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India aviation market set to be `number one` globally: KPMG

Reuters | Last Updated: Thursday, March 13, 2014 - 19:31

New Delhi: India`s fast-growing civil aviation sector, already among the top 10 globally, could be number one worldwide by 2030, said a report Thursday by global consultancy KPMG.

Even though most Indian airlines face hefty losses this year and huge debts in the face of fierce competition and a sharply slowing economy, in the longer term the USD 16-billion sector is on a high-growth track thanks to large untapped potential, experts say.

"We`ve just touched the tip of the aviation iceberg," said Amber Dubey, KPMG`s India aerospace head said, noting "access to aviation is still a dream for nearly 99.5 percent" of India`s 1.2 billion population.

The report was released to coincide with a five-day air show in the southern city of Hyderabad which winds up this weekend.

Chicago-based Boeing separately Thursday, in a similarly bullish mode, projected demand for over 1,600 new airplanes in India over the next 20 years, valued at USD 205 billion.

"India`s demographics are highly favourable to growth of air transportation" while "the share of India`s large population entering the workforce is growing," said Dinesh Keskar, a Boeing senior vice president. 

Boeing on Wednesday clinched a USD 4.4-billion order from India`s fourth-place no-frills carrier SpiceJet for 42 of its top-selling single-aisle 737 MAX jets.

Low-cost carriers, foreign investment in domestic airlines, modern airlines and a new drive for regional connectivity are propelling a new expansion wave, the KPMG report said.

Many states, especially in eastern India, have begun promoting air connectivity including by lowering aviation fuel sales tax and developing no-frills airports, the report noted.

But a lot more needs to be done, such as allowing domestic code-sharing and developing infrastructure, said the report prepared with the Federation of Indian Chambers of Commerce and Industry (FICCI).

"India is blessed with a great geographic location, a large upwardly mobile middle class and immense tourism opportunities," Dubey said, adding, "the beauty is our challenges primarily relate to policies, procedures, regulations and taxes".

"These are all man-made problems and hence surmountable."

The number of Indian airline passengers has grown by around 13 percent a year over the last decade, according to the Airports Authority of India, to 159 million in 2013.

The most significant development in the domestic market is growing dominance of low-cost carriers which now account for almost 70 percent of capacity.

Boeing projects passenger airlines in India will rely primarily on single-aisle airplanes such as the Next-Generation 737 and the 737 MAX, a more fuel efficient variant of the widely used 737, to connect passengers.

First Published: Thursday, March 13, 2014 - 19:31
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