India’s aviation sector is on flight path to success amid investments and reforms
▶ By 2043, the industry could contribute up to $1tn annually to India’s economy, writes Rebecca Bundhun in Mumbai
Experts say many steps, including new robust policies, are required for the aviation sector to realise its full potential
India’s aviation industry is taking off in a big way, and is set to play a larger role in the country’s economy over the coming years, analysts and industry insiders say.
But many steps, including a new robust policy framework, are required for the aviation sector to realise its full potential, they say.
“The industry is at an inflection point,” says Kapil Kaul, chief executive and director at Centre for Asia Pacific Aviation (Capa) India.
“It is critical to make sure that we have the requisite infrastructure to grow to the scale. It’s important that this growth potential gets converted. It requires a transformative policy – and that policy must happen now.”
India’s aviation industry handled about 200 million passengers in the financial year to the end of March 2023, according to Capa’s data.
That figure could jump to more than 1.3 billion passengers in the next 20 years, but would require enormous efforts in scaling up the country’s aviation ecosystem. By 2043, aviation could contribute up to $1 trillion annually to the Indian economy, according to Capa.
Sudeep Mehrotra, managing director at professional services firm Alvarez & Marsal, says the government is taking steps “to further support” growth in the aviation sector with efforts to encourage more private investment and by expanding the number of airports.
The civil aviation ministry has said that the number of airports in the country will increase to more than 200 in the next six years, from 147 now.
Mr Kaul also highlights positive steps by the government including the privatisation of Air India, increasing the role of private airports and pushing states to reduce taxes on fuel.
“We need to put in place the civil aviation infrastructure and capabilities that by 2047 [we] would be able to support a $20 trillion economy within India,” Jyotiraditya Scindia, India’s Civil Aviation Minister, said at a conference in New Delhi.
Several factors are providing strong tailwinds to the sector.
India has overtaken China to become the world’s most populous country with more than 1.425 billion people, according to the UN’s population figure.
Only a single digit percentage of the population in India travels by air, but the number of travellers is increasing as the economy expands and incomes rise.
A record 13 million passengers flew on domestic airlines in March, which was up 21 per cent on the same month a year earlier, and up 11 per cent on March 2019, indicating that air travel is surpassing pre-Covid levels, according to data from India’s Directorate General of Civil Aviation. “Travel is witnessing a significant resurgence post [Covid] restrictions – Indians are maximising every opportunity, including long, extended weekends, special occasions and festivals and we are seeing a brisk demand this summer season – over three times versus last year,” says Indiver Rastogi, president and group head, global business travel at Thomas Cook India and SOTC Travel.
“What is noteworthy is the trend of Indians taking multiple short duration holidays or minications to short haul destinations and this is resulting in a strong uptick in air travel.”
Business travel has also overtaken pre-Covid levels, he adds.
The Indian government’s regional connectivity scheme, which is improving the connections between towns and smaller cities in India with the country’s major cities, is also boosting travel.
Meanwhile, the country’s economy is also expanding, which in turn is propelling the sector. India is expected to be the world’s fastest-growing major economy this year, with the International Monetary Fund estimating growth of 5.9 per cent. “India’s aviation market is witnessing rapid growth, fuelled by a large population, rising disposable income, and a thriving economy,” says Maneck Eddie Behramkamdin, associate vice president and business head at Godrej Aerospace.
The company “aims to capitalise on the increasing demand for aircraft components and technology expansion by targeting 35 per cent growth in its commercial aviation business by March 2025”, he says.
The expansion of budget carriers, foreign investment into airlines and urbanisation are also aiding the sector, says Shrenik Ghodawat, director at Star Air, a Bengaluru-based airline.
“Limited airport infrastructure” at some of the destinations that are experiencing fast growth and high taxes on aviation in India are hurdles for the sector as passenger numbers climb. “With the right policies and infrastructure in place”, India could become a much larger aviation market, says Mr Ghodawat.
The growth in the sector is also attracting interest from international plane makers such as Boeing.
The US plane maker, which signed a deal for up to 290 planes with Air India this year and announced plans in February to invest $24 billion to set up a logistics centre for aircraft parts in the country, says that it is “confident about the potential for growth in India”.
“The aviation industry in India has undergone significant policy reforms in recent years, such as the launch of the Regional Connectivity Scheme and the National Civil Aviation Policy, which have helped to improve air connectivity and make it easier to do business in the sector,” says Salil Gupte, president of Boeing India.
But a new policy should focus on areas including consumer protection and reducing the cost of regulation, according to Capa. A bilateral policy aimed at maximising growth is also needed, it adds.
India’s aviation sector also has to “deal with a range of challenges, including infrastructure limitations, regulatory compliance, a lack of skilled workers, high operational costs and environmental impact”, says Godrej Aerospace’s Mr Behramkamdin.
Opportunity in the industry can be further leveraged if “airlines can expand into regional airports, employ emerging technologies … to enhance operations and customer experiences”, says Anand Yedery, regional head of customer travel and lifestyle, South Asia, Middle East and Africa at Cathay Pacific, Hong Kong’s flag carrier.
The role that technology can play in the rise of India’s aviation sector cannot be underestimated, adds Sri Srinivasan, chief revenue officer at Zvolv, an AI-powered hyper-automation service provider for enterprises.
“Smart technology, automation and digitalisation are key for the aviation industry to thread the needle between safety, profitability and sustainability,” he says.