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Global Aviation Summit 2019: Setting pace for exponential growth in India's aviation sector 

Moneycontrol , Jan 15, 2019

India will need 200 airports and an investment of $40-50 billion to handle at least 1.1 billion passengers flying to, from and within the country.

These numbers were revealed by the government's Vision 2040 document projecting growth in the Indian aviation industry over the next two decades.

"The projected passenger traffic (to, from and within India) for FY 2040 is 1.1 billion. This comprises around 821 million domestic passengers and around 303 million international passengers (to and from India). This is over six times the 187 million traffic recorded in FY 2018," the vision document said.

Launching the vision document, Union Minister for Civil Aviation Suresh Prabhu said that the document will "chart out" a roadmap to achieve the objectives to make India a "global hub" for the aviation sector.

According to the document released by the government during Global Aviation Summit 2019, while most of the airports' passenger capacity will saturate in the next 15 years, India will have to nearly double the count from 99 to 200.

"In leading regions like Delhi and Mumbai, even the second airports are likely to be saturated by 2040 and will require a third airport. Overall, India may require around 190-200 airports in 2040," it said.

The document laid out that in order to cater to such passenger traffic, India will have to "holistically" develop airports having all stakeholders on board. This has to be coupled with providing "quality service" to flyers.

It also suggested ushering in amendments to Land Acquisition, Rehabilitation and Restructuring Act, 2013 and adopting "land-pooling" techniques to develop newer airports.

Airlines in 2040

The Vision document of 2040 said that scheduled airline fleet will rise from 622, at the end of March 2018, to 2,360 till March 2040. This will force airlines to order more aircraft to cater to the demand. According to the document, close to 1,024 aircraft deliveries are pending for five airlines.

Interestingly, the document said that while India is a "price sensitive" market, gradual rise in per capita incomes, increased (perceived) value of 'time', propensity for leisure and tourism will lead to more and more Indians using airways as a medium to travel.

The document pitched for a lower Goods and Services Tax (GST) reasoning that "taxes add pressure on the airline's bottom line", thus aviation turbine fuel (ATF) needs to be brought under GST "at the earliest".

It added that airlines must try to reduce dependence on ATF by adopting biofuels and explore issuing masala bonds to raise funds for themselves.

Air Cargo

While the document was silent on detailed "policy" framework, it pointed out that air cargo will reach 17 million MT per annum by 2040, up from 3.35 million MT per annum in 2018.

This will need setting up of Air Cargo Logistics Promotion Board (ACLPB) to enable time-bound implementation of policies, establishing free trade warehousing facilities at the airports, setting up Air Freight Station (AFS) and putting in place Risk Management System (RMS) to minimise congestion.

It also suggested development of low frill cargo airports and augmentation of tier II/III airports to avoid congestion at metro airports.

Aviation Financing

While aviation financing was pitched as a major breakthrough in the policy document by Prabhu, no elaborate measures were mentioned.

The document said that in the wake of falling rupee, airlines may not be able to continue with Sale and Leaseback (SLB) model due to reduced margins (on account of expensive dollar). Thus, the model will fail to be a sustainable model in the long run.

"Establishing a domestic aircraft finance industry will require a long term vision and significant policy reforms, especially on the taxation front," it said.

The document suggested automatic de-registration and repossession system, making registrar repository public, incorporation of ratified CTC 2001 conventions, making taxation of aircraft leasing more attractive and simplification of brown/green field airport agreements among many other things.

Made in India factor

Prabhu has set up a task force, under National Civil Aircraft Development (NCAD) programme, to chalk out plan for indigenous aircraft, helicopters and associated equipment manufacturing.

With an aim to promote India as a global aircraft manufacturing hub, the task force is expected to set up a special purpose vehicle (SPV) with an investment of $ 1.4 billion.

To achieve the target, the task force will identify technologies where India can pioneer in, giving SEZ status to aero-clusters, allowing 100 percent foreign direct investment (FDI), through automatic route, for investments by OEMs and Tier 1 manufacturers in defence aeronautical manufacturing, skill development, etc.

The Vision document for 2040 has also addressed areas of concerns for maintenance, repair and overhaul (MRO), human resource development, aviation safety and security, ground handling mechanism, air navigation and remotely piloted aircraft (drones).

India is the world's seventh largest aviation market and projected to become third largest by 2022.

 

 

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