A landmark year for India’s civil aviation sector 2016 witnessed first systematic and inegrated policy designed to propel the growth of airlines which is rising by leaps and bounds every passing day. Keeping positive factors in mind aviation experts opine India’s domestic market is on track to surpass 100 million passengers in FY2017 and it is likely to overtake Japan this year to become the world’s third largest domestic market behind the USA and China.
In the year gone by, civil aviation sector continued to reap benefit of lower ATF prices and rise in domestic disposable income as a result passenger traffic during January-November 2016 zoomed by 23.10 per cent to 90.36 million and National Civil Aviation Policy, is expected to further strengthen the sector.
NCAP did away with controversial 5/20 norm and now any domestic airline can fly overseas provided it deploys 20 planes or 20 per cent of its total capacity for domestic operations. But, Kingfisher Airlines of Vijay Mallya, which spearheaded the demand for scrapping of 5/20 norm, was not there to avail of the new opportunity as it is now defunct.
The Government wants to take flying to the masses by making it affordable and convenient. So, airlines will charge only Rs 2,500 for one hour flights and will get tax incentives for operating on unserved routes even as fliers will have to pay additional levy towards regional connectivity fund. The ‘UDAN’ (Ude Desh ka Aam Naagrik) Regional Connectivity Scheme (RCS) is expected to become a reality from early this year.
Though the move would ultimately lead to growth of the civil aviation sector as a whole, all domestic airlines, barring Air India, have ganged up against Government’s notification of imposing a levy of Rs 7500 to Rs 8500 per flight to create a fund for development of regional airports.
The Federation of Indian Airlines, which represents scheduled carriers like Jet Airways, Indigo, Spicejet and Go Air, have gone to court challenging the Government notification imposing a levy per flight to create a fund for development of regional airports.
Minister of State for Civil Aviation Jayant Sinha remarked in a FICCI function in December 2016 that aviation sector is the sunrise sector of growth and going through profound changes.
The aviation sector has dramatic headroom for growth with 150 million passenger trips a year as compared to China with 450 million passenger trips and USA at 800 million passenger trips a year. The total revenue of airlines is Rs 1.4 lakh crore and is growing at a rate of 20 per cent. He added that as of today 9 crore passenger travel domestically and 5 crore internationally.
Going ahead, he said that Government is working to build airport capacity by expanding existing terminals, building new terminals and developing greenfield airports. The Minister said that Rs 2.5-3 lakh crore investment is required for airports excluding the land acquisition cost. He added that Government is a developing regulatory framework for the aviation sector to make it asset class attractive.
2016 saw low-cost carrier IndiGo becoming the first Indian airline to operate the fuel-efficient A320 Neo plane while another budget airline GoAir became eligible for international operations as it inducted 20th aircraft into the fleet.
Regional carrier Air received national operator’s permit from DGCA while Air Pegasus was forced to ground its operations and its flying permit was also suspended.
last year represented a turnaround in the fortunes of India’s aviation industry after several very difficult years. lower fuel prices combined with modest capacity growth and strengthening economic fundamentals were largely responsible for surging traffic and an improvement in airline financials in FY2016. Domestic traffic was up 21.2 per cent while international grew by a more modest 7.7 per cent.
Sydney-based aviation think-tank CAPA estimates that India’s airlines reported a combined profit of $122 million in FY2016, the first time in a decade. This included record profits at IndiGo, Jet Airways, SpiceJet, GoAir and Air India Express. AirAsia India and Vistara, still in their initial years of operations, were however loss-making, as was the national carrier, Air India. Although Air India reported its first operating profit in a decade.
India’s domestic market is on track to surpass 100 million passengers in FY2017. After a strong FY2016, traffic growth has accelerated further in FY2017, with India likely to overtake Japan this year to become the world’s third largest domestic market behind the USA and China.