India outpaces China in air passenger growth

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

April 1st 2018

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Air traffic growth in India has overtaken every other country in the world a series of recent forecasts have revealed. Read More » Data compiled by India’s Directorate General of Civil Aviation (DGCA), reports air traffic in India increased six fold, to 265 million passengers in 2016, compared with 44 million passengers in 2008.

This year, Indian airports expect domestic air passengers to exceed 300 million, a figure that is only 17 million passengers short of India’s national airport capacity. In the next five to seven years, the top 30 to 40 airports in India will be operating beyond their capacity.

New Delhi’s Indira Gandhi International Airport and Chennai’s International Airport are forecast to reach maximum handling capacity in four to six years. Mumbai’s Chhatrapati Shivaji International Airport (CSIA) is at 94% capacity and “close to saturation”, aviation regulators said.

Across India, flights have increased every year by 20% or more since 2015 and there is no sign of stalling growth. The latest figures from the DGCA, for February, revealed domestic airlines had recorded passenger growth of 24.14% compared with the same month a year ago.

Indian airlines carried 10.7 million passengers during the month, up from 8.6 million in February 2017. All major scheduled operators flew their aircraft with load factors above 80%, with Gurgaon-based SpiceJet recording 96.3%, followed by IndiGo with 91.8% and part Singapore Airlines-owned Vistara with 91.2%.

All of this is music to the ears of aircraft manufacturers. They are increasing their long-term forecasts of aircraft Indian airlines will need in the next two decades. Boeing Commercial Airplanes senior vice president for sales in the Asia-Pacific and India, Dinesh Keskar, said in March India would need 2,100 airplanes at a cost of US$290 billion. Speaking at the Wings India 2018 aviation show at Begumpet airport, he said India’s growth is way above the global average.

In the last five years, Indian domestic passenger traffic has outpaced forecasts, albeit assisted by the appreciation of India’s rupee. Profits have been contained by an 81% increase in fuel costs since 2016. Indian airlines pay more for fuel than U.S. carriers because of Indian domestic fuel surcharges and taxes.

Airbus’ latest forecast, also released in March, was slightly more conservative than Boeing. Airbus said India would need new passenger and cargo aircraft valued at US$255 billion in the next two decades: 1,320 single aisle aircraft and 430 wide bodies.

Traffic serving the Indian market is forecast to grow 8.1% per year in the next 20 years, almost twice as fast as the world average of 4.4%. Domestic Indian traffic is expected to grow five-and-half times over the next 20 years, reaching the same level as U.S. domestic traffic today.

On average, one Airbus aircraft will be delivered to India every week for the next 10 years, the manufacturer said. “Make in India is at the heart of our strategy,” said Airbus Commercial Aircraft president India, Srinivasan Dwarakanath. “Airbus has the largest footprint in India of any international aircraft manufacturer across all aircraft programs. Our sourcing volume has grown 16 times over the past ten years and is at more than $550 million annually.”

Embraer also is betting big on the Indian market, although it only has 17 aircraft in the country at present. It forecasts a market for 1,000 commercial regional jets in the next two decades. The Brazilian manufacturer wants to fill the gap between 70-seat turboprops and larger 180-seat single-aisle aircraft.

Embraer’s vice-president sales and marketing Asia-Pacific, Cesar Pereira, said his company’s jets are part of the solution to overcrowding at six major airports in India. “There must be small aircraft making point-to-point flights, avoiding the six hubs that are taking 60% of the traffic,” he said.

Pereira said Air India, Vistara, IndiGo, SpiceJet and Jet Airways have shown interest in Embraer’s E-175 Jets. The bulk of regional airline fleets in India fly Bombardier and ATR turboprops.

Embraer has an order for 25 190-E2s and 25 195-E2s, with options for another 50, from India’s Air Costa, but the order is in limbo after the airline ceased flying in February last year. Its future remains unclear.

There is universal agreement among analysts and industry insiders that India needs to fast track infrastructure development otherwise many of the aircraft set to arrive at airlines across the country will have nowhere to take off and land.

Domestic travellers flying into Mumbai, India’s financial capital, complain about flights having to circle for 30 minutes before landing. Clearly, they have not been to China. Earlier this year, Mumbai said it had broken its own world record for handling the most number of arrivals and departures on a single runway in one day when 980 flights landed and took off in a 24-hour period.

The government is building a new airport at Navi Mumbai, 30 kilometres away, to ease airway congestion. It is not scheduled to open in 2023.

Jet Airways CEO, Vinay Dube, does not have a problem with the service Indian airports offer to his full service airline. He told Orient Aviation last month (See Following the Money page 20): “we have almost no infrastructure concerns and a great relationship with the director general of civil aviation. Perhaps there might be minor slot shortages. Do you know what? If it pushes up fares one or two per cent that’s not bad.”

Extremely low fares are accelerating demand. Tickets can cost as little as US$15 (1,000 rupees) which is cheaper than train travel.

In January last year, Civil Aviation Secretary, R N Choubey, said $10 billion would be spent in the following five years with many of the 400 unused airstrips across the country brought back to life. Addressing an India Aviation Summit, he said India was determined to maintain the “historic” 23% growth rate it had achieved in the aviation sector.

But in February this year, Finance Minister, Arun Jaitley, announced that only $613 million would be allocated to the Airports Authority India (AAI) to expand facilities, a figure that falls far short of the $45 billion some analysts said should be spent by 2030 to cope with future demand.

In January this year, AAI announced it was developing a national strategy for airport development and the formulation of model concession agreements. AAI chairman, Guruprasad Mohapatra, said the authority is preparing to commence “mega projects of new terminal buildings” at 14 airports this year.

AAI is now looking for a consultancy to frame a business strategy to increase revenue at its airports. From April to October 2017, passengers processed at AAI airports increased to 171 million compared with 149 million a year earlier. Annual passenger traffic in India is expected to be about 322 million in 2018-2019.

Mohapatra said airports and terminal buildings are likely to be ready at five places: Jharsuguda in Odisha, Tezu (Arunachal Pradesh), Calicut (Kerala), Gorakhpur (Uttar Pradesh) and Pakyong (Sikkim).

This year, the “mega projects” of constructing new terminals will commence at Guwahati, Leh, Patna, Trichy, Vijayawada, Jabalpur, Ahmedabad, Chennai, Srinagar Pune, Lucknow, Mangalore, Dehradun and Jaipur, the finance minister said.