Need to focus on airlines' viability, environmental sustainability: Economic Survey

Economic survey on aviation: India's aviation sector is set for unprecedented growth, and there must be a focus on enhancing the efficiency and viability of airlines while ensuring environmental sustainability, according to the Economic Survey 2023-24, presented on Monday.

The survey underlined the importance of collaborative efforts between the government, industry stakeholders, and international partners to provide adequate long-haul connectivity from India. Currently, a significant portion of Indian international traffic relies on connectivity hubs in the Middle East and Southeast Asia.

The civil aviation sector is experiencing a surge in demand, driven by increased economic activity, tourism, higher disposable incomes, favourable demographics, and expanded aviation infrastructure.

India, the third-largest domestic aviation market, recorded a 15 per cent year-on-year growth in total air passengers, reaching 376 million in FY24.

Finance Minister Nirmala Sitharaman tabled the survey in Parliament, which highlighted the necessity for the aviation industry's growth to match economic expansion. The growth requires expanded airport capacity, raising sustainability concerns and the need for more skilled workers.

"The aviation industry in India is on the verge of unprecedented growth, with Indian airlines placing orders for more than 1,500 aircraft and projected demand exceeding 2,200 aircraft by 2042," the survey noted.

For India to assume a leadership role in aviation, the survey stressed the need to improve airline efficiency and viability while ensuring environmental sustainability.

The survey stated that the sector's significant potential hinges on collaborative efforts between the government, industry stakeholders, and international partners. Investments in infrastructure, skill development, and sustainability initiatives will drive the future expansion of India's aviation sector.

"The airline industry is highly competitive and vulnerable to external shocks, such as oil prices, exchange rates, epidemics, wars, and equipment issues. These factors can impact airline operations and viability, necessitating the development of capabilities in segments like MRO (maintenance, repair, and operations), leasing, and skilling," it noted.

The survey also pointed out that the future of aviation services in India is anchored in the growth of the MRO sector and the burgeoning drone industry.

An emerging challenge for the aviation sector will be compliance with the mandatory phase of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from 2027.

For the FY2020 to FY2025 period, the government's capital expenditure plan exceeds Rs 26,000 crore to develop, upgrade, and modernise airports to meet international standards.

The Airport Authority of India (AAI) has spent around Rs 23,000 crore from FY2020 to FY2024, while public-private partnerships and other airport operators have invested approximately Rs 49,000 crore during the same period.

"The number of airports in India has more than doubled since 2014. However, there is a need to augment this capacity by adding more airports and expanding or upgrading existing ones in the next five years," the survey said.

Among the services sectors, the aviation space saw the most significant credit inflow, with a year-on-year growth of 56 per cent, attributed to increased aircraft leasing, hiring, and a positive medium to long-term growth outlook.

(Source: Republicbiz)