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SPECIAL REPORT

Thursday, 17 March, 2016, 17 : 00 PM [IST]

India on way to become the third largest aviation market by 2020: FICCI-KPMG India Aviation Report

Low oil prices and proactive government policies provide the right push
With 81 million trips, India’s domestic aviation market grew at over 20.3% during Jan-Dec 2015 - the highest growth rate recorded in the world. India is well on its way to become the third largest aviation market by 2020 says the FICCI-KPMG 'India Aviation Report 2016', launched at the Civil Aviation exposition in Hyderabad.

The report suggests that aspects such as increasing disposable incomes, fall in prices of Aircraft Turbine Fuel (ATF), increase in tourism, visa reforms, etc. have placed India in a unique position. This is bringing the country closer to achieving its vision of becoming the largest aviation market by 2030.

The report highlights that the National Civil Aviation Policy (NCAP 2016) is likely to provide a significant fillip to the industry. The various fiscal and monetary incentives, liberal policies focused on ‘ease of doing business’ and enhanced push for regional and global connectivity are extremely positive.

Steps taken to revive and operationalise around 160 airports in India, if chosen carefully, will improve air connectivity to regional and remote areas. Public-Private Partnerships (PPP) in the sector will get substantial support from the state in terms of financing, concessional land allotment, tax holidays and other incentives.

According to Harshavardhan Neotia, President, FICCI, “Enormous growth in domestic passenger traffic, substantial strengthening through Government initiatives, decrease in global crude oil prices and airlines showing profits indicates a significantly positive transformation for the Indian civil aviation market. The close partnership between the government and the industry in ongoing and future projects will further improve regional connectivity. I am certain that the sector will take complete advantage of the positive momentum and help sustain the growth”

Amber Dubey, Partner and India Head of Aerospace and Defence, KPMG said, “The positive impact of NCAP 2016, rise in disposable incomes and the fall in ATF prices are likely to help India leapfrog into the top three of the world. One hopes that the government can match domestic ATF prices with global levels for a three year experimental period. MRO is likely to see a huge revival if the service tax is zero-rated. Growth of aviation and tourism can create a huge multiplier in terms of GDP growth and jobs.”

The report sheds light on the astounding growth of 17.1% in the total passenger throughput for FY 2015-16 till January 2016 standing at 184 million. Passenger throughput is expected to reach around 370 million by 2020, with domestic traffic constituting around 80% of the total throughput.

The report strongly suggests that in order to ensure high-geared growth, it is imperative to broaden the base of domestic flyers through greater air connectivity in Tier II/III cities. Many Indian states have taken positive initiatives, largely in the field of development of airports, reduction in sales tax rates on ATF and direct subsidy to airlines for improvement of connectivity. TravelBiz Monitor presents details.

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