India@100: A Blue Sky Agenda

India@70 is the fastest growing major economy in the world with a forecast by the International Monetary Fund (IMF) of 7.1 per cent growth in FY 2016-17. Aviation has played an important role in achieving this. Today, the aviation industry in India supports 1.7 million jobs, 0.5 per cent of GDP and 90 per cent of international tourist arrivals.

Concomitantly, India has become the world’s fastest growing domestic travel market for the 22nd time in a row, recording a 26.6 per cent year-on-year growth in January 2017. International Air Transport Associ-

ation (IATA) projects that the country will become the third largest aviation market in the world in terms of passengers by 2026. Furthermore, air passengers are expected to grow at a compound average growth rate (CAGR) of 3.7 per cent to double from 3.8 billion air passengers in 2016 to 7.2 billion air passengers by 2035.

In the last seven decades, growth of Indian aviation has been gradual but steady — picking up steam in the last quarter of a century. In the 1990s the Open Sky Policy heralded the liberalisation of the Indian aviation sector.

Today, India has shown that it can build world-class facilities, some through public private partnerships (PPP). It has also recognised the importance of coordinated efforts in the global environment debate. India is among the leaders calling for the European Union (EU) to forego its unilateral and extra-territorial inclusion of international aviation in its Emissions Trading Scheme (ETS).

From India@70 to India@100, the next phase of growth is expected to be fuelled by better regional connectivity focusing on tier-2/3 cities, a strong domestic MRO sector and building no-frills airports through PPP, supported by a proactive policy framework. The progressive new civil aviation policy focused on realising the vision of ‘Make in India’ can be achieved through greater skill development, new generation wide-body aircrafts and encouraging increased foreign investment.

However, challenges persist. Today, the hyper-growth is exerting immense pressure on the existing infrastructure resulting in increased congestion, higher operating costs, greater environmental impact, potential safety implications and compromise on passenger experience. This means that the sector is growing, but not profitably. So even though, India’s airlines reported a combined profit of $122 million in FY16, the first time in a decade, this era of industry profitability is likely to be short-lived. At a total industry level, losses could reach $250 million-300 million (in FY17). India has one of the lowest air travel penetration rates globally of 0.08 annual domestic seats per capita — significantly lower than other developing markets such as Brazil, Turkey, Indonesia and China, where penetration rates are between 0.35 and 0.65. Finally, a holistic view of the sector especially in policy formation is lacking. Aviation is the responsibility of the Ministry of Civil Aviation. Its success though rests on the coordinated efforts of the Ministries of Finance, Tourism, Commerce, Environment and many others.

Handling increased air traffic needs new strategies — more infrastructure, more airports, greater capacity for airports, and most importantly, environment commitments that India signed at the Paris meet. This will require a serious push to more wide-body aircrafts between leading metros — so fewer flights can carry more people and save the environment. Increased movement between smaller cities would mean greater traffic between hubs (metros).

Wide-body aircraft present a number of strong advantages on high-volume domestic routes. They prove to be a high-yield option for airlines, providing carriers more revenue per available seat mile; provide a significant advantage at airports with restricted infrastructure usage, enabling airlines to carry more passengers to airports with limited slots; create a competitive environment demand that operating costs be kept low and improve fuel-efficiency, resulting in reduced costs for airlines and thus, passengers too.

All this ensures reducing the aerospace industry’s environmental footprint. Additionally, deployment of wide-body operating model will free up a substantial chunk of narrow-body fleets which can be used successfully on newly opened regional routes. Other new strategies needed are greater innovation in technology, electronics, biofuels and greater automation at airports.

The growth of Indian aerospace activities is further spurred on by a favourable policy regime and the launch of National Civil Aviation Policy (NCAP 2016), which focusses on the critical pillars of ‘affordability’ and ‘connectivity’. Initiatives like UDAN, which focuses on improving regional connectivity, allows airlines to expand their routes and evaluate their growth ambitions. Airbus and Boeing have forecasted a demand for over 2,400 new aircraft valued at $480 billion over the next 20 years, indicating that airlines operating in India are planning an aggressive expansion in the coming few years.

Aircraft design and technology has progressed over the years. Today’s wide-body engines are much more environment friendly, with reliable engines that are fuel-efficient, cleaner and quieter. Increased reliability of engines has also resulted in twin-jets being certified for longer duration of ETOPS operations. This was a privilege enjoyed by only tri-jets or four-engine aircraft such as the Boeing 747. Additionally, the use of composite materials for wide-body airframes has increased across the industry. These techniques reduce weight, increase corrosion resistance and resistance to fatigue related damages, lowering maintenance costs.

A concerted effort with a clear three-decade vision by all the stakeholders of the Indian aviation sector can ensure that moving from India@70 to India@100 the country is among the super-economies of the world by 2047.

The author is President, Rolls-Royce India & South Asia