Aviation Industry Report
TABLE OF CONTENTS
Industry Overview
3
Indian Aviation Industry
5
Challenges in Indian aviation sector
4
Growth Drivers
6
Key Government Initiatives
7
Major Players in Indian aviation sector
8
Industry Statistics
9
2
Aviation Industry Report
Aviation Industry
The aviation industry includes almost every aspect
of air travel and the operations that support it. This
suggests that it encompasses the entire airline
industry, as well as military aviation, research
institutions, aircraft manufacturing, and several
other fields.
The globalization of the sector, which aids in
building bridges between many continents,
nations, and cultures, is one of the main reasons
influencing the relevance of the global aviation
industry. Thus, the global aviation has been able
to efficiently transport people to remote locations
and improving the lives of countless others.
In the aviation sector, civil and military flights are
the two main types. Civil aviation is the umbrella
term for all non-military aviation. Regardless of
whether an aircraft carries passengers, cargo, or a
combination of the two, both private and
commercial aviation are included in this.
Contrarily, military aviation refers to the use of
aircraft during conflict. Usually, aerial combat or
observation are supported by this form of air
transportation.
The following three businesses are among the
biggest in the aircraft manufacturing sector,
essential to the aviation industry:
AIRBUS
Airbus is a major European aircraft manufacturer
based in the Netherlands, with manufacturing
facilities in Spain, Germany and France. It is the
biggest airline manufacturer in the world and is
best known for creating the Airbus A380, which is
worlds largest passenger aircraft.
BOEING
One of the world's leading defense contractors,
Boeing is a well-known American aircraft
manufacturer. With headquarters in Chicago,
Illinois, it is the second-largest airline
manufacturer in the world. Boeing is a significant
player in the production of spacecraft along with
commercial and military aircraft. Boeing 737, 747,
and 777 are a few notable aircrafts.
LOCKHEED MARTIN
Lockheed Martin, headquartered in Maryland,
USA, is the largest defense contractor in the
aviation
sector.
Producing
fighter
and
reconnaissance aircraft for air forces around the
world, it specialises in military aviation.
Lockheed Martin's notable aircraft include the F-16
Fighting Falcon and the F-35 Lightning II.
Latest trends in
aviation industry
The aviation business is constantly changing, and
technology has played an important role in its
evolution. Significant progress has lately been
achieved in the use of technology to improve the
customer experience, safety, and effectiveness.
The COVID-19 epidemic has also prompted the
development of new technology, which may
impact how we travel in the future.
1. RFID IN AVIATION
RFID technology is gaining traction in the aviation
sector, offering improved accuracy and efficiency.
It enables enhanced operational performance by
tracking luggage, managing inventory, and
monitoring equipment. The use of RFID can
reduce lost cargo and expedite turnaround times,
making it a significant innovation for airlines.
DELTA Airlines has fully integrated RFID into their
baggage tracking system, using RFID tags
attached to checked luggage. RFID scanners
along the handling process provide real-time
updates to both the airline and passengers via the
Delta app.
2. AUTONOMOUS AIRCRAFT
Unmanned aerial vehicles (UAVs), sometimes
known as drones or autonomous aircraft, have the
potential to revolutionize the aviation sector by
lowering human error, raising safety, and lowering
operational costs. Autonomous aircraft technology
is being aggressively pursued by major firms such
as Boeing and Airbus. The first test flight of
autonomous passenger air vehicle (PAV)
prototype successfully completed by Boeing in
2019, demonstrating the exciting future of
unmanned aviation.
3. ELECTRIC AND HYBRID AIRCRAFT
To reduce its carbon footprint, the aviation industry
is increasing its usage of electric and hybrid
aircraft. These planes' electric motors reduce
noise pollution and air pollution. Major industry
players such as Airbus and Boeing are investing in
the development of hybrid and electric aircraft.
The Alice Commuter, an all-electric aircraft in
development by companies such as Eviation,
might carry up to nine passengers on short-haul
flights.
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Aviation Industry Report
Aviation Industry
4. BIOMETRICS
Airport security and boarding procedures can be
improved with the use of biometric technology
such as facial recognition and fingerprint scanning.
Biometric authentication can be used for both
payments and access control.
Indira Gandhi International Airport in Delhi, for
example, uses Digi yatra, which assures a
paperless boarding process.
Exhibit: Revenue of commercial airlines
worldwide for past 7 years(Billion USD)
900
800
700
5. CONTACTLESS TECHNOLOGY
The COVID-19 epidemic has accelerated the
adoption of contactless technologies in the
aviation industry. Contactless technology can
reduce the risk of infection by reducing the need
for passengers and airport workers to have direct
physical touch. Travelers, for example, can use
contactless check-in kiosks and bag drops to
check in and drop off their baggage without
dealing with airport personnel.
600
500
400
300
200
100
0
2017
2018
2019
2020
2021
2022
2023
Year
Financial Outlook
• In 2023, net profits for the airline industry are
anticipated to reach $9.8 billion.
• The airline industry's operational earnings are
predicted to reach $22.4 billion in 2023, a
considerable increase from the $3.2 billion
anticipated in December.
• In 2023, 4.35 billion individuals are anticipated
to travel, approaching the 4.54 billion who did
so in 2019.
• Cargo volumes are estimated to be 57.8 million
tonnes, down from 61.5 million tonnes in 2019
due to a dramatic deceleration in international
trade volumes.
Revenue is predicted to reach $803 billion in
2023, up 9.7% from 2022 and down 4.1% from
2019.
Expenses are predicted to rise to $781 billion
up 8.1% from 2022 and down 1.8% from 2019.
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Aviation Industry Report
Indian Aviation Industry and Latest Trends
Over the last three years, the civil aviation sector
in India has seen tremendous growth, making it an
industry with one of the most rapid growth rates.
First, we have the airlines we're all familiar with
that operate on regular routes and have set
schedules, which comprises the domestic and
international air travel. Secondly, there are the
comparatively flexible services that cater to
specific travel needs, like private charters or air
taxis. Lastly, we have the cargo services,
responsible for the delivery of mail and cargo by
air. This vital sector plays an important part in
facilitating the movement of goods and ensuring
efficient logistics
International Air Transport Association (IATA)
predicts that, by 2030, the country with the third
highest share for air passengers in the world
would be India. Additionally, the huge demand of
the sector has led to increase in the number of
aircrafts operating there. It is forecasted to operate
approximately 1100 planes worldwide by 2027.
Additionally, the Union Civil Aviation Ministry
received Rs 3,113.36 crore from FM Nirmala
Sitharaman.
Industry Scenario
India's growing demand for air travel has forced
the government to create a strong ecosystem and
supportive legislation.
To increase the volume of passenger traffic, the
government has formulated a strategy called the
National Civil Aviation Policy, which aims at
enhancing connectivity at lesser costs.. This policy
aims to do so by ensuring streamlining of
processes, deregulation, enhanced e-governance
and increasing the ease od doing business. The
Goods and Services Tax on locally provided MRO
services dropped from 18% to 5% in April 2020.
In seven airports, the Airport Authority of India has
established joint partnerships. Six airports —
Ahmedabad,
Jaipur,
Lucknow,
Guwahati,
Thiruvananthapuram, and Mangalore — received
recent awards for operations, management, and
development under PPP for a 50-year period. AAI
airports have been designated for asset
monetization between 2022 and 2025, in
accordance with
Pipeline (NMP).
the
National
Monetization
In actuality, the airline has placed orders for up to
840 aircraft with Airbus and Boeing, including 370
optional purchases. The Tata-owned company
looks to be vying for the largest market share in
Indian aviation.
Interestingly, despite the fact that Air India, Airbus,
and Boeing are all privately held businesses, the
significance of the agreement may be determined
by the discussion Prime Minister Narendra Modi
had with US President Joseph Biden and French
President
Emmanuel
Macron
after
the
announcement.
Given that a sizable amount of production will also
take place in the UK, British Prime Minister Rishi
Sunak has also applauded the agreement,
according to sources.
Only behind the United States and China, India
holds the third position in the list of countries with
the highest air passenger traffic, and it is also one
of the most competitive.
Key investments and
developments
⮚ The Department for Promotion of Industry and
Internal Trade (DPIIT) reported that between
April 2000 and September 2022, FDI inflow into
India's air transport sector (including air freight)
reached US$ 3.61 billion.
⮚ 100% FDI has been grantedd by the
government in the areas of air transport
comprising of regional, scheduled and
domestic passenger airlines.
⮚ In the next five years, AAI and other airport
developers hope to invest close to Rs 1,00,000
crores towards the airline sector.
⮚ The following four years lie in anticipation that
India's aviation sector will get investments
totaling Rs. 35,000 crores (US$ 4.99 billion).
The Indian government intends to spend $1.83
billion on the construction of airport
infrastructure.
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Aviation Industry Report
Indian Aviation Industry and Latest Trends
⮚ Mr. Jyotiraditya Scindia, currently the Civil
Aviation Minister. has said that there will be an
addition of 220 airports in the country by 2025.
In the upcoming years, 133 new flights will
increase perishable food cargo flights by 30%.
⮚ In 2022, Apollo Global, a private asset
management located in the US, helped the
Mumbai airport raise capital of $750Mn through
debt.
⮚ Adani Airport Holdings (AAHL) received
funding to the tune of %250Mn that it seeks to
allocate towards the execution of capital
projects and development of airports under its
control.
⮚ The Ministry of Civil Aviation granted an
objection less permit to Akasa Air, a new-age
airline, to begin operations in October 2021.
The start-up started running in the middle of
2022.
Air India and Tatas
Under a huge burden of debt, the once-shining Air
India was sold to the Tata group by the
government for a price of $2.2Bn in 2021. One of
the main reasons for Air India’s fall was the
emergence of low-cost carriers in the early twentyfirst century. As competition rose in the aviation
industry in India, Air India started to suffer
significant losses and needed taxpayer-funded
bailouts to survive. The redesigned airline is now
aiming to face up against the same competitors
once more.
According to reports, the Tata Group has asked
the Competition Commission of India (CCI) for
permission to merge Air India, its flagship airline,
with Vistara, a carrier affiliated with Singapore
Airlines (SIA).
.
What Challenges do Indian
Airlines Sector Face?
Cost of Aviation Turbine Fuel (ATF): Due to
high taxes, ATF represents the single largest price
for carriers, accounting for 40–50% of operational
costs, yet Indian airfares are 15% below the
break-even point
Tax on ATF: Some Indian states impose up to
30% taxes on jet fuel, which prevents smaller
airlines from operating shorter flight routes
profitably. Large airlines like IndiGo exploit their
size to recover expenses by charging low rates on
certain flights.
The National Civil Aviation Policy has a problem in
that not all players have been treated equally. Up
until 2016, in order to fly internationally, a new
airline required to have 20 aircraft and have been
in business for at least five years. The National
Civil Aviation Policy of 2016 brought about a
revision to this, but domestic airlines were still
required to have at least 20 aircraft for domestic
operations.
High Lease Cost: Airlines pay annual lease rates
of approximately 10,000 crore, making up almost
15%, and nearly 80% of India's commercial fleet is
leased.
Dollar-Rupee Volatility: Because leases are in
US dollars and the Indian rupee has depreciated,
this results in increased operating costs. The
government's intention to create leasing firms in
India could result in cost savings.
High Service Fee and Low Ticket Price: Airlines
must pay for the use of airport infrastructure, such
as runways and terminals, and charging low fares
to obtain a competitive edge in the market is
detrimental to their ability to make a profit.
Concerns over fee rises have been voiced as a
result of airport privatization.
High cost of crew training: There is a shortage
of pilots since there aren't enough flight training
organizations, and training airline crew is
expensive.
.
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Aviation Industry Report
Growth Drivers and Government Growth in Indian Aviation
Industry
Initiatives
Pre-Post Pandemic effects
Aviation have been significantly affected by the
COVID 19 virus which has led to a sharp decrease in
industry revenue of less than 40 % from its level last
year. In the foreseeable future, the sector is expected
to remain smaller, with a projected return to the level
of pre pandemic traffic by 2024. The pandemic, which
also led to more stringent hygiene standards and the
rapid adoption of digitalization, triggered fundamental
changes in the aviation sector alongside financial
challenges. The following points explores these shifts
and provides a call to action for carriers to adapt to
the long-term realities of COVID-19.
➢ The recovery will be driven by leisure travel,
while business travel may take considerable time
to return to pre pandemic levels, possibly reaching
only 80% by 2024.
➢ During the pandemic, aviation has accumulated a
significant amount of debt which may lead to
possible ticket price increases and increased
government role.
➢ There would be a varying performance among
airlines, with some proactive restructuring for
efficiency in order to emerge as stronger
competitors.
➢ Aircraft markets may remain oversupplied due
to increased production before the pandemic,
offering opportunities for countercyclical actions
such as securing orders or leases at lower rates.
➢ Air freight will face undersupply as cargo
demand surged during the pandemic, prompting
carriers to consider enhancing cargo services,
using freighter conversions, while maintaining
flexibility in approach.
Demand
upliftment
investments
with
SUPPORTIN
G POLICIES
DEMAND
GROWTH
• -Robust growth
in foreign trade
• Surging
domestic and
international
tourists and
travelers
• Increasing
middle-income
segment and
workforce
• Enhanced
government
attention towards
infrastructure
development
• Growing
liberalization,
Open Sky Policy
• Policies
facilitating FDI.
policies
driving
INCREASE
IN
INVESTMEN
TS
• AI lead extensive
modernized and
development
projects,
upgrades
existing airports,
and develops
low-cost airports.
• Private sector
involvement and
greenfield
projects.
Travel and tourism spending (US$) billion
250
200
150
100
50
0
2016
2017
2018
2019
2021
Business Travel and Tourism Spending
Leisure Travel and Tourism Spending
Source:Global Business Travel Association, Make in India,
World Travel and Tourism Council, News Article
Travel-Tourism & Export-Import
Travel and tourism accounted for 4.7% of India's
GDP in 2021. Business travel is going to be boosted
by business hubs such as Mumbai, Bengaluru,
Chennai and Delhi. Expenditure on leisure travel is
expected to grow by 300% over the period until 2028.
The Indian Government envisages opening of 100
airports by 2024, while the travel market is estimated
to reach EUR 125 billion in fiscal year 27. Since
October 15, 2021, the renewal of tourist visas is
facilitated by chartered flights. Merchandise exports
and imports in FY22 were US$419.7 bn and
US$611.69 bn, respectively, with a CAGR of 8.2% in
exports.
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Aviation Industry Report
Government Initiatives
Liberalization, open sky policy
•
Liberalization and open skies policy have led to the
establishment of six major urban airports through
private participation in public private partnerships
(PPP).
•
At present, 60% of air traffic in the airports
operates under PPPs and 40% is managed by
AAI.
•
By engaging into reciprocal agreements with other
nations, India has increased its air transport rights.
Recently, India and Greece signed the first
open skies deal.
Union Budget
•
The Ministry of Civil Aviation received an allocation
of INR 3,224,67 crores in the budget for the period
from 2023 to 24.
•
Tax holidays for capital gains income of aircraft
leasing and financing businesses are included in
the budget, as well as tax exemptions for aircraft
lease rentals or royalties paid to foreign lessors in
the International Financial Services Centre (IFSC)
at GIFT (Gujarat International Finance Tec-City)
City.
•
The government also plans to enhance health
system capacities with a view to developing entry
points for aviation as per Prime Minister Atma
Nirbhar Swasth Bharat Yojana.
•
The objective of this initiative is to enhance public
health services in 32 airports, making it easier for
medicines to be transported by air both within India
and internationally.
•
In addition, in this budget the government went
over disinvestment of Air India as well as
PawanHans for the financial year 2021-22
Northeast India
•
More than 30 airport development projects are
now underway throughout NEI's various areas.
•
Over the next five years, the AAI intends to build
more than 20 airports in Tier II and III cities.
•
In October 2021, under the Ministry of Civil
Aviation, Shri Jyotiraditya M. Scindia, opened 6
routes which significantly improved air traffic in
Northeast India. He also officially launched direct
flights from Shillong to Dibrugarh.
Notes - AAI- Airport Authority of India
Encouragement to FDI
•
For Greenfield Projects 100% FDI is permitted
under an automatic route, while for brownfield
projects it is possible to obtain up to 74% foreign
direct investment.
•
For scheduled air transport services, regional air
transport services, and domestic scheduled
passenger airlines, an automatic route may be
used to reach a total of 100% FDI.
•
However, foreign direct investment beyond 49%
must be approved by the Indian government. Up to
49% of their own funds may be invested in the
aviation industry by foreign airlines.
•
India's air transportation industry, including air
freight, drew and collected FDI inflows totaling
US$ 3.61 billion from April 2000 to September
2022.
Metro airports:
•
India wants to have 220 operational airports by
the year 2030.
Non-metro airports:
•
Over the period next five years, the AAI have
intentions to invest Rs 25,000 crore to improve
infrastructure
facilities,
encompassing
the
construction of new terminals, expansion, and
modification of existing terminals, as well as
runway and apron expansions.
•
The government of Andhra Pradesh plans to move
forward with the construction of greenfield airports
in six cities: Nizamabad, Nellore, Kurnool,
Ramagundam, Tadepalligudem, and Kothagudem.
•
The AAI plans to connect roughly 22 airports as
part of its regional connectivity plan.
FDI in aviation and
liberalised aviation
policy
Increasing airline
operators
Higher aircraft
movement
Growth in passenger
traffic
Rise in freight traffic
8
Aviation Industry Report
Key Players In Indian Aviation
Exhibit: Market Share of KEY PLAYERS
In May 2023, the Indian domestic civil aviation
industry witnessed a significant milestone as IndiGo
emerged as the dominant player with an impressive
market share of nearly 62%. The company's
unwavering commitment to providing top-notch
service and maintaining its competitive edge has
positioned it at the forefront of the market.
Following closely behind were two other major
players, Air India and Vistara Airlines, both part of
the renowned Tata group, each holding
approximately 9% of the market share. The industry
itself operates as an Oligopoly, characterized by
limited competition and high entry barriers, making it
a challenging environment for new players to enter.
Despite the industry's limited competition, the
demand for domestic air travel in India remained
strong, with a remarkable 13.2 million people
choosing to travel by plane in May 2023.
This robust demand is a testament to the growing
importance of air travel in the country's transportation
landscape.
Notably, there are exciting developments on the
horizon as Air India and Vistara Airlines are
preparing to join forces through a merger.
Exhibit: Domestic Demand
Airline Data
180000
100.00%
160000
90.00%
80.00%
140000
70.00%
120000
60.00%
100000
50.00%
80000
40.00%
60000
30.00%
40000
20.00%
20000
10.00%
0
0.00%
FY16 FY17 FY18 FY19 FY20 FY21 FY22
Capacity (Available Seat Km)
Demand (Revenue Passenger Kilometre)
Utilisation (Passenger Load Factor in %)
Source: Financial Express article on Domestic demand
12%
8%
9%
62%
9%
Indigo
Air India
Vistara
Air Asia
Others
Source: Live Mint article on Indian Aviation Industry
Over the past few years, India's civil aviation sector
has witnessed a remarkable journey, with both
demand and capacity soaring to new heights.
However, the industry faced a major setback during
the Covid-19 pandemic in the years 2020-21, where
demand for air travel significantly declined. Despite
the challenges, the sector has displayed resilience,
and we now witness a rapid recovery, though still
below pre-pandemic levels.
During FY22, there was a notable increase in
capacity, with a staggering 111,455 million available
seat kilometers offered on domestic flights. An
interesting trend has been the constant increase in
demand outpacing the expansion of supply,
resulting in high utilization rates, represented by the
impressive Passenger Load Factor.
Looking at the broader picture, the domestic
market's capacity (ASK) showed consistent growth
with a 3.5% CAGR from 2011-12 to 2021-22.
Meanwhile, the demand (RPK) increased at a
slightly lower rate but still substantial, with a 3.3%
CAGR during the same period.
India's significance in the global aviation landscape
cannot be overstated. The nation has successfully
climbed the ranks to become the world's thirdlargest domestic aviation market. And the future
looks even more promising as it is anticipated to
surpass the UK by 2024, claiming the third-largest
position in terms of air passenger market size.
This incredible growth story exemplifies India's
determination and potential in the aviation sector, as
it continues to connect people, facilitate travel, and
foster economic growth. Despite the challenges
thrown its way, the civil aviation sector in India
remains steadfast in its pursuit of excellence and
unparalleled service for its passengers.
9
Aviation Industry Report
Industry Statistics
400
The Covid-19 pandemic dealt a severe blow to the
aviation industry in 2020-21, causing a significant
decline in passenger traffic. However, the industry is
now witnessing a commendable recovery, although it
has not yet reached its pre-pandemic levels.
In FY 2021-22, a total of 188.89 million passengers,
combining both domestic and international, took to the
skies, indicating the beginning of the industry's
comeback. The fiscal year 2022-23 showed further
improvement, with passenger numbers reaching
236.71 million by December 2022.
Exhibit: Passenger Traffic
350
300
250
200
150
100
50
India's potential in the aviation sector is truly
impressive. Projections estimate a whopping 480
million travelers by 2036, surpassing the combined
numbers of Japan and Germany. Moreover, the
nation is set to claim the third-place position in the
global aviation passenger market, overtaking even
giants like China and the United States by 2030.
Although there were declines in both domestic and
international passenger traffic between FY16 and
FY22, the recent resurgence brings hope for a
brighter future. The Indian aviation industry's
resilience and determination to soar to new heights is
evident, promising a future where air travel will
continue to connect people and cultures, driving
economic growth and enriching lives across the
globe.
Exhibit: Aircraft Movement
4000
3500
3000
0
FY16 FY17 FY18 FY19 FY20 FY21 FY22
Domestic
International
Source: KPMG Insights on Indian Airline passenger traffic
The aviation industry in India faced a challenging
period between FY16 and FY21, with a notable
CAGR of -7.79% in aircraft movements, declining
from 1.60 million to 1.20 million. The situation
worsened during the Covid-19 pandemic, resulting
in a significant decrease in aircraft travel in the
years 2020-21. However, there's a silver lining as
the industry is now witnessing a faster rebound,
although it has not yet fully reached its prepandemic level.
During FY22, a total of 1,757,112 aircraft
movements were recorded, indicating signs of
recovery. The progress continued in the fiscal year
2022-23 (April-September 2022) with 1,207,279
aircraft movements made, adding to the positive
momentum.
The domestic and foreign aircraft traffic
experienced declines between FY16 and FY22 at
CAGRs of -6.44% and -18.52%, respectively.
Despite the challenges, the industry displayed
resilience, especially with domestic movements,
which reached 1,062k in FY21, along with 135k
international airplane movements.
2500
2000
1500
1000
500
0
FY16 FY17 FY18 FY19 FY20 FY21 FY22
International
Domestic
As the aviation sector picks up speed, there's hope
for a brighter future ahead, with air travel continuing
to connect people, cultures, and destinations. With
safety measures in place and a determination to
overcome obstacles, the Indian aviation industry is
on its way to reclaiming its soaring heights and
contributing to the nation's progress and prosperity.
Source: IBEF Report on Indian Aviation Industry
10