Aviation is a great industry. It is a force for good in the world that generates wealth—both material and of the human spirit. It has enormous potential—particularly in this region.
Alexandre de Juniac, IATA’s Director General and CEO, said: “These are good times for the global air transport industry. Safety performance is solid. We have a clear strategy that is delivering results on environmental performance. More people than ever are travelling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability. It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses.”
All the signs are positive. The future looks bright and without turbulence. The upswing in policy support, conducive business conditions, varied investment opportunities, open markets for foreign direct investments (FDI) and increased investments have been reflected in growing aircraft fleet size, strategic location, a trained pool of highly skilled engineering expertise clubbed with lower labour cost—all of these coming together as an entity.
This strength gives India the edge to be a global Maintenance, Repair and Overhaul (MRO) hub in the longer term. Growth seen in the aviation segment is resulting in an increased demand for MRO facilities. According to Boeing estimates, the Indian fleet will reach 1,200 in size by 2020. India at present has 400 commercial and 700 general aviation aircraft—300 business jets, 300 small planes and 250 helicopters are expected to be added to the current fleet over the next five years.
India is one of the fastest growing aviation markets and currently the ninth largest civil aviation market in the world with a market size of around $16 billion. India is projected to become the third-largest aviation market by 2026 and the largest by 2030.
India’s status as the fastest growing aviation market in the world creates tremendous opportunities. However, the risks are also heightened as the inadequacy of India’s infrastructure planning, a fast emerging shortage of skills, flawed policy initiatives, and weak regulatory oversight, threaten to become major stumbling blocks. The potential is enormous, but unless the government bites the bullet, it will be seriously constrained.
The future surge has received a push from the past growth from 10 years ago. This period alone eclipses that of the past 50 years. Domestic traffic could grow by nearly 25% in FY2018 and approach 130 million passengers, while international airport traffic has gone up from 22 million passengers to 55 million passengers. Interestingly, the increase in domestic airport traffic in the past 10 years is about three times that of domestic airport traffic in the past 50 years. At present, India has over 430 aircraft in service, and 783 on order. Aside from this, an additional 250-300 orders remain in the pipeline from various airlines. This ratio of orders to in-service aircraft is the highest out of all major markets around the world. At present, most of the top 10 airlines are achieving year round load factors of 90% or higher, indicating constrained capacity. A consistent traffic growth of 20% for 3-5 years will consume scarce capacity without significant productivity improvements at both AAI (Airport Authority of India) and PPP (Public Private Partnership) airports.
Traffic is expected to grow by about 20% during the financial years of 2017 and 2018. During the next 18-24 months, airlines in India are expected to add 100 more aircraft.
The highest growth market is projected to be to and from the Indian subcontinent area at 5%, followed by intra-Middle East travel at 4.3%. The most heavily travelled routes, in total passenger terms, will continue to be to and from European markets.
India is expected to continue and experience economic growth at higher than the world average during the next 20 years. In addition, the 18.2% air travel growth projection provides a strong foundation for expansion by the region’s airlines.
The main thrust for a build up of the regional network in India should come from two directions. The first, in realising that pride and prestige routes are no longer viable and that large aircraft with 35% load factors are not the answer to servicing secondary airports. So far, the region has been slow to accept the role of the below 80-seater aircraft.
There should also be a corresponding increase in bizjets with charters and outright corporate investment adding a boost to this category.
There seems to exist a belief that turboprops are passé as against turbofans and little is underscored about the fact that on 40-minute runs, the costs saved on modern day high efficiency props without compromise in comfort and safety. The time loss is not even three to five minutes to the hour.
With executive traffic showing a rise and leisure tourism coming into play, especially in short haul routes, the impact will be positive—as will be the opening of new markets in the interiors.
The upswing in the bizjet market is gaining impetus again and the lull of the past two years is showing a certain surge. Bombardier’s Global 5000 leads the resurgence and one can see how the company is positioning its wide range of aircraft (from the Lear45XR to the Global 5000 and the Challenger 300 as well as the Global Express) for the Indian markets. Close on the heels of the Global Express came the Bombardier Continental Business jet aircraft, clearly designed to offer high value in the emerging super midsize business jet category.
Not only is the interest perking again where charters have achieved a certain upmarket texture to their operational envelope, the Falcons, Cessnas, Gulfstream and the Learjet family are also very popular choices.
With jet flight hours assessed at reaching the 7 million mark by 2017, this is a vibrant and vigorous market. No longer is the bizjet seen as an indulgence and governments, corporations and celebrities are all recognising the financial and efficiency advantages of having access to one’s own aircraft.
Even traditional accountants have done their homework and discovered it is a happy bottom line addition.
Boeing Forecasts demand for 2,100 New Airplanes in India
According to Dinesh Keskar, senior vice president, Asia Pacific and India Sales, Boeing Commercial Airplanes: “Commercial aerospace demand in India continues to grow at unprecedented rates.” Keskar added: “The increasing number of passengers combined with a strong exchange rate, low fuel prices and high load factors bode well for India’s aviation market, especially for the low-cost carriers.”
In the single aisle market, the A320 Family has enjoyed a high level of success across the region.
As is evident, the aviation sector in India is at a crucial juncture. With the potential for great profit and all-round growth on the horizon, the right steps need to be taken to reach that goal. Proper investments in airports and not just aircraft, and bilateral air services agreements, will lead to a well-balanced growth in the years to come.
The Indian aviation industry requires 675 new commercial jet airplanes worth $65 billion in the next two decades.
As much as 41% of the new deliveries will be intermediate-size twin-aisle airplanes, a significantly higher proportion than is expected in other regions.
More than half, or 351 airplanes delivered, will be single-aisle and small regional jets. Meanwhile, just 5% will be 747-size and larger, although that figure could change dramatically if the A380 orders take off.
The need for new airplanes is required to support a 18.7% annual increase in air travel serving India, the percentages could change and rise as high as 20.8 % per year.
Low cost airlines, the slew of Indian carriers and the market underscore the trend.
Domestic traffic could grow by nearly 25% in FY2018 and approach 130 million passengers.
It is a market with enormous potential. But aviation’s development is being held back by shortsighted government policies. High taxes mean that fuel accounts for an average of 45% of an Indian airline’s operating costs—against an industry average of 32%. A lack of capacity in the country’s economic heart—Mumbai—restricts connectivity, while development of the new Navi Mumbai airport seems to incur a fresh roadblock at every stage of its development. And where world-class infrastructure has been built—as in Delhi—costs are an issue. Proposals to boost charges by 340% may earn it distinction as one of the world’s most expensive airports, but it will destroy Delhi’s competitiveness as a hub.
The stunted growth of Indian aviation comes with an economic cost. Compared to India’s population size, the number of aviation jobs are on a higher side at 1.7 million. And the economic contribution of aviation is still only 0.5% of the Indian economy. It is an important 0.5%. But even considering the GDP per capita in India, these numbers tell us that there is unused potential in India. There is a need to reassess policies in order for aviation to reach its potential as a primary contributor to India’s economic growth.
There are six billionaires across the world who derive the majority of their wealth from aviation, according to Forbes, and all of them are from Asia. Two Indians—IndiGo’s Rahul Bhatia and Rakesh Gangwal—are No. 1 and No. 2 respectively, while another is poised to enter the club. The phenomenal turnaround of India’s third-largest airline SpiceJet is propelling its chairman and managing director Ajay Singh closer to the aviation billionaires’ group.
India will truly be flying high when these six become 60 and 1.2 billion Indians take to the air.