Indian Civil Aviation Driven By Low Cost Domestic Market

Domestic and international Indian air traffic has increased and would have been higher if fuel prices had been lower, a top industry consultant said.

Kapil Kaul, CEO - India and Middle East for consultancy firm Centre for Asia Pacific Aviation (CAPA) said domestic air traffic grew faster than international.

For the first time in years, Indian carriers saw modest profit of $122 million, mostly owing to low fuel prices.

"The impact of fuel price on profitability is estimated at about 12 per cent," Kaul said at the NewsX – Sunday Guardian Defence and Aerospace Summit in New Delhi on Wednesday.

"Amongst the top 20 LCCs (low-cost carriers) in the world, IndiGo was the fastest growing over the last 12 months with seat capacity up almost 28 per cent year on year," he said.

IndiGo is leading CAGR among the local LCCs. From FY 2002 – FY 2017 this rate was 48.2 per cent. "This is something to be proud of as Indians," Kaul said.

Jet Airways was the only airline to see lower costs, all others saw an increase.

Last 10 year’s traffic growth has been more than the growth achieved in last 50 years.

Domestic air travel in India has increased 3 times and and international air travel has increased 2.4 times.

However, the potential for Indian civil aviation is sky high. Compared to the rest of the world, India has one of the lowest per capita seats.

Domestic air travel is predicted to increase 2.8 times by between FY 2016 and FY 2026.

International air travel is forecasted to grow 2.1 times fr the same fiscal period.

With domestic low cost travel set to drive growth in civil aviation, the UDAN project also known as the Regional Connectivity Scheme (RCS) was in the spotlight. Flights under RCS were supposed to have been in air by January 2017.

Usha Padhee, joint secretary MoCA about RCS said, "Regional connectivity is a flagship program of the ministry and government. The bidding is continuing, we hope to have 43 airports under UDAN or RCS. We are doing all we can at a state and ministry level, be it VGF or uniform fuel pricing, to ease regulations for airlines. Hopefully, with god’s blessings, we can make the project a success."

"It’s undeniable the regional connectivity will be important to Indian aviation. It’s not just more flights, India will need more infrastructure to keep up with demand. India will possibly need a further 50 new airports, a problem in itself given the 3-4 years it takes to identify and make land acquisition given new land bills. Even international airports like of Delhi and Mumbai will need a second airport to meet demand," Kaul said.

Civil aviation will also grow if structuring of bilateral partnerships with foreign airlines is beneficial and contributing to the Indian economy (the Etihad-Jet deal is an example) and requirements for skilled labor are fulfilled.

Sanat Kaul, chairman of International Foundation for Aviation, Aerospace and Development (IFFAAD) India chapter, said: "Too many pilots, not enough commanders in the industry."