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Stronger Aviation Ecosystem is needed to brace for 2X fleet expansion in 5-6 years
Context:
Directorate General of Civil Aviation and Bureau of Civil Aviation Security need restructuring to address technological, digitisation, and environmental challenges of the Aviation sector.
Aviation Sector Developments Since 2022:
- Privatisation of Air India: The transfer of Air India’s ownership to Tata Sons in 2022 marked a significant milestone in the airline sector.
- This stabilised the airline system and potentially benefited the entire value chain, extending beyond India.
- Air India Aircraft Orders: Air India placed a record order for 470 aircraft, with an option for 370 more. The airline added 40 aircraft last year and plans to receive five per month.
- IndiGo’s Growth: IndiGo, India’s largest airline, has a fleet of about 370 aircraft and over 980 on order. The airline continues to grow despite global supply-chain challenges.
- Fleet Expansion: The Indian airline fleet, currently at almost 700 aircraft, could double by 2030, potentially adding 600-700 more aircraft in the next 5-7 years.
Infrastructure Developments:
- An $11 billion investment pipeline is in place for airport infrastructure.
- Delhi International Airport Limited will expand to handle 130-140 million passengers annually, complemented by the Noida International Airport, expected to open by April 2025, with a capacity of 70 million passengers.
- Mumbai Metropolitan Region will develop a dual airport system, handling about 145 million passengers annually.
- The Adani Group is expanding capacity at six PPP non-metro airports: Lucknow, Jaipur, Ahmedabad, Guwahati, Thiruvananthapuram, and Mangaluru.
- The Airports Authority of India is investing $4 billion to enhance non-metro airport capacity.
- Greenfield airports are planned in Chennai and Pune.
Policy and Fiscal Recommendations:
- Skills Shortages: Anticipated shortages of pilots, maintenance engineers, and air-traffic controllers due to the rapid industry growth.
- Budget and Incentives: The Budget should provide fiscal incentives for investment in skilling, training, and education.
- Restructuring Requirements:
- DGCA and BCAS: Restructuring of the DGCA and BCAS is needed.
- Separating air navigation services from the AAI will enable corporatisation and better capital access for managing increasing air traffic.
- Tax Rationalisation: Consider rationalising direct and indirect taxes, such as state levies on aviation turbine fuel, which account for nearly 20% of an airline’s revenue.
- Airport Privatisation: Fast-track the privatisation of 25 airports planned under the national monetisation plan to benefit from modern infrastructure and regional economic development.
Cape Town Convention and Protocol:
- The Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment were concluded on 16 November 2001 in Cape Town, adopted under ICAO and UNIDROIT.
- These documents should be read together as a single instrument (Article 6(1) of the Convention).
- Objective: They address the challenge of securing clear and enforceable rights to high-value aviation assets like airframes, engines, and helicopters, which lack a fixed location.
Government Policies and Initiatives:
- National Civil Aviation Policy 2016 (NCAP).
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- Regional Connectivity Scheme – UDAN: launched in 2016.
- Krishi UDAN 2.0.
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- Monetizing Assets: AAI formed joint ventures in seven airports and awarded six airports for PPP operations, management, and development for 50 years.
- Ministry of Civil Aviation (MoCA) working towards carbon neutrality and net zero emissions at airports.
- VISION 2040: In 2019, the Indian Ministry of Civil Aviation’s report “Vision 2040” projected air passenger traffic to surge six-fold to 1.1 billion by 2040, with 821 million domestic and 202 million international passengers.
India’s Aviation Industry:
- India’s aviation industry experiences rapid growth, fueled by rising demand and supportive government policies.
- India now ranks as the world’s third-largest domestic aviation market, following the USA and China.
- Number of operational airports doubled from 74 in 2014 to 148 in April 2023.
- Unmanned aerial vehicles, also known as drones have been welcomed across industries.
- The Indian drone industry is expected to have a total turnover of up to $1.8 Bn by 2026.
- Domestic airlines carried 29.10% more passengers from January to September 2023 compared to the same period in 2022.
- International passenger volume increased by 39.61% during the same period.
