India Aviation Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

India Aviation Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The aviation industry in India is expected to witness a CAGR of over 5% during the forecast period (2022 - 2027).

The COVID-19 pandemic had a significant negative impact on the Indian Aviation market. India was one of the worst hit countries in the world by the COVID-19 pandemic. Consequently, the aviation industry was severely crippled in terms of revenue and the overall market economy. With the lockdown across the country implemented stringently, the need for air transportation drastically reduced, leading to an economic crippling of the market, and the key stakeholders of the market.

Despite the economic downfall of the commercial and general aviation segments of the market, the military aviation of the country has witnessed a significant growth rate throughout the time period of the pandemic. The national government investment as military expenditure was ranked the world's third largest expenditure after the United States and China coming first and second respectively. Owing to significant investments into the defense segment in the country, the aviation market sustained a small improvement in the conditions across the country.

Key Market TrendsIncreasing Aviation Investments Driving the Market

India has been witnessing a constant investment in the betterment of the country's aviation industry over the past years. Various development projects announced by the aviation governing bodies in India aim to improve the market opportunities in particular for commercial and general aviation segments of the market. The projected increase in air travelers to the pre-pandemic levels by 2023-2024, has driven various airlines and airports to invest in upgrading their existing facilities that offer a great customer experience for the passengers both in the aircraft and the airports. The country is dominated by low-cost carriers that have entered the market and disrupted the existing players. IndiGo, the country's largest airline, in February 2022 announced it has significant expansion plans to build a regional international footprint that has India as the hub for the airline.

Similarly, privatization of the aviation industry is on an increasing trend in the country. The country's national carrier Air India was purchased back by its original founding company, the Tata Group, in January 2022. With this, the airline has witnessed a major structural re-shuffle, to streamline its operations and bring back the lost glory of the airline. As part of the Tata Group, the airline will witness significant influx of additional aircraft fleet that will be used to cater to the expected increase in market demand in the country.

Furthermore, new airline inductions have been occurring in the market. The COVID-19 pandemic, despite creating a negative impact, paved the way for reduced prices for aircrafts that can be purchased by the airlines. For instance, in December 2021, India witnessed the induction of a new airline, Akasa Air, which is an ultra-low-cost airline. This new airline started in its inaugural flight in August 2022, with a vision to expand rapidly over the coming years.

Military Segment is Expected to Lead the Market During the Forecast Period

Greater emphasis on higher indigenous content in new purchases in the Defence Acquisition Procedure (DAP) 2020 has enabled the country to indigenously develop defense system technologies, owing to which several new weapons and missile defense systems have been witnessed in the country. Furthermore, the rising geopolitical rift in the region, especially in the South China Sea, combined with the country's long-term international border conflict with both China and Pakistan has necessitated the development of various weapons for surveillance, reconnaissance, defense, and attack requirements of the country's military.

The Army has introduced 75 small indigenously-manufactured drones into service between August 2020 and January 2021 to introduce swarm drone technology. Initially, in August 2020, only five drones were acquired by the Army. However, as the border tensions escalated with China and Pakistan, the Army decided to procure additional drones. Furthermore, the government is in plans to increase its fleet of UAVs to 1,000 drones.

In January 2021, the Indian Army signed a contract worth USD 20 million with IdeaForge to deliver an unknown quantity of Switch UAVs to perform ISR missions. The order was placed under fast-track procurement. The Switch UAVs are high-altitude vertical take-off and landing (VTOL) drones designed for the surveillance operations of the Indian Forces. The country’s Defense Budget for FY21-22 is EUR 42.18 billion, signifying an 18.75% Y-o-Y growth.

Out of the total capital outlay, the outlay for the Indian Navy is EUR 3.82 billion, representing a 24.6% YoY growth.

Competitive Landscape

The Indian aviation industry is segregated into Commercial aviation which is occupied by the country's major airlines like IndiGo, SpiceJet, and Vistara among others, and Military aviation, which is occupied by the country's large defense manufacturers like Hindustan Aeronautics Limited (HAL) and Defense Research and Development Organization (DRDO), among other private manufacturers. The country's military aviation is majorly dominated by the above-mentioned government entities that receive immense order backlogs from both the government and international governments that have a friendly relationship with India. India also partners with friendly countries like France to maintain trade relations via defense aircraft purchases. For instance, Rafael Advanced Defense Systems Ltd. of France is a major supplier of military fighter aircrafts for the military's army, navy, and air force. The commercial aviation space is a tightly wound competitive landscape with the carriers offering a wide range of services at low cost for the customers. The competitive rivalry among commercial carriers of the country is extremely high.

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