Mumbai, May 26, 2022: With fast receding Covid 19, the airline industry is expected to gain traction and grow a fast. Going forward, Asian carriers are likely to gain share globally led by carriers in China, South Asia, and Southeast Asia. In India, single-aisle airplanes such as the 737 families will continue to drive growth in domestic and regional markets, e.g., short-haul flights from India to the Middle East and Asia-Pacific regions. Indian operators will need 1,960 new single-aisle airplanes over the next 20 years. These are some of the findings of a report on aviation. These are some major findings of a report titled Airlines Industry: Prospects and Challenges released by Infomerics Valuation and Rating Pvt Ltd., the well-known SEBI-registered and RBI-accredited financial services credit rating company.
Airlines Industry: Highlights
Mounting and volatile crude oil prices are seen in Jet Fuel price rising from ₹ 76062/KL from Jan’22 to ₹ 112924/KL on 1 April’22. In March 2022, Crude oil price were (Indian Basket) $112.87/barrel ($/bbl) as against $94.07/barrel ($/bbl) in Feb. 22.
At present, the Central Basic Excise Duty (BED) on ATF is 11 per cent, basic Custom Duty (BCD) is 5 per cent and Additional Custom Duty (ACD) is 11 per cent. [under the list of Non-GST goods]. Overall, ATF constitutes 45 percent of the operating cost. Further, there are various state taxes and VAT. However, Union and some states are acting on taxation and 12 additional states and UTs are in the process of bringing VAT and ATF rates to 1 to 5 percent.
Airlines hit because of delayed fund infusion, stoppage and go-slow of flights, and post pandemic effects with rising outstanding across vendors and suppliers. There are also issues of legal battles, motivating employees and cargo business.
Leading players have modified business plans to reduce costs, enhance liquidity, customer preference, explore new revenue models, optimize networks. Going forward, this would strengthen their financial position over the medium-term and shore up the bottom-line of the Airlines.
However, air travel is rising in terms of domestic and international passengers handled by Mumbai & Delhi Airport, industry-wide revenue passenger-kilometers (RPKs), aircraft movements of passengers and freight, etc. With fast receding Covid 19, the Airlines industry is expected to gain traction and grow at a fast.
Factors aiding the growth of air travel in the future :
With steady economic growth in India, the burgeoning middle class, the thrust on mobility and connectivity, the opening of new Airports and the up-gradation of the existing Airports, the pent-up desire for air travel and synchronized institutional support, including at the level of the Government of India, the Airlines industry is likely to do well over the medium-term. Should there be a tax reduction in the case of ATF, this would provide a further impetus to the growth of the airline industry.
Drones to see high growth :
Drones may see an investment of over ₹ 5000 crores in the next three years. Moreover, the annual sales turnover of drone manufacturing may zoom from ₹ 60 crore in 2020-21 to over ₹ 900 crores in FY 24; generating more than 10,000 direct jobs over three years. India has banned imported drones (barring foreign imported drone components) to promote the Atmanirbhar Bharat scheme and security concerns; except for R&D and defense purposes.
Under the “Atmanirbhar Bharat Abhiyaan” scheme, India is increasing its competence to indigenously design, develop and manufacture advanced cutting edge technologies and systems in the Defence Sector. The Cabinet Committee on Security (CCS) approved the procurement of 15 Light Combat Helicopters (LCH) for Rs 3,887 crore or about Rs 260 crore each. The CCS also approved the creation of infrastructure worth Rs 377 crore.
