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

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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.
Aviation Industry Report
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 Exhibit: Revenue of commercial airlines
Airport security and boarding procedures can be worldwide for past 7 years(Billion USD)
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 900
example, uses Digi yatra, which assures a
800
paperless boarding process.
700
5. CONTACTLESS TECHNOLOGY
The COVID-19 epidemic has accelerated the 600
adoption of contactless technologies in the
aviation industry. Contactless technology can 500
reduce the risk of infection by reducing the need
400
for passengers and airport workers to have direct
physical touch. Travelers, for example, can use 300
contactless check-in kiosks and bag drops to
check in and drop off their baggage without 200
dealing with airport personnel.
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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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
Aviation Industry Report
accordance with the National Monetization
Pipeline (NMP).
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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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 twenty-
first 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).
. organizations, and training airline crew is
Aviation Industry Report
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
expensive.
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 Aviation Industry Report

Growth Drivers and Government Growth in Indian Aviation

Initiatives Industry
Pre-Post Pandemic effects Demand upliftment with policies driving
investments
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 INCREASE
DEMAND SUPPORTIN IN
to remain smaller, with a projected return to the level GROWTH G POLICIES INVESTMEN
of pre pandemic traffic by 2024. The pandemic, which TS
also led to more stringent hygiene standards and the
rapid adoption of digitalization, triggered fundamental
• -Robust growth • Enhanced • AI lead extensive
changes in the aviation sector alongside financial in foreign trade government modernized and
challenges. The following points explores these shifts • Surging attention towards development
domestic and infrastructure projects,
and provides a call to action for carriers to adapt to development upgrades
international
the long-term realities of COVID-19. tourists and • Growing existing airports,
travelers liberalization, and develops
➢ The recovery will be driven by leisure travel, • Increasing Open Sky Policy low-cost airports.
middle-income • Policies • Private sector
while business travel may take considerable time segment and facilitating FDI. involvement and
to return to pre pandemic levels, possibly reaching workforce greenfield
projects.
only 80% by 2024.
➢ During the pandemic, aviation has accumulated a
significant amount of debt which may lead to Travel and tourism spending (US$) billion
possible ticket price increases and increased
250
government role.
➢ There would be a varying performance among 200
airlines, with some proactive restructuring for
efficiency in order to emerge as stronger 150
competitors.
100
➢ Aircraft markets may remain oversupplied due
to increased production before the pandemic, 50
offering opportunities for countercyclical actions
such as securing orders or leases at lower rates. 0
2016 2017 2018 2019 2021
➢ Air freight will face undersupply as cargo
demand surged during the pandemic, prompting Business Travel and Tourism Spending
carriers to consider enhancing cargo services, Leisure Travel and Tourism Spending
using freighter conversions, while maintaining
flexibility in approach.
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 Encouragement to FDI

Liberalization, open sky policy
• For Greenfield Projects 100% FDI is permitted
• Liberalization and open skies policy have led to the under an automatic route, while for brownfield
establishment of six major urban airports through projects it is possible to obtain up to 74% foreign
private participation in public private partnerships direct investment.
(PPP).
• For scheduled air transport services, regional air
• At present, 60% of air traffic in the airports transport services, and domestic scheduled
operates under PPPs and 40% is managed by passenger airlines, an automatic route may be
AAI. used to reach a total of 100% FDI.

• By engaging into reciprocal agreements with other • However, foreign direct investment beyond 49%
nations, India has increased its air transport rights. must be approved by the Indian government. Up to
Recently, India and Greece signed the first 49% of their own funds may be invested in the
open skies deal. aviation industry by foreign airlines.

Union Budget • India's air transportation industry, including air

freight, drew and collected FDI inflows totaling
• The Ministry of Civil Aviation received an allocation US$ 3.61 billion from April 2000 to September
of INR 3,224,67 crores in the budget for the period 2022.
from 2023 to 24.
Metro airports:
• Tax holidays for capital gains income of aircraft
leasing and financing businesses are included in • India wants to have 220 operational airports by
the budget, as well as tax exemptions for aircraft the year 2030.
lease rentals or royalties paid to foreign lessors in
Non-metro airports:
the International Financial Services Centre (IFSC)
at GIFT (Gujarat International Finance Tec-City) • Over the period next five years, the AAI have
City. intentions to invest Rs 25,000 crore to improve
infrastructure facilities, encompassing the
• The government also plans to enhance health
construction of new terminals, expansion, and
system capacities with a view to developing entry
modification of existing terminals, as well as
points for aviation as per Prime Minister Atma
runway and apron expansions.
Nirbhar Swasth Bharat Yojana.
• The government of Andhra Pradesh plans to move
• The objective of this initiative is to enhance public
forward with the construction of greenfield airports
health services in 32 airports, making it easier for
in six cities: Nizamabad, Nellore, Kurnool,
medicines to be transported by air both within India
Ramagundam, Tadepalligudem, and Kothagudem.
and internationally.
• The AAI plans to connect roughly 22 airports as
• In addition, in this budget the government went
part of its regional connectivity plan.
over disinvestment of Air India as well as
PawanHans for the financial year 2021-22
FDI in aviation and
Northeast India Increasing airline
liberalised aviation
operators
policy
• More than 30 airport development projects are
now underway throughout NEI's various areas.

• Over the next five years, the AAI intends to build Higher aircraft
movement
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 Growth in passenger
Rise in freight traffic
traffic
Northeast India. He also officially launched direct
flights from Shillong to Dibrugarh.
Notes - AAI- Airport Authority of India 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 12%
unwavering commitment to providing top-notch
service and maintaining its competitive edge has 8%
positioned it at the forefront of the market.

Following closely behind were two other major 9%

players, Air India and Vistara Airlines, both part of
the renowned Tata group, each holding 62%
9%
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
Indigo Air India Vistara Air Asia Others
demand for domestic air travel in India remained
strong, with a remarkable 13.2 million people Source: Live Mint article on Indian Aviation Industry
choosing to travel by plane in May 2023.

This robust demand is a testament to the growing Over the past few years, India's civil aviation sector
importance of air travel in the country's transportation has witnessed a remarkable journey, with both
landscape. demand and capacity soaring to new heights.
Notably, there are exciting developments on the However, the industry faced a major setback during
horizon as Air India and Vistara Airlines are the Covid-19 pandemic in the years 2020-21, where
preparing to join forces through a merger. demand for air travel significantly declined. Despite
the challenges, the sector has displayed resilience,
and we now witness a rapid recovery, though still
Exhibit: Domestic Demand below pre-pandemic levels.
During FY22, there was a notable increase in
Airline Data capacity, with a staggering 111,455 million available
180000 100.00%
seat kilometers offered on domestic flights. An
interesting trend has been the constant increase in
160000 90.00% demand outpacing the expansion of supply,
resulting in high utilization rates, represented by the
140000
80.00% impressive Passenger Load Factor.
70.00% Looking at the broader picture, the domestic
120000
market's capacity (ASK) showed consistent growth
60.00%
100000 with a 3.5% CAGR from 2011-12 to 2021-22.
50.00% Meanwhile, the demand (RPK) increased at a
80000 slightly lower rate but still substantial, with a 3.3%
40.00% CAGR during the same period.
60000
30.00% India's significance in the global aviation landscape
40000
cannot be overstated. The nation has successfully
20.00% climbed the ranks to become the world's third-
20000 largest domestic aviation market. And the future
10.00%
looks even more promising as it is anticipated to
0 0.00% surpass the UK by 2024, claiming the third-largest
FY16 FY17 FY18 FY19 FY20 FY21 FY22 position in terms of air passenger market size.
Capacity (Available Seat Km) This incredible growth story exemplifies India's
Demand (Revenue Passenger Kilometre)
determination and potential in the aviation sector, as
it continues to connect people, facilitate travel, and
Utilisation (Passenger Load Factor in %) foster economic growth. Despite the challenges
thrown its way, the civil aviation sector in India
remains steadfast in its pursuit of excellence and
Source: Financial Express article on Domestic demand unparalleled service for its passengers.

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 Aviation Industry Report

Industry Statistics 400 Exhibit: Passenger Traffic

The Covid-19 pandemic dealt a severe blow to the 350

aviation industry in 2020-21, causing a significant
decline in passenger traffic. However, the industry is 300
now witnessing a commendable recovery, although it
has not yet reached its pre-pandemic levels. 250

In FY 2021-22, a total of 188.89 million passengers, 200

combining both domestic and international, took to the
skies, indicating the beginning of the industry's 150
comeback. The fiscal year 2022-23 showed further
improvement, with passenger numbers reaching 100
236.71 million by December 2022.
50
India's potential in the aviation sector is truly
impressive. Projections estimate a whopping 480 0
million travelers by 2036, surpassing the combined FY16 FY17 FY18 FY19 FY20 FY21 FY22
numbers of Japan and Germany. Moreover, the Domestic
nation is set to claim the third-place position in the International
global aviation passenger market, overtaking even
giants like China and the United States by 2030. Source: KPMG Insights on Indian Airline passenger traffic

Although there were declines in both domestic and

international passenger traffic between FY16 and
FY22, the recent resurgence brings hope for a The aviation industry in India faced a challenging
brighter future. The Indian aviation industry's period between FY16 and FY21, with a notable
resilience and determination to soar to new heights is CAGR of -7.79% in aircraft movements, declining
evident, promising a future where air travel will from 1.60 million to 1.20 million. The situation
continue to connect people and cultures, driving worsened during the Covid-19 pandemic, resulting
economic growth and enriching lives across the in a significant decrease in aircraft travel in the
globe. 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 pre-
pandemic level.
During FY22, a total of 1,757,112 aircraft
Exhibit: Aircraft Movement movements were recorded, indicating signs of
recovery. The progress continued in the fiscal year
4000 2022-23 (April-September 2022) with 1,207,279
aircraft movements made, adding to the positive
3500 momentum.
3000 The domestic and foreign aircraft traffic
experienced declines between FY16 and FY22 at
2500 CAGRs of -6.44% and -18.52%, respectively.
Despite the challenges, the industry displayed
2000
resilience, especially with domestic movements,
1500 which reached 1,062k in FY21, along with 135k
international airplane movements.
1000
As the aviation sector picks up speed, there's hope
500 for a brighter future ahead, with air travel continuing
to connect people, cultures, and destinations. With
0 safety measures in place and a determination to
FY16 FY17 FY18 FY19 FY20 FY21 FY22 overcome obstacles, the Indian aviation industry is
on its way to reclaiming its soaring heights and
International Domestic contributing to the nation's progress and prosperity.
Source: IBEF Report on Indian Aviation Industry

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