Republic Economic Summit: Indian Civil Aviation 'takes off' in 2021 after COVID slump

As the Indian economy scripts its recovery emerging in the post-lockdown era, one of the worst-hit sectors - the civil aviation industry seems to be on an uptick. With Covid restrictions lifting across India, the nation's two busiest airports - Delhi and Mumbai recently recorded a footfall of 3,50,000 people per day - a pre-COVID record. Looking forward to welcome tourists as India opens up to the world, Indian aviation sector has received major boost from the Centre with new airport projects, increase in flights, drone investment, FDI inrush etc.

Indian aviation sector 'takes off'

In the lead-up to the first-ever Republic 'India Economic Summit', which will see the most influential names in the industry and the economic world come together to put the world's fastest-growing major economy under the microscope, Republic World is taking an in-depth look into some of its key drivers. Here is a look at how the Indian aviation sector rose from crippling losses in FY 2020-2021 to 'take off' in FY 2021-22.

The pandemic effect

As per recent govt data, Indian airlines and airports incurred financial losses worth Rs 22,400 crore in the last financial year amid the coronavirus pandemic. With 75% of govt-operated incurring losses, Airports Authority of India (AAI)'s revenue also came down to Rs 889 crore. As India saw the world's strictest COVID lockdown in 2020, domestic air travel reduced by 61.7% as flights remained suspended. International air travel too remained limited Vande Bharat Mission and Air Bubbles, severely damaging the sector's revenue. Rising oil prices, cap on airfare, GST added to the sector's woes during COVID.

Budget allocation boost

To revive the severe cash-crunched sector, Union Budget 2021-22 introduced many reforms such as - tax incentives for aircraft leasing and financing, zero custom duty, asset monetisation of 6-10 airports through PPP model for operations and management, disinvestment of Air India and Pawan Hans and expansion of Krishi Udaan. 

As COVID subsided in India, Centre opened domestic travel capping fares and passenger capacity at 30% initially. With the gain in passenger footfall, Centre gradually increased the capacity to 70% and finally to full capacity. The country’s biggest airline, IndiGo, said its current load factor was at 75-80% and that it is operating 1,200 flights daily - 80% of its pre-Covid-19 capacity. Centre has also thrown open its borders to international tourists subject to strict testing, vaccination and quarantine guidelines. To attract tourists, Centre has announced that it will give out visas to the first 500,000 tourists free of cost till March 2022. Currently, India has Air Bubble arrangements with 28 countries, including Japan, the UK, the USA and the UAE.

New airports, new flights, new airlines

As Modi govt overhauled its Union cabinet in July, newly appointed Civil aviation minister Jyotiraditya Scindia accelerated the opening of 50 new air routes under Centre's UDAN scheme. Out of these 50 new routes, 30 were launched in October - Alliance Air (6), IndiGo (4), SpiceJet (4), Big Charter (8), Star Air (8). Multiple new airports were also thrown open in November - Keshod in Gujarat, Deoghar in Jharkhand, Gondia in Maharashtra, Sindhudurg in Maharashtra, and Kushinagar in Uttar Pradesh. Heliports in Sanjoli, Sase, Mandi, Baddi, Haldwani and Almora have are being made operational.

Akasa Air, the new airline backed by billionaire Rakesh Jhunjhunwala which received a no-objection certificate from Centre on October 11, expects to start flying next year. Jhunjhunwala has inked a $9 billion deal to acquire 72 Boeing 737 Max aircrafts for his fleet. Centre has also outlined a Rs 120 crore inlay for drones and drone components under its Production-Linked Incentive (PLI) scheme.

Air India disinvestment

The biggest relief to Indian civil aviation has been the finalisation of the bid to privatise the national carrier - Air India.  After 68 years since Tata Airlines was taken over by Govt of India, Tata Sons subsidiary Talace Pvt ltd won the bid to acquire the cash-starved airline for Rs 18,000 crores, absorbing Rs 15,300 crore of Air India's debt. The remaining  Rs 46,262 crore of debt will be retained by a govt company called AIHL. As Centre retained ownership of the land and building assets valued at Rs 14,718 crore, Talace also won a 50 percent stake in Air India SATS apart from full control of Air India and Air India Express. With the boost in Indian aviation, Tata Sons aims to turn its luck after its other carriers- Vistara and Air Asia - declared losses of  Rs 1,814 crore and  Rs 332 crore respectively in fiscal 2020.