April , 2019
India to become third largest aviation market by 2024
13:13 pm

Aniket Panja

India is one of the fastest developing countries in the world and it is only fitting that the Indian aviation industry too is booming. It is broadly divided into two segments - military and civil aviation - with the civil aviation industry in India having grown rapidly during the last ten years.

India was the fastest growing domestic air travel market globally in 2018 with 18.6% more people flying within the country than the previous year. The International Air Transport Association (IATA) stated that for 2018, the Indian domestic market recorded the fastest full year domestic growth rate for the fourth year in a row followed by China (11.7%). IATA stated, “In both countries, domestic demand was underpinned by a robust economic expansion as well as by increasing number of domestic pairs - particularly in India which recorded its 50th consecutive month of double-digit annual growth in October.” According to the Directorate General of Civil Aviation, India had 13.9 crore domestic air travellers in 2018 - up by 18.6% from the 11.7 crore travellers in 2017. The growth in domestic flyers has been increasing since 2014 with the growth in 2017 over 2016 being 17.3% and the growth in domestic flyers in 2016 over 2015 and 2015 over 2014 being 23.2% and 20.3% respectively.

The IATA said that India was set to become the third largest aviation market in the world by 2024. By 2037, of the 572 million new passengers in the world, India is set to account for 414 million of them.  The improvisation of various factors such as the introduction of low-cost carriers, modern airports, FDI (Foreign Direct Investment) in domestic airlines, the intervention of advanced information technologies and the ever-growing emphasis on regional connectivity has contributed towards a dynamic expansion of the civil aviation industry of India. According to a report, India has one of the largest existing fleet of aircrafts, standing roughly at about 548 aircrafts.

Owing to the quick rise in the demand of civil aviation, it is expected that another 925 aircraft will be added in the next five years. The aviation market has continued to maintain its double-digit growth and hence it is evident that the aviation industry in India is not just growing but rapidly growing at a very high scale.

An important factor behind this growth is government schemes like UDAN (Ude Desh ka Aam Nagrik) and NABH Nirman. While the first aims to connect 56 unserved airports and 31 unserved helipads across the country, the latter targets to expand airport capacity by more than five times to handle a billion trips in a year. This will open up avenues for an enormous number of jobs – almost 2.5 to five lakh job opportunities are being created by the aviation sector. As planned under UDAN, leading airlines such as Vistara and Indigo are procuring more aircrafts to fill the supply - demand gap in second and third tier cities. This will give a major boom to jobs in customer service, operations, logistics, airport management, retail, medical tourism, and many more sectors.

However, volatility in fuel prices combined with highest tax on aviation turbine fuel continues to challenge the sector’s growth. The recent increase of FDI up to 49% in civil aviation may not result in substantial increase in investment since it has been imposed on the aggregate of FDI and FII (Foreign Institutional Investor). India has received only four million USD in the 10 years since FDI was allowed in the defence sector, while the entire economy has received over 180 billion USD. Also India’s military aviation sector needs better access to technology and funding along with rationalising the tax and regulatory framework to keep pace with global counterparts. The medium and long-term perspective plans should be shared with the industry in a transparent manner, without compromising national security. This will provide the industry information and confidence to invest in a production process that is measured in decades than years.

While air travel has expanded in India, airport infrastructure has not kept pace with it. As a result, India’s biggest hubs of Delhi and Mumbai have choked airports that find it hard to add any more flights. The second airports in these cities are about four to five years away.

Necessary steps are needed to check the problems facing the aviation market. This industry could prove to be a major asset for India in the international market. Well-informed decisions need to be taken and proper research needs to be done to realise its potential.


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