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Indian aviation industry is ranked the ninth largest aviation market in the world. It is estimated to
clock a Growth Rate of 400% between 2010 to 2020, making it one of the fastest growing aviation
industries.[1] At current rates, it will be a $16 Billion industry by 2020, making it the third largest
in the world. While the growth in civil aviation can be attributed to an increase in number of
business travellers as well as tourists, freight aviation has contributed to the growth in a major way
as well.[2] From the policy perspectives, factors like opening up of economy, increased FDI in
airline sector, increase in middle class incomes, low-cost carriers, regional connectivity,
privatization of airports, etc have been some of the major contributors in the aviation sector
growth story of India.
However this sudden burst in the number of fliers has caused multiple capacity related challenges
for the aviation sector in terms of airplanes availability, airport infrastructure and air-traffic
handling capacity. The number of fliers, which stood at 468.09 lacks in 2010 is estimated to grow
by three-folds till 2020 to more than 100 Million. Forecasts show that at this rate, there is going to
be huge demand supply gap in aviation sector in the upcoming future.[3]
Some of the major bottlenecks that the sector is going to face are:i.

Lack of aircrafts
"Indian air-carriers' total fleet-size currently stands at 335 and at a passenger growth rate of 1215 percent annually, they will need 35-40 planes per year to meet this demand", says Dinesh
Keskar, Boeing India president. He estimates this to be a major bottleneck if not resolved at the
Government provisions:- The Aircraft Acquisition Committee has been abolished
to liberalize the acquisition of aircraft by airlines, flying institutes and for private use. Hence,
airlines are free to acquire aircrafts as per their business plan and requirements, without
undergoing the cumbersome and time-taking processes of permission seeking from Ministry of
Civil Aviation. The decision will help airlines to plan better for future induction of aircraft and
also maintain timeliness of acquisition.
Moreover, by allowing up to 100 percent FDI in the aviation sector (49% for foreign airlines),
the government has given Indian airlines a chance to improve their balance sheets, and
facilitated higher investments.


Lack of skilled manpower

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3 Corporate News, India Infoline, 2010

Acute shortage of skilled manpower and Air Traffic Controllers (ATC) in aviation industry,
leads to a cut-throat competition for employees as a consequence of which, wages rises to an
unsustainable level. This hampers the growth of the industry by increasing overall costs of the
airlines and thus reducing demand. Moreover, the unskilled or semi-skilled employees are not
capable of handling demand efficiently.[4]
Government provisions:- Government has raised the retirement age of Air India pilots to 65
years and furthermore, allowing expatriate pilots to operate in India.
Expansion in terms of flying schools is also on the cards, with a world-class flying school being
set up by the AAI at Gondia in Maharashtra.
Government has also enhanced DGCAs powers after amending the Aircraft Act, which would
empower the regulatory body to license air traffic controllers.[5]
iii. Lack of Airports and other related facilities
Due to less number of airports and their individual capacities, congestion costs are increasing.
Many flights get delayed due to inadequate infrastructure facilities. This increases the overall
operating costs of airlines resulting in fewer profits especially for low cost carriers (LCC)
Other facilities at airports, like restaurants, lounges etc, also have limited capacities as
compared to demand.
Government provisions:- The Government has also allowed for flexible utilization of
Airspace by civil and military users, on sharing basis. It would result in optimum usage of
airspace, enhancement of airspace capacity, minimizing delays, conservation of fuel, reduction
in emissions and ultimate benefits to travelling public.[6]
For increasing airport capacities, Government has fast-tracked airport modernisation works in
Delhi, Mumbai and other major cities. Additionally, the Airports Authority of India started
work on 35 non-metro airports, and called for bids for developing the city-side of these
airports. Government will also set up an Airport Economic Regulatory Authority to deal with
the emerging scenario of private airport operators.
iv. Regional connectivity
Regional connectivity is a big issue in hampering growth of the industry as more and more
cities are developing in terms of business and investments. Majority of these tier-II cities are
only connected to metros like Delhi and Mumbai, which results in unnecessary stopovers for
fliers from these cities.
Government provisions:- The Government is in the process of formulation of a policy for the
promotion of regional connectivity, incentivizing Indian airlines to operate on these routes, by
code-sharing and seat-credit mechanism. The bigger airlines will be able to use such credits to
meet their requirement of having to connect such remote areas without having to lose money on
such operations. This is expected to generate greater financial viability for regional operators.
4 Indian Aviation Industry: Issues & Challenges
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Additionally, an Essential Air-Services Fund is also being proposed by the Government for
providing subsidy for development of low-cost airports throughout the country.[5]

Fuel import duties and other taxations

Domestic carriers are required to pay heavy federal and state taxes for buying fuel from
domestic oil firms, significantly adding to the debt pile-up of airlines. Furthermore, overtaxation in terms of central and state taxes on fuel and maintenance as well as service taxes on
air tickets are likely to hamper growth.
Government provisions:- Government has allowed airlines to import jet fuel (ATF) directly
from foreign oil firms in order to help the airlines cut fuel costs by up to 20%. However, due to
lack of infrastructure, local airlines face issues in direct import of fuel, and still take the less
profitable route of fuel procurement.