This report profiles India’s aviation industry, discussing market trends through 2013 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Jet Airways (India) Ltd, SpiceJet Ltd and GMR Infrastructure Ltd.

Over the last ten years, the Indian aviation industry witnessed a period of high growth with total passenger traffic growing at a CAGR of around 18% during 2003-11. The industry has also helped in stimulating other sectors of the economy such as tourism, hospitality and trade. However, the industry has seen a period of subdued growth over the last two years, particularly in domestic passenger traffic.

India’s aviation sector saw a marginal recovery in terms of passenger traffic in 2013 after the unexpected decline of 2012. However, the recovery in passenger traffic was eclipsed by a massive rise in aviation turbine fuel (ATF) costs. ATF costs spiked post-June 2013 due to a large depreciation in the Indian rupee. This was unexpected and as a result scheduled Indian carriers had to witness another year of significant losses with few of them even reaching unsustainable levels.

Airport management was the only silver lining in the dark cloud of Indian aviation sector. The airport management service providers were able to reap profits arising out of consistent growth in passenger traffic.

Going by the current trend, the sector will need substantial help from the government as well as suitable global conditions to post a recovery. Depreciation of rupee, rise in fuel prices and highly leveraged balance sheets are the biggest challenges for the sector. However, despite the challenges, the rising middle class and consistent growth in tourism bodes well for the sector.

Key Points:

• In the first four months of 2014, passenger traffic at domestic terminals grew by 2% y/y. International terminal passenger traffic, meanwhile, grew by 4.5% y/y during the same period.

• In the first four months of 2014, domestic cargo carried by Indian carriers grew by 15.5% y/y while international cargo grew by 4.4% y/y.

• The utilization of available passenger capacity for scheduled domestic carriers was around 72% for the first four months of 2014. JetLite recorded the highest passenger load factor, followed by Indigo.

• Domestic aircraft movements grew at a CAGR of 12% during 2003-11. However, in the last two years it has remained stagnant. In the first three months of 2014, domestic aircraft movements grew by 6% y/y.