Aviation Industry

India’s aviation traffic stood at 341.05 million in FY20. It grew at a compound annual growth rate (CAGR) of 11.13% during FY16-FY20. In FY21 (from May 2020 to March 2021), airports in India pegged the domestic passenger traffic to be ~53.4 million, a y-o-y decline of ~62% over the fiscal ended March 31, 2020. The average number of passengers per flight in February 2021 was 121, against an average of 136 passengers per flight in February 2020. International passenger traffic stood at 66.54 million, growing at a CAGR of 5.01% during FY16-FY20.

Freight traffic grew at a CAGR of 5.32% during FY16-FY20 from 2.70 million tonnes (MT) to 3.33 MT. Freight Traffic is expected to grow at a CAGR of 7.27% to reach 4.14 MT in FY23.

Aircraft movement grew at a CAGR of 9.56% from 1.60 million in FY16 to 2.59 million in FY20. During FY16-FY20, domestic aircraft movement increased at a CAGR of 9.83% and international aircraft movement expanded at a CAGR of 3.57%. India’s domestic and international aircraft movements grew to reach 2,155 thousand and 433 thousand during FY20, respectively.

To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. As of 2020, India had 153 operational airports. India has envisaged increasing the number of operational airports to 190-200 by FY40.

Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. The number of airplanes is expected to reach 1,100 planes by 2027.

Summary

• The global revenue for commercial airlines in 2019 was estimated at USD 838 Bn.
• India has 91 international carriers out of which 5 are domestically owned. India has air connectivity with 59 countries through 344 routes.
• With the industry’s USD 30 Bn contributions to India’s GDP, the domestic aviation market is projected to rank 3rd globally by 2024.
• Air traffic has been growing rapidly in the country as compared to the global average. One hundred more airports would be developed by 2024 to support the Udaan scheme. It is expected that the air fleet number shall go up from the present 600 to 1200 during this time.
• Ministry of Civil Aviation issued 170 Drone Acknowledgement Number in the month of May 2021.

Reasons to Invest

• Cabinet Committee on Economic Affairs has approved the extension of time and scope for revival and development of unserved and under-served airstrips with USD 643 Mn budgetary support.
• Greater focus on infrastructure development such as Open Sky Policy and Airports Authority of India’s (AAI) drive for modernization of airports and air navigation systems.
• Skill India Mission has a clear focus to leverage India’s human capital potential and create job opportunities.
• Innovation and Technology –
• GPS-Aided Geo Augmented Navigation (GAGAN) is India’s first Satellite-based Augmentation System. It provides additional accuracy for safety in civil aviation and has expansion capability for seamless navigation services across geographies.
• No Objection Certificate Application System (NOCAS) streamlines the online process of timely NOC for height clearances of buildings around airports.
• Airports – 3 AAI airports awarded on PPP Three airports viz. Ahmedabad, Lucknow and Mangalore of the Airports Authority of India (AAI) have been awarded to a private concessionaire through Public-Private Partnership (PPP) to bring efficiency in delivery, expertise, enterprise and professionalism apart from harnessing the needed investments in the public sector. Action completed.
• Tallest ATC tower Delhi Air Traffic Service Complex (DATS Complex) – country’s tallest Air Traffic Control tower has been inaugurated on 02.09.2019 at the Indira Gandhi International Airport. This iconic infrastructure will ensure up-scaled services and systems for efficient, smooth and uninterrupted air traffic management. Action completed.
• Digital initiatives
• eGCA – The function & process of Directorate General of Civil Aviation (DGCA) is being moved to an online platform to provide faster delivery of services & regulation oversight. The e-GCA was initiated on 14th May 2019. The first module on pilot licensing shall be launched in November 2019.
• DigiSky – Pursuant to the issuance of CAR by DGCA on 27.08.2018, DigiSky online portal has been launched to meet the requirement laid down by the CAR for flying Civil Drones. The Beta version of DigiSky is available and captures the entire gamut of activities relating to drones viz. registration of drones and pilots, approval of flight path, post-flight analysis etc. based on the distinctive features of No Permission No Takeoff (NPNT).
• e-sahaj – 100% of security clearances pertaining to the Ministry have been made online on e-sahaj online portal launched by the Ministry of Civil Aviation. The portal is operational for granting clearances in respect of 24 categories.
• DigiYatra – Trial for the rollout of DigiYatra initiative has been started at Bangalore and Hyderabad airports. The initiative envisages seamless and hassle-free passenger travel using biometric technologies to improve passenger experience, reduce queue waiting time as passengers can walk through gates by using advanced security solutions. It will remove redundancies at checkpoints and enhance resource utilization.
• The security component of ASF rationalized – Passenger Service Fee (PSF) now called Aviation Security Fee (ASF) charged as part of passenger fare and collected by the airlines which is deposited in the escrow account of respective JVs or AAI account has been rationalized and a National Trust has been created to pool all the ASF collections across airports. The trust is to be managed by AAI. The collection of PSF(SC)/ASF in a single pool account will serve the purpose of cross-subsidizing the smaller airports of AAI with low PSF(SC)/ASF collection thus bridging the funding gap.
• UDAN – Under UDAN, 57 unserved and underserved airports (including 5 heliports + 2 water aerodrome) with 347 routes have been operationalised under UDAN across the length and breadth of India.
• Aviation Jobs Portal – Aviation Jobs is a unique web-based portal launched by the Ministry of Civil Aviation on 29.08.2019, which seeks to bring together job seekers and prospective employers in the Indian civil aviation sector. It is a common platform for enabling candidates to register their job interests across various sub-sectors. At the same time, it facilitates the sourcing of information about candidates available in the market by prospective employers with a view to improving prospects for employment or re-employment in the civil aviation ecosystem.
• ICAO to present Council President Certificate to India – Recognizing India’s progress in resolving its safety oversight deficiencies and improving the Effective Implementation (EI), International Civil Aviation Organization (ICAO) has announced a Council President Certificate to India which would be presented during a special ceremony at ICAO headquarters, Montreal during the 40th Session of the Assembly
• Robust growth in Aviation Fleet – Aviation sector has seen a robust growth despite the grounding of Jet Airways. The number of aircraft has risen to 664 operational aircraft as of 31st August 2019.
• The eGCA Project for development of eGCA application/solution: eGCA project is being implemented in four phases. As on date, Phase 1 & Phase 2 services pertaining to Pilot Licensing, Medical Examination and Flight Training Organisation have been made live. Services of phase 3 & 4 related to other DGCA functions are expected to be completed tentatively by this year-end. 

FDI Policy

• Airports: 100% FDI allowed under automatic route for both greenfields as well as brownfield projects.
• Air Transport Services: Scheduled air transport service/ domestic scheduled passenger airline/ regional air transport service: Up to 49% allowed under the Automatic route beyond which Government approval is required. Non-scheduled air transport services and helicopter services, seaplane services which require DGCA approval: 100% FDI allowed under the Automatic Route.
• Other Services under the Civil Aviation Sector: Ground handling services, maintenance, repair and overhaul services, flying institutes, technical training institutions: 100% FDI allowed under the Automatic Route.

Sector Policy

Lifeline UDAN

• UDAN (Ude Desh ka Aam Nagrik) scheme was launched to transport experts and equipment to every corner of the country (NER, hilly and island states).
• Under Udan – Work has been initiated to connect
• 98 unserved/underserved
• 33 Helipads
• 12 Water Aerodromes

RCS- UDAN:

• RCS-UDAN was launched to Promote air connectivity to unserved and underserved airports in Tier-II and Tier-III cities to stimulate regional growth and provide affordable air travel to the citizens.
• 76 Airports operational till 2014.
• 53 airports added to the network in the last 6 years
• Total operational airports today 76 + 53 = 129 in 2020
• On 14th January 2021, the first flight was flagged off at the newly constructed Hisar airport in Haryana from Chandigarh.
• 02 new RCS routes have been commenced in the month of April, 2021.
• The first direct flight operations between Nashik (Maharashtra) and Belgaum (Karnataka) started today under the RCS-UDAN (Regional Connectivity Scheme — Ude Desh Ka Aam Nagrik). 
• 34 routes have been operationalized, awarded under round 1, 2 and 3 / Tourism RCS. These 34 RCS routes provide connectivity to 4 unserved (Jharsuguda, Mysore, Kolhapur and Jalgaon) and 4 unserved (Gwalior, Belgaum, Durgapur and Shillong) airports connecting 10 served (Raipur, Bhubaneswar, Kolkata, Bangalore, Mumbai, Hyderabad, Goa, Kochi, Rajahmundry and Vizag) airports under the scheme.
• 30 new RCS routes have been commenced and operations started from 03 new airports in the month of March 2021.
• NABH Nirman announced in 2018-19 Union Budget, aims to expand airport capacity by more than five times to handle a billion trips in a year. The expansion is planned to be funded by leveraging the balance sheet of the Airports Authority of India.
• Secure Application for the Internet (SAI) – Indian Army has developed “Secure Application for the Internet (SAI)” for a simple and secure messaging application.  The application supports an end to end secure voice, text and video calling services for Android platforms over the internet. The application has been vetted by CERT-in empanelled auditor and Army Cyber Group.
• Initiatives for Maintenance Repair and Overhaul (MRO) services:
• The tools and tool-kits used by the MRO have been exempted from Customs duty. The exemption shall be based on the list of tools and tool kits certified by the Directorate General of Civil Aviation (DGCA) approved Quality Managers of aircraft maintenance organisations.
• MROs were required to provide proof of their requirements of parts or orders from their client airlines. The process for the clearance of the parts has been brought in line with that of the tool kits for one-time certification by DGCA approved Quality Managers in MROs.
• Restriction of one year for utilization of duty-free parts has been extended to three years to enable economies of scale.
• To allow the import of unserviceable parts by MROs for providing exchange/ advance exchange, the concerned notification has been revised to enable the advance export of serviceable parts.
• Foreign aircraft brought to India for MRO work will be allowed to stay for the entire period of maintenance or up to 6 months. For a stay beyond 6 months, DGCA’s permission will be required. 
• India to become a hub for MRO Airframe. There is an investment of 2 hanger base/heavy maintenance facility for narrowbodies aircraft tied up at Kochi Airport by private MRO.
• Krishi Udaan – Airlifting agri-produce for better value realisation for farmers: The total tonnage of agri-perishables handled in the 12th month of FY 2020-21 ending on 31 March 2021 was 18,962 MT.

Financial Support

MRO, ground handling, cargo, and Aviation Turbine Fuel (ATF) infrastructure facilities collocated at an airport, including heliport licensed by DGCA, are covered under the ‘harmonized list of infrastructure’ in the National Civil Aviation Policy 2016. This makes them eligible to get the benefits offered for the infrastructure sector under the Policy. The Regional Connectivity Scheme under the Policy provides for the following financial support:

• The revival of airstrips/ airports as No-Frills Airports at an indicative cost of USD 7.1 Mn to USD 14.3 Mn.
• Demand-driven selection of airports/ airstrips for revival in consultation with State Governments and airlines
• Viability Gap Funding (VGF) to airline operators
• Reduced Service Tax on tickets (on 10% of the taxable value) for 1 year initially
• Reduced Excise Duty at 2% on ATF picked at RCS airports.

Investment Opportunities

• Indian carriers are projected to increase their fleet size to 1,100 aircraft by 2027.
• Demand for MRO facilities is increasing in India due to consistent double-digit growth in the aviation sector.
• Investment opportunities worth USD 3 Bn in greenfield airports under PPP mode at Navi Mumbai (Maharashtra) and Mopa (Goa).
• Development of greenfield airports – Government agencies project development of about 250 airports across the Country by 2020.
• For the development of the aviation industry in the North-East States, AAI plans to develop Guwahati as an inter-regional hub. It also plans to develop Agartala, Imphal and Dibrugarh as intra-regional hubs.
• Indian airports are emulating the Special Economic Zone (SEZ) Aerotropolis model to enhance revenues. The model focuses on revenues from retail, advertising, vehicle parking, security equipment and services.

Foreign Investors

Airbus (France), Boeing International Corporation (US), AirAsia (Malaysia), Rolls Royce (UK), Frankfurt Airport Services Worldwide (Germany), Honeywell Aerospace (the US, Malaysia Airports Holdings Berhad (Malaysia), GE Aviation (US), Airports Company South Africa Global (South Africa), Alcoa Fastening Systems Aerospace (US), Singapore Airlines (Singapore), Etihad Airways (UAE), Fairfax (London).

Road Ahead

India’s aviation industry is largely untapped with huge growth opportunities, considering that air transport is still expensive for the majority of the country’s population, of which nearly 40% is the upwardly mobile middle class. 

The industry stakeholders should engage and collaborate with policymakers 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. The expenditure of Indian travelers is expected to grow up to Rs. 9.5 lakh crore (US$ 136 billion) by 2021. Due to the rise in demand for air travel, India will need 2,380 new commercial airplanes by 2038.