India - Civil Aerospace: High demand fueling growth (Strategy, Performance and Risk Analysis)
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The civil aviation industry in India has recorded steady growth in the number of air passengers due to a rise in productivity and household disposable income. An increasing number of trade deals with various countries has greatly supported the growth of India’s air freight carriage. Additionally, the Government of India has been taking several initiatives to develop the civil aviation industry by entering into agreement to encourage connectivity and affordable travel to and from India. The government is attempting to build investors’ confidence by implementing favorable foreign direct investment (FDI) policies, expediting approvals for pending projects, and passing market liberalization reforms. The government has also permitted 100% FDI in the aerospace industry.
Demand for air travel to drive aircraft procurement
With the second-highest passenger volumes in Asia-Pacific after China, India dominates the civil aviation market. Passenger volume registered an annual growth rate of 20.9%, from 98.9 million in 2015 to 119.6 million in 2016 and are expected to post a CAGR of 6.9%, from 118.7 million in 2017 to reach 154.7 million in 2021. An increase in the demand for airline services will encourage the country to procure more aircraft which will bolster the fleet size of planes in active service. New aircraft deliveries are anticipated to post a CAGR of 14.9%, from 31 units in 2017 to 54 in 2021. Narrow-body aircraft deliveries are forecast to post a CAGR of 14.2%, from 27 aircraft in 2017 to 46 in 2021.
Growing procurement of single-aisle aircraft to drive capital expenditure
Capital expenditure on single-aisle aircraft accounted for 74.1% of all capital expenditure in the civil aerospace industry in 2016. It stood at US$3.4 billion in 2016 and is forecast to post a CAGR of 6.6%, from US$3.7 billion in 2017 to US$4.7 billion in 2021, due to an increase in the demand for low-cost carriers (LCCs). The growing procurement of narrow-body aircraft to service the regional market will drive capital expenditure. The volume of narrow-body planes procured by airline operators in India registered an annual growth rate of 51.3%, from 39 units in 2015 to 59 in 2016.
Establishment of new MRO facilities to drive MRO expenditure
Maintenance, repair and overhaul (MRO) expenditure registered an annual growth rate of 6.9%, from US$498.5 million in 2015 to US$532.8 million in 2016. It is forecast to post a CAGR of 5.8%, from US$595.5 million in 2017 to US$745.9 million in 2021. MRO expenditure is anticipated to be supported by the establishment of new facilities in India.
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