300, Aviation. Draft, Civil, DGCA, Growth, Million, Ministry, Passenger, Policy, population
Everyone today looks upto India as the next destination for growth. The Ministry of Civil Aviation, in its draft National Civil Aviation Policy, has captured the attention of everyone with the claim of a large middle class population, and the promise of certain reforms that should may better the ease of doing business.
We appreciate what the Ministry has done, is doing, and will do. But certain claims must be taken with a pinch of salt, must be questioned, and analysed, just to prevent over-optimism and to make room for realism. Like for example:
- India is a 300 million strong population of middle class persons. The Ministry targets each of these 300 million to fly atleast once in their life. Pertinent questions: What is the definition of middle class? What subset can really afford air travel? These questions are important to prevent overcapacity in the Indian market based on optimism.
- India targets 300 million domestic ticketing by 2022. That means, calendar year (CY) 2021 must end with 300 million domestic passengers in a single year. India will end CY 2015 with 80 million domestic passengers. What is the compound annual growth rate (CAGR) required to touch 300 million in CY 2021? Is this CAGR too high to achive? What do market leaders like Airbus say?
Today, we focus on these two issues, which form part of the Ministry’s vision, and we see if this is achievable. Our views on the Regional Connectivity Scheme and the 5/20 are ready, which we hope to release tomorrow. We will also be commenting on Scheduled Commuter Airlines (SCA) and Safety, and lightly touch upon Aeronautical ‘Make in India’, Aviation Education & Skill Development, and Air Navigation Services.
To read about the first two issues, please click here.
1. What is Airbus saying in terms of pax growth. ?
They predict 9 percent per year. What does that equate to in terms of pax numbers by year 2021.
2. What is Boeings forecast ?
3. What is Embraer forecast ?
4. What is bombardier forecast?
5. What are GDP projections for india until 2021 by the world bank?
Comment: typically commercial aviation grows at the rate twice that of the GDP based on world wide statistics . Let us be conservative and say it grows only 1.6 times GDP. What would that pax number be by 2021. ?
If we assume average GDP will grow by 6.5 to 7 percent. We can expect a 11 percent approx growth in commercial air transport.
Chuck Pulakhandam Director, Business Development South Asia & Myanmar Embraer Asia Pacific, Singapore Mobile: +919741937572 http://www.embraer.com
Atul Bhatia said:
You nailed it. Our middle class isn’t as big as it appears.
Thank you for this series of articles, all well researched as always.
I also believe that the middle class population that has the means to fly is much smaller than what the government says. And even if they have the means to fly, some people never do, as they have no reason to do so. Even here in Finland where almost everyone belongs to “middle class” and everybody can afford to fly at least once a year, some 25% never do. When asked, they say they have no need to fly anywhere.
I also agree with Chuck that the annual long term growth of air travel in India will probably be closer to 10% mark, as forecast by Airbus too. This is of course long term average and the growth will not be linear, but will have peaks and troughs, depending on many factors, so in several years the growth will actually be higher.
And finally, I agree that the 5/20 year rule should be abolished and not replaced by any other equally artificial rule, as the rules do hamper the natural growth of the new airlines to expand to international markets. If an airline is granted an AOP and the government exercises regular oversight on the operations, there should be no need to limit the operations to domestic routes. Flying is the same everywhere and the flying conditions that Indian pilots encounter in domestic flying give them enough competence to fly international routes.