 "Air show highlights opportunities in Indian aviation")
The fifth edition of the Hyderabad air show, which concluded on Sunday, became a showcase of emerging opportunities in Indian aviation. Experts, however, are skeptical of the air show's outcome, pointing to the gaps in the government's reform intent and delivery.
Read more from our special coverage on "AVIATION"
| INVESTMENT ANNOUNCEMENTS AT THE SHOW |
|
While there were no big-ticket aircraft orders this time (SpiceJet had signed the order for 42 Boeing 737 Max in the last edition in 2014), there were announcements related to MRO units, aviation training and helicopter assembly plant during the show.
Pawan Hans announced plans to set up MRO facilities for military and Airbus helicopters.
While the government has not accepted the aviation sector's demand for abolition of service tax on MRO activities, Civil Aviation Secretary R N Choubey tried to assuage delegates at the air show stating the airlines can claim a set-off or a credit equivalent to the tax payable on MRO expense in their total tax liability.
High taxes, coupled with a lack of adequate capabilities, have been the bane of the MRO sector in India, which results in 90 per cent of airline maintenance contracts going outside India.
There is enough demand for MROs in India from local and foreign airlines but it is critical for service providers to acquire international certification, said Rajeev Gupta, chief executive officer of Indamer, which plans to invest Rs 400 crore to develop an MRO facility for narrow-body planes in Nagpur.
Airbus announced Rs 260 crore investment in a pilot training school near Delhi and Telangana government a tie-up with French institute Aero Campus Aquitaine to set up a centre for MRO training.
Airbus and Boeing are increasing their investment footprint and sourcing components for civil and military aircraft and helicopters from vendors in India. The plane makers outsourced $500 million worth of components and engineering services each from India last year. They look to increase collaboration further. Both Airbus and Boeing have no plans to set up final assembly lines for civilian aircraft in India as the country still remains a small market.
Textron, however, announced in Hyderabad that it was seeking partners to manufacture Bell 407 helicopters and added it was carrying out a feasibility study.
In 2015, domestic airlines flew 81 million passengers, with 20 per cent year-on-year growth, making India the fastest growing market. International air traffic, too, is growing at eight per cent and Gulf airlines including Emirates and Qatar Airways are pitching for higher traffic rights citing demand from India and support to tourism.
For long, India has been a laggard in the world of aviation. The combined fleet size of all airlines in the country at around 430 planes is smaller than South West Airlines of the US, which flies 716 Boeing 737 planes.
But, things are changing now. Indian carriers IndiGo, GoAir, Jet Airways, SpiceJet and Air Costa collectively have 650 aircraft on order. The growing middle class and the absence of a high-speed road and rail network have boosted air travel's potential in the country.
"As operators, we feel bullish about India's prospects in aviation. With the increase in disposable income, customers now spend more in the airports, which is boosting the revenue. If one is looking at India's prospects, low fares and increased capacity will make our airports vibrant," said K Narayana Rao, director of Delhi International Airport.
Airbus and Boeing estimate India will need 1,610 and 1,740 jets, respectively, over the next 20 years, in their latest market forecast. Turboprop aircraft makers such as ATR and Bombardier, too, are optimistic about the demand for their planes, with the government's thrust on regional connectivity.
While metros account for the bulk of domestic air traffic at present, civil aviation secretary R N Choubey is hopeful that the next wave of growth will come from regional and remote area routes. The government plans to propel services on these routes through sops and viability gap funding (VGF). VGF means a grant to support infrastructure projects that are economically justified but fall short in financial viability.
Currently, only 75 airports in the country have a scheduled airline service. There are 350 unused airstrips, many built during the World War II. Reviving them and linking the small towns are high on the government's agenda. Reviving an existing air strip would be easier as it would save the time taken in land acquisition, Choubey said at the air show.
"The government is planning to invest around $120 billion in development of airport infrastructure and aviation navigation services over the next decade. The deeper air penetration to smaller cities, better connectivity to north-eastern part of India, and higher disposable incomes of the middle class are expected to further propel the growth of Indian civil aviation sector," President Pranab Mukherjee said inaugurating the air show.