The Aviation Industry in India has emerged as one of the fastest growing industries in the country, especially so during the last three years. Introduction of low-cost carriers, FDI in domestic airlines, advanced information technologies, modernization of airports, and increasing emphasis on regional connectivity has led to the sector’s unprecedented growth in recent years.
This remarkable growth has propelled India to be counted amongst the top seven aviation markets, with 187 million passengers (to, from and within India) during FY 2017-18. India today handles the third largest domestic traffic after USA and China and is expected to become the third largest market (domestic plus international) by 2022.
The government’s focus is also on developing an aircraft financing and leasing model in the country and leveraging the country’s large engineering pool to develop a hub for maintenance, repair and overhaul (MRO) services, and thereby achieve self-reliance in aircraft maintenance and engineering services.
Some major initiatives undertaken by the Government of India
- In February 2019, the Government sanctioned development of a new greenfield airport in Hirasar, Gujarat, with an estimated investment of ₹1,405 crore.
- As of January 2019, the Government is working on a blueprint to promote domestic manufacturing of aircrafts and aircraft financing within the country.
- In January 2019, it organized the Global Aviation Summit in Mumbai which witnessed participation of over 1,200 delegates from 83 countries.
- In January 2019, the Government 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.
- In February 2018, the PM 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 6 cities: Nizamabad, Nellore, Kurnool, Ramagundam, Tadepalligudem and Kothagudem under the PPP model.
- Regional Connectivity Scheme (RCS) launched.
Government Policies, Schemes & InitiativesUDAN (Ude Desh ka Aam Nagrik) has been instrumental in connecting travelers to destinations that were difficult to reach until now. The scheme focuses on providing connectivity to un-served and under-served airports of the country through the revival of existing airstrips and airports. Prime Minister is giving wings to the dream of millions of people by raising the budget substantially for UDAN for the next 10 years.
NABH Nirman (NextGen Airports for Bharat) is an initiative to enhance airport capacity for handling 1 billion trips in the next 10 to 15 years. According to official sources, the government is also considering setting up a NABH Nirman Fund (NNF) with a starting corpus of around USD 2 billion to support low traffic airports in their initial phases. The concept of land pooling may be used to keep land acquisition costs low and to provide landowners with high value developed plots in the vicinity of the airports. The Civil Aviation Ministry has prepared a proposal seeking additional funds for this flagship scheme by the Center.
The Airports Authority of India (AAI) that runs all the non-private civilian airports in the country, has plans to create additional capacity in the airports in Agartala, Patna, Srinagar, Pune, Trichy, Vijayawada, Port Blair, Jaipur, Mangalore, Dehradun, Jabalpur, Kolhapur, Goa, Rupsi, Leh, Calicut, Imphal, Varanasi and Bhubaneswar, with a capital expenditure of ₹20,178 crore over the next four to five years. AAI has also decided to lease out six airports run by them: Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvanthapuram and Mangaluru under phase1 of development, operation and management under PPP.
- AAI plans to invest ₹15,000 crore (US$ 2.32 billion) in 2018-19 for expanding existing terminals and constructing 15 new ones.
- In June 2018, India signed an open sky agreement with Australia allowing airlines on either side to offer unlimited seats to six Indian metro cities and various Australian cities.
- The AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-regional hubs.
- Indian aircraft Manufacture, Repair and Overhaul (MRO) service providers are exempted completely from customs and countervailing duties.
- 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.
- In December 2018, Kannur International Airport was inaugurated making Kerala the only state in India to have four international airports.
Schemes like NABH Nirman (for airport capacity augmentation), Digi Yatra (for paperless travel) and AirSewa (for online passenger grievance redressal) are bringing radical changes. The tax structure for Aviation Turbine Fuel (ATF), Maintenance, Repair and Overhaul (MRO) and aircraft leasing may be gradually aligned with leading global jurisdictions.Growth Potential
India’s booming aviation sector is set to boost air connectivity between cities and ease congestion at airports by building new airports and modernizing the existing ones. The Minister of State for Civil Aviation, Jayant Sinha, recently underlined the government’s plans to establish about 100 airports in the next 15 years at an estimated cost of ₹4 lakh crore. Among them, 70 will be at new locations, while the rest will be second airports or will undergo expansion of existing airfields to handle commercial flights.
Also, several cities are expected to get one or more airports under the Greenfield Airport Development Plan. Initial findings of a study by the Civil Aviation Ministry have revealed that Mumbai, Delhi, Goa, Visakhapatnam, Jaipur, Pune, Ahmedabad, Rajkot, Patna, Kolkata and Bangalore are among cities that will need a second airport by 2030. And by then there would be more cities on the list.
Vision 2040 highlights the growth capability of the Indian Aviation Industry in different sub sectors and the crucial steps to achieve the desired target. Going ahead, India will require 200 airports and a financial commitment of $40-50 billion to handle a minimum 1.1 billion passengers flying to, from and within the country. According to the report, air cargo movement will quadruple to 17 million tons; number of airports would increase from 101 in January 2019 to around 190-200; and an estimated 150,000 acres of land and US$ 40-50 billion of capital would be required for construction. The government has proposed creating a $2 billion fund to help support low-traffic airports and establishing an aircraft manufacturing base in India.
Amongst other areas of economic growth, the Budget has also focused on all forms of physical connectivity, including UDAN. The allocations for rail, road and airport sectors is significantly higher at ₹2.52 lakh crore.Private Interest
Infra building majors like GMR Infra, Adani Group, Reliance Infra and L&T are among the top prospective investors who have joined the fray to bag the ₹16,000-crore greenfield Jewar airport project in Greater Noida, while offshore firms like Zurich Airport International and Hong Kong ADP and other Indian suitors like GVK, Fairfax India, sovereign wealth fund NIIF and PNC Infrastructure are also in the race.
Chennai-based Taking Off to the Future Pvt Ltd (TOFL) plans to develop private airports, both greenfield and brownfield across regions, and has formed a SEBI-approved, airport-specific ₹10,000-crore Taking Off to the Future Airport Fund. This is a Category II Alternative Investment Fund (AIF), and is a first of its kind in the airport sector, according to managing director Gigi George.
|The Vision 2040 for the Indian airport sector is summarised below:|
|S.No||Parameter||Year ended Mar 2018||Year ended Mar 2040||CAGR (%)|
|01||Total passengers (million)||187||1124||8.5 %|
|02||Number of operational airports||99||190-200||3.0 %|
|Number of international airports||34||70||3.3%|
|03||Number of cities / regions with three airports||0||2||NA|
|04||Number of cities with two airports (within a 50 km radius)||0||31||NA|
|05||Number of airports with over 10 million passenger throughput||7||47||9.0%|
|06||Number of airports with over 1 million passenger throughput||37||84||3.8%|
|07||Land area under airports (acres)||90.000||2,40,000||4.6%|
|08||Cumulative cost of land acquisition and multimodal connectivity (USD billion)||NA||30-50||NA|
|09||Cumulative capex for airport (USD billion)||NA||40-50||NA|
|10||Total capex - land plus airport development (USD billion)||NA||70-100||NA|
|11||Direct employment at airports - airport, retail, security (’000)||46||80||3.6%|
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$ 1,817.23 million between April 2000 and December 2018. The government has 100 percent FDI under automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49 percent would require government approval.
|Upcoming airport projects|
|Bhogapuram Intl Airport||₹2,260.73 crore|
|Hirasar Airport||₹2,654 crore|
|Dholera Intl Airport||₹5,083 crore|
|Agartala Airport||₹438 crore|
|Jewar Airport||₹16,000 crore|
|Navi Mumbai Intl Airport||₹16,700 crore|
|Mopa Intl Airport||₹3,000 crore|
|Hollongi Airport||₹1,200 crore|
|Mundra Intl Airport||₹1,400 crore|
|All gures are estimates based on the project DPR|
- The Civil Aviation Ministry has sanctioned ₹7,737 crore for two airports at Hirasar near Rajkot and the Dholera airport, coming up in the Ahmedabad district of Gujarat. A sum of ₹2,654 crore has been sanctioned by the Government for the Hirasar airport and ₹5,083 has been cleared for the proposed international airport at Dholera.
- Jewar airport, which was initially planned to have four runways, will now have six runways as the UP cabinet recently gave a heads up to that. The new airport will reduce load on Delhi’s IG Intl Airport and much like it, will have international connectivity with USA, UK, Singapore, Australia and the Middle East.
- India’s third busiest airport - the Bengaluru’s Kempegowda International Airport is expecting a 70% surge in passenger traffic over the next two years. Bangalore International Airport Authority (BIAL), which owns and operates it has announced an investment of $2 billion for a new terminal and a second runway.
- To come up at Cheyyur near the scenic East Coast Road (about 100km south of Chennai) will be Chennai’s second international airport. An aero city may come up around it.
- The PM recently inaugurated an airport in Jharsuguda – also known as the powerhouse of Odisha. It is the first airport in Odisha to provide connectivity to Bhubaneshwar, Raipur and Ranchi under the Regional Connectivity Scheme (RCS) - UDAN.
- Bhogapuram Airport, a greenfield international airport project about 40 km from Visakhapatnam, being built by the Bhogapuram International Airport Company Limited (BIACL), as part of an aerotropolis, which will also have a Maintenance, Repair and Overhaul (MRO) facility along with an Aviation Academy. The airport will be developed by the Government of Andhra Pradesh under PPP model, and is expected to be completed by 2022.
- Orvakal Airport in Kurnool is a greenfield project, which will be catered by low-cost airlines operating domestic flights under the government’s UDAN scheme.
- Vijayawada Amaravati International Airport in Mangalagiri will connect capital city Amravati to international destinations.
- After Guwahati and Imphal, the Agartala airport is set to become the third international airport in the north-eastern region by early 2020.
- The Hollongi Airport is located about 25km from Itanagar, will provide easy access to the state capital, and will be connected to other state capital cities with direct flights, and even neighboring countries.
- The Mopa International Airport will be the gateway to north Goa, and will be built in four phases, with its passenger-handling capacity increasing over the last phase. It will have a modern infrastructure built by GMR Infrastructure Ltd.
- The Navi Mumbai Intl Airport will be constructed in a phased manner from 2019 until 2031, and once ready, it will decongest the increasing air traffic at Mumbai’s Chhatrapati Shivaji International Airport.
- Sindhudurg Airport at Chipi Parule near Malvan, is the state’s 14th airport. It connects the Konkan region comprising parts of Maharashtra, Karnataka and Goa. Located 25km from the Mumbai-Goa highway, it is driving distance from Tarkarli Beach in Maharashtra, and to north Goa’s Arambol and Mandrem beaches.
- Chhatrapati Sambhaji Raje International Airport will be Pune’s second international airport at Purandar, the air force base.
- Ludhiana International Airport being built in the existing IAF base in Halwara, a 32-km drive from Ludhiana City. To be developed by the Punjab government and the AAI, its international civil terminal in the first phase is expected to be completed in 2022. It will ease the air traffic load of the Amritsar International Airport.
- Sabarigiri International Airport is being developed at Cheruvally Estate near Erumely in Kottayam district. It will be the nearest airport for Sabarimala and the fifth international air travel hub in Kerala. Currently, the Cochin International Airport is the nearest airport to Sabarimala.
- The state government has initiated 30 acres of land acquisition for the extension of Kangra Airport in Dharamshala. Currently, the airport can handle landing of small 80-seater planes. The expansion will facilitate airbuses. A new airport has been sanctioned for Mandi district of the state.
India is one of the largest aviation markets in the world and annual air passenger traffic is estimated to touch 1.1 billion in the coming years. It is quite apparent that the Indian Aviation Industry is on a speedy growth, with potential to reach greater heights. It is estimated that 80-90 new airports are likely to come up in the next 20 years under the NABH Nirman initiative. These would include regional airports and aerodromes in larger cities with the Civil Aviation Ministry urging state governments to undertake development of new airports in their respective states by forming SPVs and through the PPP model. All major airports are also augmenting their airside and terminal capacity to address rising demand.
While the Civil Aviation Ministry is continuing its focus on developing new airports and in enhancing regional connectivity, there will be many challenges to contend with - from strengthening the infrastructure to implementing more sustainable, eco-friendly designs that include solar power systems, rainwater harvesting, and a noise-absorbing green belt; besides facilities like aircraft rescue and firefighting.
Cochin Airport was awarded Champion of Earth Prize - UN’s highest environmental honour - for meeting its energy demands solely from the electricity generated by solar panels. Many other airports are also investing in solar power generation, and many airports operated by AAI and private operators have been accredited LEED gold certification for their environment-friendly buildings.
Creating an ecosystem for skilling the workforce is also a priority. Technologies like artificial intelligence (AI), machine learning, blockchain, and biometrics, are also increasing efficiencies in the aviation sector.
To boost India’s civil aviation industry, all the industry stakeholders should collaborate with policy makers to implement efficient and rational decisions, with the right policies and focus on quality and cost management. According to Vision 2040, with the right policies and with efficient execution, India can surprise the world by not just meeting but overshooting the Vision 2040 targets.
References: Directorate General of Civil Aviation (DGCA), Airports Authority of India (AAI), Interim Union Budget 2019-20, KPMG Report.