AVIATION INDUSTRY IN INDIA

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India’s civil aviation industry is on a high-growth trajectory. The Civil Aviation industry has welcomed a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity.India is currently the ninth-largest civil aviation market in the world, with a market size of around US$ 16 billion.

According to the FICCI-KPMG’s India Aviation Report 2016, India is expected to become the third largest aviation market by 2020.

By all means, India seems to be on a cusp of a civil aviation revolution. Aviation Industry in India holds around 69% of the total share of the airlines traffic in the region of South Asia. This time period, thus, is critical for the industry and requires serious governance and leadership to create global Indian institutions.

MARKET SIZE

India is one of the fastest growing aviation industries. There are a total of 132 airports in India, which includes international airports, domestic airports, custom airports and civil enclaves managed by The Airport Authority of India.

During January-August 2016, domestic air passenger traffic rose 23.14% to 64.47 million from 52.36 million during the same period in 2015.

Passenger traffic during FY 2015-16 increased at a rate of 21.3% to 85.57 million from 70.54 million in the FY 2014-15.

In July 2016, total aircraft movements at all Indian airports stood at 168,400, which was 14.3% higher than July 2015. International aircraft movements increased by 8.2% to 32,830 in July 2016 from 30,330 in July 2015. Domestic aircraft movements increased by 15.8% to 135,570 in July 2016 from 117,050 in July 2015. Indian domestic air traffic is expected to cross 100 million passengers by FY 2017, compared to 81 million passengers in 2015, as per Centre for Asia Pacific Aviation (CAPA).

India is among the five fastest-growing aviation markets globally with 275 million new passengers. The airlines operating in India are projected to record a collective operating profit of Rs 8,100 crore (US$ 1.29 billion) in fiscal year 2016, according to Crisil Ltd.

Passenger Traffic in FY16 (millions)Source: Association of Private Airport Operators, TechSci Research,Notes: CAGR - Compound Annual Growth Rate,FY: Indian Financial Year (April to March)

FY06 FY11

73.496.5

116.9 108.9123.8

143.8162.3 159.4

169.0190.1

223.6

0 -10%

250

200

30%

15020%

10010%

50 0%

FY07 FY12FY08 FY13FY09 FY14FY10 FY15 FY16

Passenger Traffic - LHSGrowth - RHS

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UDAN Schenme

FDI Policy

RegionalConnectivity

Scheme

In April 2017, the central government launched Udan - the regional connectivity scheme for civil aviation - from Shimla airport. Under the scheme, the flights are avilable from Nanded, Shimla & Kadapa airports.

100 per cent FDI for greenfield projects and 74 per cent FDI for brownfield projects is allowed under automatic route. 100 per cent FDI in scheduled air transport service, regional air transport service & domestic scheduled passenger airline is allowed under autometic route. FDI over 49 per cent require government approval.49 per cent FDI is allowed in aviation for foreign carriers.

Under Regional Connectivity Scheme, the government plans to increase the total number of operational airort in India from 75 to 118.

Key Policy Initiatives

Key Point

Presently India has 5 Public Partnership (PPP) airport each at Mumbai, Delhi, Cochin,Hyderabad & Bengaluru, Which together handle over 55 per cent of country’s air traffic.

Delhi International Airport Ltd. became 1st airport in the world to receive ISO

22301:2012 certificate for its robust business continuity

management system

Currently, 60 per cent of airport traffic is handled

under the Public - Private Partnership (PPP) model, while

the remaining 40 per cent is managed by Airports Authority

of India (AAI)

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INVESTMENT

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in air transport (including air freight) between April 2000 and March 2016 stood at US$ 931.05 million.

In the Union Budget 2016-17, the government introduced various proposals for Maintenance, Repair and Overhaul (MRO) operations for airplanes. These include customs and excise duty exemption for tools and tool-kits used in MRO works. The government has also scrapped the one-year restriction for utilisation of duty free parts apart from allowing import of unserviceable parts by MROs for providing exchange. As per revised norms, the foreign aircraft brought into India for MRO work would now be permitted to stay up to six months or as extended by aviation regulator Directorate General of Civil Aviation (DGCA).

Sector AdvantagesFreight Traffic on Airport in India

20162.7 million

tonnes

According to Directorate General of Civil Aviation, Domestic passenger traffic witnessed growth at a rate of 22 per cent, till February 2017, in

Comparison 21.24 percent in FY16

2031F11.4 million

tonnes F - F

orec

ast

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Such foreign aircraft would also be henceforth permitted to carry passengers in the flights at the start and end of its period of stay in India.

As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service. FDI beyond 49% is allowed through Government approval. For Non-Resident Indians (NRIs), 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing policy.

Up to 100% FDI is permitted in Non-scheduled air transport services under the automatic route.

Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic route.

Up to 100% FDI is permitted in MRO for maintenance and repair organisations; flying training institutes; and technical training institutes under the automatic route.

Up to 100% FDI is permitted in Ground Handling Services subject to sectoral regulations and security clearance under automatic route.

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ROAD AHEAD

India’s aviation industry is largely unexploited 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.

The industry stakeholders should engage and collaborate with policy makers 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 and the largest by 2030.

Watch this video to get a better idea:https://www.youtube.com/watch?v=yVR_9-xMKdg