Competition is expected to soar in India’s aviation sector during 2022, as new players enter the industry along with deeper penetration of air transportation in the hinterland.
Therefore, new airlines as well as more privately operated airports are expected to increase competition in the sector that has faced the brunt of the ongoing pandemic.
Besides, expanding regional and intra-regional presence will continue to widen the hope of the industry.
Moreover, passengers will gain from increased competition, Centre from divesting airport help, and the force from more professional opportunities in the aviation sector
Jet Airways and Air India
In terms of airlines, in 2021, Jet Airways and Air India found new owners.
“The cherry on the cake was the takeoff of Akasa Air underpinning the possibilities of this sector in India,” expressed Jagannarayan Padmanabhan, Director and Practice Leader, Transport & Logistics, CRISIL Infrastructure Advisory.
“Competition will resume being strong across the airlines, the sector must learn from the previous misadventures of undercutting costs to gain or hold volumes.”
- In the medium term, the sector’s development is anticipated to come from the tier 2 and tier 3 cities for which it is required to increase capacity as well as extend up new regional airports.
“While Covid-19 has led to uncertainties in the airport sector, the established regulatory framework, as well as the development potential in the Indian market over a long term, would continue to attract private developers,” expressed Vishal Kotecha, Director, India Ratings and Research.
Adani Group winning six airports
Notably, there have not been any bids in the airport space over the last two years, however, 2019 saw a significant number of bids in the airport sector with Adani Group winning six airports, GMR, and Zurich airports being awarded one airport each.
“There was a significant interest seen from both domestic as well as international players in these bids,” expressed Kotecha. Under the National Monetisation Pipeline, the Centre plans to divest brownfield assets such as airports, thereby rising competition in this sector.
At least 25 additional airports have been identified for monetization in the following three years. Furthermore, there has been an increased focus on increasing regional connectivity. In terms of the RCS-UDAN scheme, 948 valid routes have been awarded.
395 routes connecting 63 unserved and
Out of which, 395 routes connecting 63 unserved and underserved airports including six heliports and two water aerodromes have been operationalized.
Ministry of Civil Aviation
As per data, under UDAN 4.1, 168 routes were awarded during the year. The Ministry of Civil Aviation has set a target of operationalizing as many as 100 unserved and underserved airports and starting at least 1,000 RCS routes by 2024.
“Expect the target of operationalizing 100 airports under UDAN by 2026, with a delay of two years from the revised schedule (of 2024 from earlier 2019),” told Rajeshwar Burla, Vice President and Group Head, Corporate Ratings, ICRA.
“The weak credit profile of some of the domestic airlines is anticipated to have an effect on the existing routes under UDAN scheme, particularly for smaller airlines given the stretched liquidity position, low utilization in some of the routes and this will also affect future bidding of routes under the scheme.”
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- Burla attributed the slow progress of UDAN implementation to delayed up-gradation of infrastructure and readiness of airports, lack of adequate right of way including insufficient runway lengths at some of the RCS airports, and delays in securing necessary regulatory approvals.
Additionally, Suman Chowdhury, Chief Analytical Officer, Acute Ratings & Research said: “As of 2020, there were 153 operational airports in India which are poised to grow to by another 20-30 by 2030.”
“AAI has a capital expenditure program of Rs 25,000 crore over the next 4-5 years for the development of new domestic airports as well as the expansion and up-gradation of the existing ones.”
In addition, Chowdhury told the private sector is increasingly participating in the development and expansion of the international airports in the country to cater to the potential incoming business and leisure traffic.
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