Home' Asian Aviation : AAV April 2010 Contents 32 AsianAviation | APRIL 2010
Civil aviation in India is entering a
new phase of development a er
experiencing both stagnation and
explosive growth over the past 20
years. Even a er the huge boom
in demand earlier this decade and
with its expanding middle class, fewer than 2 percent
of Indians travel by air in any given year -- an indication
of just how much growth potential there is le in the
To accommodate that growth, India has been
pursuing an ambitious plan to develop and upgrade its
airport infrastructure, maintaining its e ort through
the global slump of the past year with an eye on the
The period from 2003 to 2006 marked an
unprecedented change for India's aviation industry. A
new domestic open skies policy opened the door for
an in ux of start-up airlines, some of which adopted
the low-cost carrier business model that had proved
successful in the United States and Europe.
Among these were companies such as Air Deccan,
SpiceJet, IndiGo and Go Air, all making air travel
available to people who had previously been unable to
a ord it. At the same time, national carriers Air India
and Indian Airlines placed long-awaited orders for 111
new aircra in a modernisation and expansion of their
At the same time, there was liberalisation of the
international air transport sector, allowing some private
carriers to start operating overseas, allowing greater
access to foreign airlines and opening up international
routes for non-metro airports. As a result of all this,
domestic and international tra c started to grow at
double-digit rates, demonstrating how much pent-up
demand there was for air travel in the market.
As growth of the airline industry accelerated, India
announced its airport modernisation plan, which
included the privatisation of Delhi and Mumbai
airports, upgrades to 35 smaller facilities and active
encouragement of green- eld developments.
But by 2007, when tra c growth approached an
amazing 40 percent, many were realizing that this
expansion could not be sustained. Overcapacity was
hurting yields while the poor state of the airport
infrastructure and a shortage of pilots and engineers
was pushing costs ever higher. At this point, capacity
was increasing about twice as fast as demand was
rising -- and this at a time when the country's airport
infrastructure programme was yet to deliver real results.
With congested airports and inadequate surface
access to the facilities, airlines found they were unable
to compete successfully with other modes of transport.
Soaring fuel prices in 2008, which had a severe e ect
on airline costs around the world, were exacerbated in
India a taxes that increase fuel costs by as much as 60
percent. Carriers were forced to raise fares, just as the
Indian economy slowed. As a result, tra c fell by 10-
Now, according to the Centre for Asia Pacific
Aviation (CAPA) in its report 'Indian Aviation:
A Review of 2009 and Outlook for 2010', a more
favourable environment is starting to emerge. As the
global economic crisis took hold, growth of India's
gross domestic product slowed from 9 percent in
2007-2008 to 6.1 percent in 2008-2009. Still, given
the worldwide recession, CAPA points out, this was
not a bad result.
Now the economy is recovering faster than
anticipated and the World Bank predicts it will return
to 8 percent annual growth from 2011 to 2014.
Tr a c growth is returning too. A er 12 straight
months of year-on-year declines, the gure returned
to positive territory in July last year and has stayed
positive since then, although yields remain low.
" e operating environment is improving, with
airports and airspace gradually being upgraded and
ground access being developed, which will not only
enhance the passenger experience, but should allow
airlines to achieve faster turnarounds and higher
aircra utilisation," CAPA says.
Prior to the country's air transport boom, India's airports
had su ered decades of neglect and underinvestment.
In the Naresh Chandra Committee's 2003 report to
the Ministry of Civil Aviation, the authors wrote that
the country's "passenger airports are for the most part
When tra c growth took hold in earnest, several
major airports were quickly pushed way past their
design capacity, causing congestion in terminals, on
runways and in the air. As a result, passengers su ered
and the airlines found their operating environment
becoming increasingly ine cient and costly.
As a result, in 2005, the government announced a
ve-year plan for upgrading and modernising airports,
requiring investment of about US$10 billion. From
2010 to 2020, about another US$20 billion investment
is expected. e government recognised that it lacked
the expertise and capital required to complete the
upgrade, so it invited private sector participation.
As a result, joint venture operators are now in place
in Delhi, Mumbai, Bangalore, Hyderabad and Cochin,
India invests in airport development
Earlier this decade, India experienced a massive -- and unsustainable -- surge in air travel demand. Now, however,
more stable growth has returned and the country's plans to develop its airport infrastructure are more important than
ever, writes Andrzej Jeziorski.
By 2020, analysts predict India's domestic passenger traffic could quadruple from 2008 levels.
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