook

Exceptional traffic on account of GST implementation and movement of aircraft components was observed during FY2018, reducing international freight traffic growth to 3-5% in fiscal 2019.The rising oil prices and depreciation of rupee in the current fiscal has brought down the operating profits of airline companies.

The induction of Boeing 737 Max was expected to significantly improve the fuel efficiency. The savings on fuel costs were expected to bring down the subsequent losses in the industry. Following the crash of an Ethiopian Airline on 29th October 2018, the Ministry of Civil Aviation banned the operations of Boeing 737 Max 8 flights as “Aircraft Safety” has become a fresh problem to deal with. Lesser flights with India’s 2nd largest (Jet Airways) and 4th largest (Spice Jet) airlines in terms of market share, the fares are expected to rise.

However, as per Crisil Research, over fiscals 2018-23, the overall passenger traffic is expected to grow at CAGR of 13-15% to 603 million, as the domestic traffic share is expected to rise further to 81-82%. The rise in share is on account of a faster growth in domestic passenger traffic at 13-15%, even as international passenger traffic growth hovers at 8-10%.

On account of a cancellation of routes awarded to Air Odisha and Deccan Charters during UDAN Phase I, the number of operational UDAN airports in November 2018 remained at 31, as the number of operational routes fell to 75 from 90 in August 2018. However, the number of airports having connectivity is expected to improve going forward as more routes from UDAN Phase II become operational. Moreover, the government recently announced the awarding of 235 routes under UDAN Phase III, in partnership with the Ministry of Tourism. This is expected to support growth at UDAN airports.

The investments in Indian airports are likely to show significant increase in the coming fiscal, as a result of privatization of non- metro projects as well as brownfield investments in Delhi, Bengaluru, Hyderabad and Chennai airports. Apart from Delhi and Mumbai airports, Bengaluru, Hyderabad, Kochi and Kannur are also being operated under the public private partnership (PPP) model. Even major upcoming greenfield airports such as Navi Mumbai, Mopa (Goa), Bhogapuram (Andhra Pradesh), Dholera (Gujarat), among others, are also being planned under the PPP route. This increase in the number of PPP airports is expected to drive investments as it improves financial flexibility in the sector by reducing dependency on the AAI, as per Crisil Research.


 

SELECT GOVERNMENT INCENTIVES

Select Government Incentives

  • In November 2018, the number of operational Ude Desh ka Aam Nagrik(UDAN) airports remained at 31 even as the number of operational routes fell to 75, from 90 in August 2018. The reduction was mainly on account of a cancellation of routes awarded to Air Odisha and Deccan Charters during UDAN Phase I.
  • The Government of India’s recently released National Air Cargo Policy Outline 2019 envisages making Indian air cargo and logistics the most efficient, seamless and cost and time effective globally by the end of the next decade.
  • Currently, six international airports have been completed successfully under PPP mode.
  • The sector is expected to witness investments worth US$25 billion by 2027.
  • In November 2018, the Government of India approved a proposal to manage six AAI airports under public private partnership (PPP). These airports are situated in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangalore.
  • The Navi Mumbai airport is being developed under a PPP model by GVK Group subsidiary Mumbai International Airport (MIAL) and City and Industrial Development Corporation of Maharashtra Ltd (CIDCO) with an investment of Rs 16,000 crore (US$2.22billion).
  • As of October 2018, the Government of India has released a policy on biometric digital processing of passengers at airports called ‘Digi Yatra’, The policy will ensure uniform implementation and passenger experience across Indian air ports through a connected ecosystem.
  • Digital Sky Platform was launched in December 2018 for legalized flying of Remotely Piloted Aerial Systems (RPAS), popularly referred to as drones. If an RPAS does not have permission to fly, it will not be allowed to take-off under the policy of No Permission-No-Takeoff (NPNT), as part of the Civil Aviation Regulations launched by the Ministry in August 2018.