Thursday, January 04, 2018

Aviation in India 2017: Under Modi government, sector takes off with surging traffic

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.

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.
04/01/18 Financial Express