While all agree the aviation industry globally is going through its worst phase in recent history, there is also a consensus that the downturn is temporary and the industry will scale new heights in the long term.

According to Ministry of Civil Aviation data, while the global airlines are reporting passenger growth of around 5% on an average, the Indian industry is posting around 10% growth in its phase of downturn. But the slowdown in the world economy, skyrocketing operating costs and some bad business decisions by the carriers over the last couple of years when the industry was growing phenomenally has led to fears that some airlines will go belly up soon.

There is a huge infrastructure deficit apart from the cumulative losses that the airlines have rung up. To solve this issue and get the aviation industry out of trouble, the Civil Aviation Minister Praful Patel believes ?India needs a whopping $200 billion-$300 billion investment in the aviation sector over the next 10-15 years. The investment will cover the entire spectrum of the aviation industry including airlines, airports, training facilities, maintenance facilities and other ancillary industries.?

Here to stay

?The Indian aviation industry is the ninth largest in the world,? M Madhavan Nambiar, Secretary, Ministry of Civil Aviation said. The potential of the industry is huge due to many factors, Nambiar says. Besides being an economic powerhouse there is also the fact that the country is geographically spread with huge population.

?In 2004, the sector started slowly with probably 100 plus aircraft. It was very small then, for a country like India. Though we have not grown big, over the years, the size of the aircrafts which the airline companies have, is a clear testimony to the fact that the aviation industry is here to stay,? Nambiar says. In a country of more than a billion people, less than 200 million take the aerial route ? a mere 2%.

Aviation is a major contributor to many sectors of the economy like tourism, trade and the huge employment opportunity among others. ?One complaint amongst the farmers in Kashmir is that by the time they can get their cherries to a major market, the quality of the fruit has come crashing down and they have to settle for local markets and sell their goods for a fifth of the price,? Patel says. ?The aviation industry can go a long way in solving such problems given the removal of the infrastructure constraints,? he adds.

Turbulent times

But the past few months have taken their toll on the sector. ?The quantum rise in the price of aviation fuel in the last few months has been shocking. Our fuel bill has risen by around 65% more than we had budgeted and the rise has essentially cost us around Rs 1,500 crore than anticipated,? Raghu Menon, Chairman and Managing Director of the national carrier Air India said.

And it?s not just fuel that is killing the carriers. The high operating costs from other areas like the wage bill and airport costs coupled with a dwindling mass of passengers due to high costs is taking their toll. ?The aviation industry is expected to post around Rs 8,000 crore combined losses for the fiscal year 2008-09. For the year 2007-08 the industry?s losses are estimated to be around Rs 4,000 crore after posting cumulative losses of Rs 2,000 crore in 2006-07,? Naresh Goyal, Chairman, Jet Airways said.

Unfazed by the slowdown, aircraft manufacturing majors Boeing and Airbus are still bullish on the Indian aviation market. However, Airbus expects global demand for aircraft to slacken due to the credit crunch and plans to put on hold its production plans until 2009.

Airbus? aircraft account to over 60% of the aircraft in the Indian fleet, Boeing aircraft constitute the rest. Dr Dinesh A Keskar, Senior Vice-President, Sales, Boeing said about 29,400 new aircraft will be required over the next 20 years, of which 12,500 will be for replacement of current ones, and 16,900 new ones inducted to meet growth. The overall value of these planes is estimated at about $3.2 trillion.

Where?s the infrastructure

And its not just the size that has many believing the huge potential. Many parts of the sector remain untapped in the country due to infrastructure constraints. The location of the country gives it an edge over most of the world in terms of the cargo industry. The country has amazing potential to become one of the biggest international cargo hubs providing European and West Asian markets access to South East Asia and vice versa. This step would act as a catalyst to compete with major international airport hubs like Dubai, Singapore, Bangkok, etc.

The opportunities emerging the air cargo segment include are limitless. Just the investment in domestic cargo would provide more than enough revenues to justify the costs.

The Ministry of Civil Aviation has done more for the aviation sector than could have been imagined with the modernisation and development of new airports, enabling greater investment through public private partnership and foreign direct investment, liberalising the policies governing the sector allowing for more carriers ? international and domestic to enter the country, and expand operations so that more people can fly. The general aviation sector or business and private air carriers have never seen such growth in the past few years.

In 2008, the government has already given permission to more than 30 companies to import private aircraft. International charter majors like Warren Buffet promoted NetJets, Vistajets, Execujets are falling over each other trying to enter the Indian market while domestic charter firms like ClubOne Air and Briley Group promoted BJets are well on their way to making the country one of the major charter aircraft markets as well.

Driven by long-term prospects, helicopter firms like Bell and Eurocopter are upping the ante in their attempt to garner greater market share in the country.

All this despite the fact that the International Air Transport Association (IATA) saying that global passenger traffic grew by 5.4% in the first half of the year but slowed down by 1.3% in August. While the traffic growth is on the declining mode, the industry is heading for $5.2 billion loss this year. It is learnt that the industry is suffering worst crisis because there is huge overcapacity and airlines are facing a downturn in the passenger loads. IATA also pointed that jet fuel is 58% more in India compared to Singapore and air traffic control charges are about 33% higher than other countries.

Civil aviation has tremendous potential for growth. Whether steps like retrenching are the answer to current challenges or longer term solutions are found soon will probably determine the future of Indian civil aviation.