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India aspires to be the world’s third largest aviation market by 2020; Air India to post profit?
March 18th 2016
As part of its 12th five-year plan (FYP), which runs until the end of 2017, India plans to be the world’s third largest aviation market by 2020 as passenger throughput is expected to increase to 450 million from 159.3 million annually in 2013. Read More » This forecast stands in contrast with IATA’s assessment, which predicted 378 million passengers a year passing through Indian airports by 2034.
"The aviation sector is likely to see investments totalling $12.1 billion during the 12th FYP, of which $9.3 billion is expected to come from the private sector,” said Anil Srivastava, Joint Secretary Ministry of Civil Aviation at the opening of this week’s India Aviation Show in Hyderabad. The secretary added the government plans to build 200 “low-cost airports” in the next 20 years to connect second and third tier cities. India today has 75 airports with scheduled services. He said $1.3 billion is planned to be spent on non-metro projects during 2013-17, mainly focusing on the modernisation and upgrading of airports.
Manufacturers are eyeing India. In a first for a foreign original equipment manufacturer (OEM), Airbus Group exceeded the $500 million annual procurement mark from India in 2015. The group has set its sights on exceeding $2 billion in cumulative procurement covering both civil and defence by 2020.
India is a key market for the A320neo Family, with 430 of the single-aisle jets on order at LCC IndiGo Airlines alone, the first of which was delivered from Toulouse to Delhi last week, and is now on display in Hyderabad. India is forecast to build its own aircraft, likely with the input of Indian conglomerate, Tata Group, which holds equity in AirAsia India and Vistara.
Pratt & Whitney has invested more than $150 million to set up an MRO, component repair and training centre in Hyderabad and Boeing has said it would “invest in capabilities, infrastructure and partnerships to enable aerospace to be an economic growth engine” in India.
Both Airbus and Boeing are expected to receive significant new orders from Indian carriers if the government abolished the punitive 5/20 rule, which requires an airline to operate a minimum of 20 aircraft over five years before it is allowed to fly internationally.
Chronically unprofitable Air India could be reversing its fortunes this year. It aimed to post its first operating profit in eight years after saving more than $150 million in fuel. “All indications are we might post an operating profit for the financial year ending March 31,” the airline’s commercial director, Pankaj Srivastava, told The Wall Street Journal. Air India would certainly meet the target of operating back in the black in 2017, he added. The carrier has begun to hedge fuel for about 25% of planned consumption to ensure it continues to benefit from low spot rates, Srivastava said.
This week, the flag carrier signed a 12-year lease agreement with Kuwait-based ALAFCO Aviation Lease and Finance Company, for 14 A320neos powered by CFM LEAP-1As, with the first six of the airplanes scheduled for delivery in 2017. Another six will arrive at the airline in 2018 followed by the last two in 2019.
