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Must know facts:
- Airport Authority of India (AAI) is responsible for developing, financing, operating, and maintaining all public sector airports.
- The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world.
- Growth in import and export in India will be the key driver for growth in freight traffic as 30 per cent of total trade is undertaken via airways.
- Freight traffic on airports in India is expected to cross 11.4 million tonnes by 2032.
- Airports across the globe are planning on increasing their spending on new technology to keep up with surging passenger traffic all across the globe. India is expected to overtake China and the United States as the world’s third-largest air passenger market in the next ten years, by 2030, according to the International Air Transport Association (IATA).
Influencing Factors for price change:
- Stay updated with any news on air travel relevant regulations, approvals from Directorate General of Civil Aviation (DGCA). India aims to have 220 new airports by 2025, said, Mr. Jyotiraditya Scindia, Minister of Civil Aviation. Cargo flights for perishable food items will also be increased to 30% with 133 new flights in the coming years.
- Impact of Brent crude oil prices on airlines industry is extremely significant factor, higher prices could be due to OPEC supply cuts or US administrative policy changes should be monitored. Cost per Average Seat Kilometre (CASK) is directly impacted with any change in Air traffic fuel (ATF) prices.
Understanding the Industry:
Indian aviation is experiencing dramatic growth which includes the emergence of Low Cost Carriers (LCC) / new carriers to a growing middle-class ready to travel by air as well as growth in business and leisure travel. Five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) have been completed and are operational under Public Private Partnership (PPP) mode.
Total passenger traffic stood at 224 million during 2016. India is one of the least penetrated air markets in the world with 0.04 trips per capita per annum as compared to 0.3 in China and more than 2 in the USA. Indian carriers plan to increase their fleet size to reach 800 aircraft by 2020.
The Civil Aviation industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity.
Airport Authority of India (AAI) is responsible for developing, financing, operating, and maintaining all public sector airports. New airports are permitted under the Greenfield Airport Policy 2008. Investment in airports is encouraged under the PPP Policy of the Government of India. Regional Air Connectivity Policy offers attractive incentives in the form of exemption of landing, parking and navigation fees to airlines operating at designated airports in non-metro areas.
Estimated Market Size:
India’s passenger* traffic stood at 188.89 million in FY22 and 76.47 million in the first quarter of FY 2022-23. In FY22, airports in India pegged the domestic passenger traffic to be 166.8 million, a 58.5% YoY increase, and international passenger traffic to be 22.1 million, a 118% YoY increase, as compared to FY 2020-21.
Road Ahead:
India is expected to overtake China and the United States as the world’s third-largest air passenger market in the next ten years, by 2030, according to the International Air Transport Association (IATA). Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. The number of airplanes is expected to reach 1,100 planes by 2027.
The government has allowed 100% FDI under the automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49% would require government approval.
India aims to have 220 new airports by 2025, said, Mr. Jyotiraditya Scindia, Minister of Civil Aviation. Cargo flights for perishable food items will also be increased to 30% with 133 new flights in the coming years.
The Government of India has started a new regional connectivity scheme (RCS) called Ude Desh ka Aam Nagrik (UDAN) under which fares will be capped at Rs 2,500 (US$ 37.5) for half the seats in an one-hour flight, as per Minister of State Civil Aviation.
Indian airline companies like Indigo, Air India, SpiceJet, Vistara, Go First, Air Asia India are few of the Airlines which are actively catering to domestic passenger movement across India. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2026.
– Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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Top Stocks in the industry:
INDIGO, JETAIRWAYS, SPICEJET.
(Please note above stocks are not recommendations, they are purely for information purpose only)
Information Source / References: The Economic Survey 2016–17 &17-18, IBEF, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports,IBEF,AAI,DGCA.
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