Aviation in India 2017: If 2017 can be called a breakout year in the aviation industry, it is for a good reason.
Aviation in India 2017: If 2017 can be called a breakout year in the aviation industry, it is for a good reason. The year saw flying become easier and affordable for the common man as increased regional connectivity and revamped airport infrastructure opened up the market like never before. Combined efforts of the government and private sector to expand capacity through policy push and investment have helped unlock value of air travel for small-town India.
The aviation market has now put in a robust year-on-year growth consecutively over the last three years on the back of a strong domestic demand. Having grown 20 percent and 18.8 percent during FY2016-17 and FY2015-16 respectively in terms of passengers carried by Indian airlines and crossing the 100-million-flier mark in 2016, India has become the third largest domestic aviation market in the world – and among the markets that grew the fastest. In the first eight months alone of FY 2017-18, the number of domestic passengers carried were 78.65 million passengers. As per IATA, the country is set to be the third-largest aviation market by 2025 after China and the United States, surpassing countries such as UK, Japan, Spain and Germany.
You may also like to watch
The drivers to that stellar showing are primarily the rising middle class, low-cost carriers, and the developing regional aviation market. The most significant is the first-of-its-kind Regional Connectivity Scheme, UDAN (Ude Desh ka Aam Nagrik), which has brought affordable flying at Rs 2,500 to fliers on interior routes. For this, the Ministry of Civil Aviation has brought unserved and underserved locations on the air transport grid through viability gap funding to airline operators, on routes ranging up to 800 km.
In the first phase of bidding, 128 RCS Routes were awarded involving 31 unconnected airports, 12 underserved airports and 27 functioning airports. The most significant is the additional capacity it created as a result. Approximately 13 lakh seats per year were added. Major Indian airline operators placed orders for additional aircrafts – Indigo Airlines for 50 new ATR- 72 aircrafts and Spice Jet for 50 Bombardier Q-400 type planes. For Phase 2, the bidding for which is under progress, the government has received a total of 141 proposals to operate on 502 new routes from 17 airline and helicopter operators to connect 126 airports and helipads. The award of these routes is likely to happen in the first quarter of 2018.
However, a sustained growth of aviation is not possible without the requisite infrastructure. GVK Power & Infrastructure Ltd, that currently operates the existing airport in Mumbai, won the right to build the Navi Mumbai airport. The project will require an investment of up to Rs. 16,000 crore in order to handle 10 million passengers annually in the first phase and is expected to be operational by 2019. GMR Infrastructure won the right to develop and operate MOPA airport in Goa, the first phase of which is expected to be operational within 36 months of the commencement of work. The government also approved 17 other Greenfield airports in the country, to be executed and financed by the respective airport owners at an estimated investment of around Rs.30,000 crore.
There is more. The Airports Authority of India has planned to invest Rs 17,500 crore in upgrading the existing airport infrastructure as part as part of Project DISHA (Driving Improvements in Service and Hospitality at Airports), the largest airport transformation program ever undertaken in the country to enhance operational efficiency and the overall travel experience of the travellers.
All that ramp-up has a significant technology play with airports like Hyderabad and Bengaluru taking the lead in introduction of biometric authentication system for e-boarding. Passengers can now enter the airport using only their fingerprint scan that is linked to AADHAR and airline departure control system database. Air SEWA mobile application was also launched to enable passengers check flight status and connecting flights in real time, and get information on the facilities available at all airports in the country. It also helps users address their grievances through the application.
In one of the biggest initiatives of 2017, the government worked towards the strategic divestment of Air India. The MoF-Department of Investment and Public Asset Management (DIPAM) is currently in the process to close the structure of the proposed deal for the airline that is saddled with a debt of a more than Rs. 50,000 crore with over 42 international, 70 domestic destinations and an operating fleet size of 140-plus aircraft. Bids have also been invited from private companies, including foreign ones, to buy out the governments entire 51% stake in helicopter service operator Pawan Hans, along with management control; ONGC retains balance 49 per cent stake. The process should be completed in 2018-19.
2018 is expected to see airlines complete fleet expansions. Vistara is expanding by over 100 aircraft. This would help them complete their fleet size of 20 aircrafts before they could fly internationally, in line with 0/20 rule. Spice Jet too placed one of the biggest orders with Boeing for a whopping $22 billion for up to 205 aircraft, with other players like Indigo, Jet Airways and Go Air expecting aircraft deliveries.
As Indian aviation market continues to surge, including with initiatives like WINGS-2017 which provided a platform to State Governments to market themselves to Airline Operators, the focus has now shifted to ensuring adequate airport infrastructure capacity. Based on some projections, most of India’s 40 largest airports are expected to exceed their design capacity within a decade. An estimated Rs 3 lakh crore investment is needed to triple airport capacity in the next 15 years. In this context, it is important that airport operators take all efforts to ensure maximum asset utilization including through use of appropriate technological interventions.
Speedy execution of such initiatives will be key to capitalizing on the momentum. With matching efforts to enhance safety and filling the skill gap in aerospace manufacturing and maintenance, Indian aviation can look at continuing to fly high.
The author is Peeyush Naidu, Partner, Deloitte India