India is the world’s fastest growing domestic aviation market and has posted the fastest full-year growth rate for three years in a row. India’s Revenue Passenger Kilometre (RPK) growth of 17.5% was higher than the global average growth of 7% in 2017. India’s aviation market is currently the 9th largest in the world and is estimated to be worth USD 16 billion. It is projected to be the 3rd largest by 2020 and the largest aviation market by 2030. More than 80 international airlines operate in India and connect the country with the rest of the world.
Reasons to Invest
India is projected to be the third largest aviation market by 2020, and the largest by 2030. According to the rough estimates, the Indian Aviation sector is likely to see investments totalling $15 billion in between the financial years 2016-17 and 2019-20; of which $10 billion is expected to come from the private sector alone.
The Airport Authority of India (AAI) also has plans to revive and operationalize around 50 airports in India over the span of next 2 years to improve regional and remote air connectivity. The estimated growth in aviation market will also increase the demand for MRO (maintenance, repair and overhaul) facilities.
The government is focused on infrastructure development, increasing liberalization by implementing Open Sky Policy which opens doors of opportunity for any potential national or international players in the industry. In line with this, the AAI is driving modernization of airports and air & navigation systems under Public Private Partnership (PPP) mode. So far five international airports have been operationalised under the PPP mode which includes Delhi’s Indra Gandhi International Airport, Mumbai’s Chhatrapati Shivaji International Airport, Cochin International Airport, Hyderabad’s Rajiv Gandhi International Airport, Bengaluru International Airport.
Enhanced Skill Development – Potential players can leverage India’s human capital potential and create job opportunities.
Innovation and Technology – India is harnessing its IT and mature space industry to offer a wide range of facilities which include but not limited to – GPS Aided Geo Augmented Navigation (GAGAN) for providing precise location data for navigation, No Objection Certificate Application System (NOCAS) for streamlining the process to obtain NOC for the height clearances required for building a building in the vicinity of an airport, E-Governance of Civil Aviation (eGCA) for online delivery of 162 licensing and regulatory processes of DGCA.
Statistics
The domestic passenger traffic crossed the 100 million mark in 2017 and is expected to touch 106 million passenger mark in between January 2018 to November 2018.
India is the fastest growing aviation market and is expected to cater to 478 million passengers by 2036.
India is one of the least penetrated air markets in the world with 0.04 trips per capita per annum as compared to 0.3 in China and more than 2 in the USA (according to 2016 analysis report).
FDI Policy
Airports –
100% FDI is allowed under the automatic route for greenfield as well as brownfield projects.
Air transport services –
Up to 49% is allowed under automatic route and 49% and above is possible based on a case to case study by the GOI for air transport services like scheduled air transport service/domestic passenger airline/regional air transport service.
For non-scheduled air transport services and helicopter services/seaplane services requiring approval from DGCA 100% FDI is allowed under automatic route.
Other services under the Civil Aviation sector-
100% FDI under automatic route is available for ground handling services and maintenance repair and overhaul services.
Sector Policy
Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the government last year will connect 56 unserved airports and 31 unserved helipads across the country. 16 such airports have already been operationalised so far under the UDAN scheme.
NABH Nirman announced this year aims to expand airport capacity by more than five times to handle a billion trips in a year. This expansion will be funded by leveraging the balance sheet of Airports Authority of India.
Maintenance Repair and Overhaul Services
The tools and tool-kits used by the MRO have been exempted from customs duty. This exemption is available for the tools and toolkits listed and certified by the Directorate General of Civil Aviation (DGCA) and approved by Quality Managers of aircraft maintenance organisations.
Traditionally MROs were required to go through a tedious repetitive process of providing the proof of their requirements of parts, or orders from their client airlines and getting the clearance to buy them. Not the process for the clearance of the parts has been brought in line with that of the toolkits for a one-time certification by DGCA approved Quality Managers in MRO’s.
To enable economies of scale, the restriction of one year for utilization of duty-free parts has been extended to three years.
To allow the MROs to import unserviceable parts including aircraft components like engines and landing gears for providing exchange/advance exchange, the concerned notification has been revised to enable advance export of serviceable parts.
Foreign aircraft brought to India for MRO work will be allowed to stay for the entire period of maintenance or up to 6 months, whichever is lesser. But during the period the aircraft shouldn’t undertake any commercial flights. The aircraft may, however, carry passengers in the flight at the beginning and end of the stay period in India. For stays beyond 6 months, DGCA’s permission will be required. However, the no records pertaining to the amount spent by the airline in India for MRO will be maintained by the Ministry, as it is a financial matter of an airline, in which the Ministry does not want to interfere.
Financial Support
MRO, ground handling, cargo and ATF infrastructure facilities collocated at an airport (including heliport licensed by DGCA) are covered under the ‘Harmonised List of Infrastructure and will get the benefit of ‘infrastructure’ sector.
Investment Opportunities
Over the span of next five years 300 business jets, 300 small aircraft and 250 helicopters are expected to be added to the current fleet of Indian carriers. Consequently, to cater to the servicing demand the demand for MRO facilities in India is bound to increase.
Investment opportunities worth $3 billion in greenfield airport under PPP model are being developed in Navi Mumbai and Mopa (Goa).
With the Airport Authority of India (AAI) aiming to bring around 250 airports under operation across the country by 2020, there are a lot of investment opportunities in line with the PPP model. For the development of aviation in the North-East region, the AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-regional hubs.
AAI plans to spend USD 3 billion on non-metro projects between 2016 and 2020, focusing on the modernisation and up-gradation of airports. Indian airports are emulating the Special Economic Zone (SEZ) Aerotropolis model to enhance revenues, the focus is also on enhancing revenues from retail, advertising and vehicle parking, security equipment and services.
Foreign Investors
Airbus (France), Boeing International Corporation (USA), AirAsia (Malaysia), Rolls Royce (UK), Frankfurt Airport Services Worldwide (Germany), Honeywell Aerospace (USA), Malaysia Airport Holdings Berhad (Malaysia), GE Aviation (USA), Airports Company South Africa Global (South Africa), Alcoa Fastening Systems Aerospace (USA), Singapore Airlines (Singapore), Etihad Airways (UAE), Fairfax (London)
