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The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world and is expected to overtake UK to become the third largest air passenger (Domestic & International) market by 2024 (as per IATA forecasts).

Domestic passenger traffic grew YoY by 18.28 per cent to reach 243 million in FY18 and is expected to become 293.28 million in FY20E. International passenger grew YoY by 10.43 per cent to reach 65.48 million in FY18 and traffic is expected to become 76 million in FY20E. India's domestic and international aircraft movements grew 14.40 per cent YoY and 9.40 per cent YoY to 1,886.63 thousand and 437.93 thousand during 2017-18, respectively.

This growth is being driven by a growing economy, rising incomes, intense competition among airlines and a supportive government policy environment. The National Civil Aviation Policy (NCAP 2016) signalled the government's intent to radically alter the sector's growth trajectory. NCAP's flagship program - Regional Connectivity Scheme (RCS or UDAN) is taking flying to the masses by offering subsidised fares as low as Rs. 2,500.00 for a one-hour flight. The government decided to privatise its national carrier Air India and helicopter company Pawan Hans, something unthinkable in the past.

Initiatives like Nabh Nirman (for airport capacity augmentation), Digi Yatra (for paperless travel) and AirSewa (for online passenger grievance redressal) etc. are bringing in radical changes. The tax structure for Aviation Turbine Fuel (ATF), Maintenance, Repair and Overhaul (MRO) and aircraft leasing may be gradually aligned with leading global jurisdictions.

The Government of India released the National Civil Aviation Policy in June 2016. This is for the first time since independence that an integrated Civil Aviation Policy has been brought out by the Ministry of Civil Aviation.

The policy aims to take flying to the masses by making it affordable and convenient, establish an integrated eco-system which will lead to significant growth of the civil aviation sector to promote tourism, employment and balanced regional growth, enhance regional connectivity through fiscal support and infrastructure development and enhance ease of doing business through deregulation, simplified procedures and e-governance.

The comprehensive policy document covers over 22 areas of the Indian aviation industry. NCAP 2016 has given a big boost to industry growth, transparency and investor sentiments.

The cornerstone of NCAP 2016 is the Regional Connectivity Scheme (RCS), also known as UDAN ('Ude Desh ka Aam Naagrik'). This scheme plans to enhance connectivity to India's unserved and under-served airports.

State governments will be offering a pre-decided amount per seat as subsidy on routes covered under this scheme, and airlines will be required to bid on the percentage of flight capacity for which subsidy is required. The subsidy will be provided for a period of three years, along with exclusivity to the selected airline on that route for the same period.

UDAN has received significant interest from leading domestic carriers and startup airlines due to the various fiscal and monetary incentives therein and the three-year exclusive right to operate on the allotted RCS routes.

The selection of the RCS operator on a particular route is through a transparent electronic bidding process. Under RCS-1 in April 2017, five airlines won the licenses to operate on 128 routes connecting over 31 new and 12 under-served airports under the regional connectivity scheme.

The second round of RCS bidding saw significant improvement over the first one, including doubling of the number of RCS flights for priority routes (Northeast, J&K and Andaman and Lakshadweep areas) and participation by market leader IndiGo and helicopter companies. Under RCS-2 in January 2018, the aviation ministry awarded 325 routes to 15 airlines and helicopter operators. These routes included 25 new airports and 31 new helipads.

In August 2018, The Ministry of Civil Aviation unveiled a draft International Air Connectivity (IAC) scheme for extending affordable air travel programme UDAN to international circuits, with state governments identifying the routes for operation. The draft International Air Connectivity (IAC) scheme envisages to increase international ticketing to 20 crore by 2027. 

The draft scheme seeks to assist state governments as they try to facilitate air connectivity between their respective states and international destinations.  Assistance will be provided through financial support (subsidy) to airlines to meet the gap, if any, between the cost of airline operations and the expected revenues on such routes.  

The scheme has proposed to set up an International Air Connectivity Fund (IACF) - a dedicated fund for providing subsidy support under the scheme. It will be created through the con tributions of state governments. 

The government has identified eight potential routes so far for the implementation of International UDAN. Six of these routes are to provide connectivity from Guwahati to Dhaka, Kathmandu, Yangon, Kuala Lumpur, Singapore and Bangkok, while two routes are from Vijayawada to Dubai and Singapore.

Nabh Nirman

The government, in the Budget 2018-19, announced a scheme to expand airport capacity more than five times to handle a billion trips a year under a new scheme called NextGen Airports for Bharat (NABH) Nirman.

This scheme constitutes investments to be made in airport upgrade by both the private sector and the state-owned Airports Authority of India (AAI) in the due course of time. The scheme is to establish about 100 airports in 15 years at an estimated investment of Rs 4 lakh crore – a large percentage of the investment is to come from the private sector.

1. This initiative has the potential to transform the Indian aviation sector and make India a global aviation superpower.

2. The initiative will help to connect smaller towns and cities and increase tourism and economic activity.

3. Creating capacity will bring in passengers as well as airlines. In India, about 300 million can afford air travel and creating capacity will ensure that those 300 million have the option of taking flights.