The Aviation Industry covers all the aspects of air travel and the activities related to it. The terms ‘Aviation Industry’ and ‘Airline Industry’ are most commonly used interchangeably but they do mark out different things. Airline Industry just forms a part of the Aviation Industry which encompasses the entire airline industry, aircraft manufacturing, research companies, military aviation, and much more.

The globalized nature of the industry, serving different continents, countries, and cultures defines its importance. The industry not only has inculcated its essential contribution in the tourism industry for boosting various local economies but has supported global trade as well, thus making it a key contributor to global economic prosperity.

The Booming Industry

The rise in the demand from the middle class, the disposable incomes, the travel mania, rising aircraft penetration, and aviation infrastructure growth are the fundamental boosters for this industry. To achieve the pinnacle, there has been an increase in private sector investment coupled with increased public-sector involvement in India. Since the last three to four years the Indian Aviation Industry has witnessed a growing status and is one of the fastest-growing industries in India.

The industry imparts valuable input in assisting the consumers by providing speedy connections between lands. Such virtual bridges enable economic flows of goods, people, investments, and ideas eventually supporting economic growth.

Worldwide, the Indian Aviation Industry is the third biggest domestic aviation market. With the growth rate of India’s passenger traffic at 11% CAGR, the number touched 341 million in FY20. Like any other industry, the Indian Aviation Industry was affected by the Covid-19 pandemic, but with the progressive opening of this sector from merely 58,000 domestic scheduled passengers as in May 2020, the numbers reached around 5 lakh passengers in November 2020.

From the above figures, it can easily be derived that the Indian Aviation Industry is booming.

The Indian Market

Considering the areas of strategic or national importance, India has made several attempts at skill development. By forging partnerships with global aerospace and defence majors, the Indian Government has hand-held defence public sector units in order to develop capabilities in the defence manufacturing segment.

The country’s aviation capabilities include the production of fourth-generation fighter aircraft, advanced helicopters like Dhruv and Light Combat Helicopter, and best-in-class missiles (BrahMos). This will not only create business opportunities for large and medium enterprises but also bring off some amounts of foreign exchange for the economy.

A buoyant market growth rate along with infrastructure expansion would aid the Indian Civil Aviation Industry to grow at an accelerated pace. This can be taken up as a favourable moment for both domestic and global players to exploit this opportunity with enormous potential. On one hand, the global aerospace majors can jointly work with domestic players and grasp the low-cost engineering talent, while on the other hand, the domestic players can gather the benefit of technical know-how.

Some More Insights!

The following Pie chart depicts the Market Share of the above Top Indian Airline Companies:

Source: Businesstraveller

Contribution to the Indian Economy

Let’s have a look at the different perspectives of the importance of the Air Transport Sector.

Source: IATA

  • Jobs: The sector supports jobs like aircraft manufacturers, on-site enterprises, airport operators, and air navigation service providers. It also supported local goods and services suppliers.
  • Spending: In total, approximately 1.5% of the country’s GDP is supported by the inputs to the air transport sector and the foreign tourists arriving via airlines.

Source: IATA

The above data represents the forecast scenarios for passenger traffic, jobs, and GDP footprint.

Government Initiatives

With an escalating intention for the Indian Aviation Industry, the Government of India has taken various steps and is taking up more, which are as follows.

1. Large Aircraft orders: Contemplating the projected rise in the demands for commercial air travel, the nation’s aeroplane fleet is expected to quadruple by 2038 to approximately 2500 aeroplanes.

2. Airport Infrastructure development: to elevate the airport infrastructure, the government under the UDAN scheme aims to develop 100 airports by 2024 and to invest approximately $1.83 billion by 2026.

3. National Civil Aviation Policy (NCAP): With a vision to create affordable flights for the masses, enabling 30 crores domestic tickets by 2022 and 50 crores tickets by 2027, and international ticketing to touch 20 crores by 2027, the National Civil Aviation Policy was approved in 2016. It covers various policy areas like regional connectivity, Airports Authority of India, Air Navigation Services, MRO, Air cargo, and others.

4. Regional Connectivity Scheme or UDAN (Ude Desh ka Aam Nagrik): This scheme is a vital component of NCAP 2016 envisaging to make affordable and widespread air travel. Under this, a one-hour journey of 500 km is capped at Rs.2500 (as an all-inclusive charge).

5. IFSC (International Financial Services Centre) and GIFT City: they serve certain advantages to the aircraft leasing and financial businesses. Like
  • Aircraft leasing- the capital gains on aircraft leased by an Indian Financial System Code (IFSC) unit transferred to a domestic company are eligible for a 100% deduction.
  • Tax incentives available in GIFT city- certain incentives on Income tax, GST, and other taxes and duties.
6. Production Linked Incentive (PLI) Scheme: Announced by Hon’ble Finance Minister, Smt. Nirmala Sitaraman, an outlay of Rs. 1.97 lakh crores for this scheme across 13 key sectors, among which the central government approved for drones and drone components. This scheme came up as a follow-through of the liberalized Drone Rules 2021, which are intended to drive up the super-normal growth in the upcoming drone sector. It has a scheme outlay of INR 120 crores.

Road Ahead

India’s aviation industry is largely untapped with huge growth opportunities, considering that air transport is still expensive for the majority of the country’s population, of which nearly 40% is the upwardly mobile middle class. 

Written by: Devangi Sharma