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Indian Aviation Industry
Context:
India will host the premium International Air Transport Association (IATA) Annual General Meeting (AGM) next year, marking a return after 42 years.
More on News:
- The event, considered pivotal in the aviation industry, will take place in Delhi, marking the third time the city has hosted it, following 1958 and 1983.
- The IATA AGM brings together leaders and top executives from global airlines, aircraft manufacturers, and other stakeholders in the aviation sector.
- It serves as a platform for discussing key issues and developments impacting the global aviation industry.
- Indian carriers have responded to escalating air travel demand by placing four significant aircraft orders since 2023.
IndiGo to Host IATA AGM and World Air Transport Summit:
- IATA announced that IndiGo, India’s leading airline in market share, will host the AGM and World Air Transport Summit in Delhi from June 8 to 10, 2025.
- Indigo CEO highlighted India’s remarkable progress in global aviation, citing its imminent rise as the third-largest economy and leadership in AI-driven advancements.
- Around 330 airlines, representing more than 80% of global air traffic, are members of IATA.
- The decision to host the 81st IATA AGM in India was finalised during the ongoing 80th IATA AGM in Dubai.
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.
Government Policies and Initiatives:
- National Civil Aviation Policy 2016 (NCAP):
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- Focuses on enhancing affordability and connectivity in flying.
- Promotes ease of doing business, deregulation, and e-governance.
- Reduced Goods and Services Tax (GST) for Maintenance, Repair, and Overhaul (MRO) services locally from 18% to 5% in April 2020.
- Changed ‘place of supply’ for B2B MRO services to ‘location of recipient’, encouraging global participation.
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- Regional Connectivity Scheme – UDAN: launched in 2016.
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- Aims to enhance connectivity to unserved and under-served airports, making air travel affordable.
- Government targets 1,000 UDAN routes and revival/development of 100 airports/heliports/water aerodromes by 2024.
- Aircraft Leasing and Financing at IFSC:
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- IFSC at GIFT City provides offshore status for financial services.
- Facilitates aircraft leasing and financing businesses.
- Krishi UDAN 2.0:
- Focuses on integrating and optimising Agri-harvesting and air transportation.
- Aims to contribute to Agri-value chain sustainability and resilience.
- Added 5 new airports to the existing list, totaling 58 active airports in Krishi Udan.
- Monetising Assets:
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- AAI formed joint ventures in seven airports and awarded six airports for PPP operations, management, and development for 50 years.
- 25 AAI airports earmarked for asset monetization between 2022 and 2025 as per National Monetization Pipeline.
- Carbon Neutrality Initiatives:
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- Ministry of Civil Aviation (MoCA) working towards carbon neutrality and net zero emissions at airports.
- Airports like Delhi, Mumbai, Hyderabad, and Bengaluru achieved Level 4+ ACI Accreditation and carbon neutrality.
- Ministry of Civil Aviation (MoCA) working towards carbon neutrality and net zero emissions at airports.
India’s Aviation Industry Challenges:
- Aviation Fuel Taxation:
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- High taxes on ATF in India, up to 40-45% of airline operating costs.
- Contrasts with global fuel costs (20-30%), straining airlines’ viability.
- Proposal to bring ATF under GST for long-term relief.
- Financing and Cape Town Convention:
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- Need for infrastructure as India expects over 2,700 new aeroplanes.
- Absence of Cape Town Convention impacts leasing environment.
- Unclear timeline for Indian Government’s contemplation of ratification.
- Enhancing MRO Capabilities:
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- Imperative to invest in MRO infrastructure for safety and reliability.
- Over 80% of MRO expenditure goes abroad.
- Efforts to bolster India’s MRO capabilities essential for growth and job creation.
- Dollar Dependency and Cutthroat Pricing:
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- Fluctuations in the dollar rate impact profits due to dollar-denominated costs.
- Cutthroat pricing challenges balancing operational costs amidst high competition.
Way Forward:
- Exempt critical MRO components from customs duty to enhance competitiveness.
- Ensure no restrictions on GST input credits for Indian airline customers to support the MRO sector.
- Zero-rate GST for MRO services to foreign aircraft flying into India, aligning with competing hubs.
- Implement 0% airport royalty policy at all Government-owned airports, negotiate at major privatised hubs.
- Introduce Production-Linked Incentives (PLIs) and tax waivers to incentivise capital investments.
- Streamline regulatory processes by co-recognizing DGCA regulations through bilateral agreements.
- Establish guidelines for convergence between civil and defence MRO sectors to optimise infrastructure.