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INDIAN CIVIL AVIATION MARKET IS SET TO BOOM

GOVERNMENT HAS TO EXTEND ADEQUATE SUPPORT

 

By Devsagar Singh

 

The just concluded India Aviation Show 2016 at Hyderabad has made it clear that time has come for India to take off in the civil and military aviation business leaving behind many countries.

 

A FICCI-KPMG India Aviation Report released on the occasion last fortnight showed that India’s domestic aviation market grew 20.3 per cent during 2015 compared to the previous year and predicted that India is on way to becoming the third largest aviation market by 2020. The report was released by Civil Aviation Minister Ashok Gajapathi Raju.

 

According to the report, there was 17.1 per cent growth in passenger traffic during 2015-16 at 184 million passengers. Passenger traffic is expected to reach around 370 million by 2020 , with domestic traffic constituting around 80 per cent, the report predicted.

 

Referring to public-private partnership model initiated for airports construction, the report said the sector will get substantial support from the government in terms of financing, concessional land allotment, tax holidays and other incentives.

 

Significantly, world’s largest aircraft manufacturers Boeing of the United States and the Airbus Industrie of France, who were present at the Hyderabad India Aviation show, separately released their reports on air traffic growth in India on the occasion and predicted much the same.

 

Hinting a robust growth in the aviation sector in India, the Boeing report said India will require 1740 aircraft by 2034 entailing a cumulative investment of around 240 billion dollars. According to Boeing’s Senior Vice President (Sales) Dinesh Keskar, India will become one of the biggest aviation markets in the world over the next two decades. Of the 1740 aircraft required , as many as 1460 will be of single aisles constituting about 84 per cent, 260 wide bodied aircraft (15 per cent) and 20 regional jets (1 per cent). In other words, domestic travel will register maximum growth, followed by international travel.

 

Competitor Airbus Industrie’s global market forecast released on the occasion in Hyderabad said India was poised for a major growth in air passenger traffic with several international airports becoming important hubs in Asia. It said that in 20 years beginning 2015 to 2034, India will require over 1600 new passenger and freighter aircraft to help meet growth in demand. Valued at 224 billion dollars, these will include 1230 single aisle and 380 wide body passenger aircraft.

 

The Airbus Industrie report, significantly, says that by 2035 the number of Indian cities with over one million monthly air passengers will more than triple.

 

The significance of these reports cannot be lost, for India is about to finalise its civil aviation policy anytime now. The areas needing urgent attention include expansion of airports and airfields across the country, roads connecting airports from cities and towns, hotels and other infrastructure.

 

Airlines need to look up in terms of increased fleet strength and improved passenger amenities, on- time performance. Focus has to be on domestic traffic which is predicted to grow at a very fast pace. Tier II and tier III cities and towns have to be spruced up in terms of better hotels and improved traffic management.

 

India’s flag carrier Air India, needing urgent attention of the government, hopefully gets adequate equity infusion and financial support to tide over a staggering debt burden of about Rs 40,000 crore over the years. Much of this problem was due to Government’s own unstable policies regarding the PSU. Now that the AI is looking up after trimming its workforce and following better business practices, the government should come in aid without delay. AI has already started showing operating profit. It should be given time and resources to strengthen itself.

 

The defunct Kingfisher Airlines and the Mallya episode have come as a dampener to airline industry in India. Banks and financial institutions will obviously be too wary to extend support to the industry unless the government comes out with a clear cut policy on granting loan to airlines by PSU banks. It will be prudent on the part of the government to include this aspect in the upcoming national civil aviation policy. Almost all airlines have given orders of new aircraft from both the Boeing and the Airbus Industrie. They will require massive funds.

 

Along with civil aviation, military aviation too is set to grow in India now that the government has given go ahead to foreign firms to produce in India weapons related to military aviation in collaboration with Indian firms. Hindustan Aeronautics Limited (HAL) has, for example, already tied up with Boeing’s military aircraft division. Pratt and Whitney, another major US firm on military aviation, is also in talks with Indian firms to set up shop in India.

 

Overall, India’s civil and military aviation business is on sound track and given stable policy regime in the long run should yield positive result. (IPA Service)

 

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