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India set to trigger revival of global aviation sector

BusinessIndia set to trigger revival of global aviation sector

New Delhi :The success of the global aviation sector now hinges on Asia and India occupies a prime spot in it. As more and more Asian economies are creating affluent middle classes, the aviation sector is gearing to welcome millions of them on board. The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world and is expected to overtake United Kingdom to become the third largest air passenger market by 2024.

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.  To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. As of March 2019, India has 103 operational airports. India has envisaged increasing the number of operational airports to 190-200 in the near future. Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. As of July 2018, there were nearly 620 aircraft being operated by scheduled airline operators in India. The number of airplanes is expected to grow to 1,100 planes by 2027.

Despite its woes, national carrier Air India is still the backbone of the industry. The Maharaja now owns 120 aircraft, half of which are owned and the rest leased. It runs a large number of domestic routes and flies to 40-50 international destinations. India’s national carrier is looking for a suitable bidder to overhaul the entire system. Despite all its woes, it is still fueling growth and providing a tough race for the private sector to meet the demands in the market. The nine major Indian carriers are cobbling new strategies and procuring modern aircraft to face the challenges. They together took deliveries of over 120 planes comprising both twin and single aisle as well as regional jets in the just-concluded year as against 88 planes inducted in 2017. Domestic passenger traffic has been growing at about 20% for more than four years now and capacity addition along with other factors has played a key role in this robust growth. Majority of the planes inducted by the carriers last year, according to available figures, were Airbus A320 Neos, with four carriers—IndiGo, GoAir, Air India and Vistara—taking deliveries of more than 60 of these planes besides other types of aircraft. At present, these carriers together have over 660 planes. Budget carrier IndiGo has 206 planes including A320 Neos, while both Air India and Jet Airways have 125 and 124 aircraft, respectively, in their fleets.

IndiGo inducted a total of 55 aircraft, including its first long-range A321 Neo; Air India and its subsidiaries took deliveries of 18 planes followed by GoAir 16 and SpiceJet 14 in 2018. While IndiGo and GoAir A320 Neos are powered by Pratt & Whitney engines, Air India and Vistara have CFM engines in their A320 Neo planes.

Five carriers combined—IndiGo, Jet Airways, SpiceJet, GoAir, Vistara—have placed orders for around 1,115 planes with global aircraft makers since 2011. The federal government is providing all possible to make the sector a backbone of the economy. Airport Authority of India (AAI) is going to invest Rs 15,000 crore ($2.32 billion) in 2018-19 for expanding existing terminals and constructing 15 new ones. The AAI is also planning to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-regional hubs. To support the industry, the government has exempted Indian aircraft Manufacture, Repair and Overhaul (MRO) service providers from customs and countervailing duties.

In February 2019, the Government of India sanctioned the development of a new green-field airport in Hirasar, Gujarat, with an estimated investment of Rs 1,405 crore ($ 194.73 million). As of January 2019, the Government of India is working on a blueprint to promote domestic manufacturing of aircrafts and aircraft financing within the country. In January 2019, the government organised the Global Aviation Summit in Mumbai which witnessed participation of over 1,200 delegates from 83 countries. In January 2019, the Government of India’s released the National Air Cargo Policy Outline 2019 which envisages making Indian air cargo and logistics the most efficient, seamless and cost and time effective globally by the end of the next decade.

The government has also approved a proposal to manage seven AAI airports under public private partnership (PPP). These airports are situated in Ahmedabad, Jaipur, Lucknow, Jewar, Guwahati, Thiruvananthapuram and Mangaluru. AAI received 32 technical bids from ten companies. In February 2018, the Prime Minister of India launched the construction of Navi Mumbai airport which is expected to be built at a cost of US$ 2.58 billion. The first phase of the airport will be completed by end of 2019.

The Government of Andhra Pradesh is to develop Greenfield airports in six cities-Nizamabad, Nellore, Kurnool, Ramagundam, Tadepalligudem and Kothagudem under the PPP model. Other achievements are: In September 2018, Jharsuguda Airport in Odisha and Pakyong Airport in Sikkim were inaugurated. Pakyong airport is Sikkim’s first ever airport and AAI’s first Greenfield airport construction and In December 2018, Kannur International Airport was inaugurated making Kerala the only state in India to have four international airports.

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in India’s air transport sector (including air freight) reached US$ 1.8 billion between April 2000 and December 2018. The government has 100 per cent FDI under 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 (US$ 4.99 billion) 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.

India will fuel the revival of the global aviation sector. But the decision-makers in the industry should anticipate the dips and turns to propel them to the destined targets. The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry.

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