The Indian aviation sector is on an upward trajectory, with demand rising and infrastructure facilities expanding. There is a growing focus on airport capacity expansion, air connectivity enhancement and sustainable operations. Given these trends, the sector is set to soar going forward. Industry experts share their views on the current trends shaping the aviation sector, recent milestones, the challenges faced and the future outlook…
What has been the progress in the aviation sector over the past year? What have been the major milestones?
Sonal Mishra
The Indian aviation sector has exhibited resilience and growth over the past decade, emerging as the third-largest domestic market globally after the US and China. In FY 2024, the total passenger throughput surpassed pre-Covid levels by 35 million to reach 376 million. This surge is being driven by the rising middle class (especially in Tier II and Tier III cities), expansion in the domestic aviation fleet and rapid airport infrastructure development across the nation. These infrastructural developments and domestic traffic augmentation are the results of enabling policy initiatives such as the recent extension of the Ude Desh ka Aam Naagrik (UDAN) scheme, aimed at operationalising new regional airports, provisioning helicopter services in remote areas and facilitating seaplane operations for coastal connectivity. At the same time, freight traffic has experienced substantial growth over the past three years, witnessing a CAGR of 11 per cent from 2.47 million metric tonnes (mmt) in FY 2021 to 3.37 mmt in FY 2024.
In order to fuel the burgeoning demand of the aviation sector, the supply side is also witnessing significant growth and is in the process of laying a robust foundation to facilitate this through initiatives in infrastructure readiness; robust fleet expansion plans of major Indian carriers; technological enablement with a view to facilitating a seamless passenger journey and better coordination among all aviation stakeholders; and favourable policy interventions, including a focus on environmental considerations.
To begin with, in FY 2024, infrastructural initiatives such as the operationalisation of 12 new airports and 92 new routes under the UDAN scheme (building on the already operationalised 73 airports and 467 routes since UDAN’s inception) highlight the government’s commitment to developing supply-side infrastructure – especially in Tier II and Tier III cities, which are expected to make up a major segment of the aviation traffic demand. Further, the development of multi-airport systems to facilitate sustainable traffic growth without overburdening existing infrastructure at metro airports ensures that capacity keeps pace with the demand. Likewise, with consolidation taking place in the airline space, India is expected to witness a strong national airline space with improved route optimisation and operations efficiency, enabling the development of hub airports in the country. These infrastructural and technological strides are bolstered by government policies aimed at strengthening the aviation sector. For instance, the extension in timelines for the export of goods imported for repairs from six months to one year, and the re-import of such goods from three years to five years, positions India as an attractive maintenance, repair and overhaul (MRO) hub, thereby attracting foreign players for MRO services of complex aviation equipment such as engine components and rotors. Additionally, new policies addressing previous challenges related to varying goods and services tax (GST) rates (earlier ranging from 5 per cent to 28 per cent; recently fixed at 5 per cent) on aircraft components, the inverted duty structure and GST accumulation in MRO accounts aim to eliminate these disparities, simplify the tax structure and promote growth in the aviation sector.
Christoph Schnellmann
India’s aviation sector is showing strong signs of growth, boasting the world’s third-largest domestic market and demonstrating remarkable resilience despite global headwinds. This upward trajectory is fuelled by strategic investments in airport infrastructure, with new airports emerging and existing ones undergoing modernisation to accommodate the anticipated surge in passenger traffic. India is well positioned to become a dominant force in the global aviation industry. The Economic Survey 2023-24 highlighted that in FY 2024 the total number of air passengers handled at Indian airports reached 376 million, a 15 per cent growth year on year, which is indeed a significant milestone. Domestic air passenger traffic has increased by 13 per cent year on year to 306 million, while international air passenger traffic increased by 22 per cent year on year to 70 million. Simultaneously, the air cargo handled at Indian airports also increased by 7 per cent year on year to 3.37 million tonnes in FY 2024. In terms of airport infrastructure development and boosting regional connectivity, the Indian government plans to double the number of operational airports to 300 by 2047. This ambitious expansion involves developing existing airstrips and constructing new airports across the country.
Binit Somaia
A key development in financial year 2024 was that total airport traffic in the country exceeded pre-pandemic levels for the first time. While domestic traffic had recovered fully the year prior, international traffic continued to lag. However, in financial year 2024, both the domestic and international segments exceeded their pre-Covid peaks. While traffic continued to grow, capacity was constrained by supply-side and other challenges, leading to higher fares. As a result, yields strengthened and airlines experienced improved financials. IndiGo was a star performer, reporting a record profit of around $1 billion last year. However, the industry reported an overall loss of $300 million-$400 million at a consolidated level.
What are the key challenges that remain unaddressed?
Sonal Mishra
Despite the considerable growth and ecosystem development over the years, the aviation sector continues to face challenges that must be addressed to ensure long-term success. One major issue is congestion at major airports, where the rapid recovery of passenger traffic after the pandemic has outpaced airport infrastructure development plans, leading to bottlenecks during peak hours and extreme weather conditions. Furthermore, the sector’s heavy reliance on global supply chains for aircraft components, spares and other critical equipment creates significant obstructions. This challenge is further amplified by the lack of indigenous MRO services for commercial aircraft fleets, resulting in more than 80 per cent of them being serviced overseas. Notably, engine MRO, which constitutes approximately half of the total MRO market, is almost exclusively serviced abroad. However, the recent budget provides incentives to the MRO sector, leading to a significant reduction in the outflow of service revenue.
In addition to these challenges, manual interventions in cargo operations at Indian airports – particularly in cargo handling, documentation and customs clearance – contribute to higher dwell times and increased operational costs. Therefore, in order to offset such challenges, it is important to ensure strategic investments in infrastructure, development of indigenous capabilities, thorough digital transformation on ground and formulation of clear policies.
Christoph Schnellmann
India’s aviation sector is undoubtedly on a remarkable growth trajectory, fuelled by surging travel demand and ambitious expansion plans. However, this unprecedented growth also presents complex challenges that require careful navigation. One persistent challenge is the volatility in operating costs, which significantly impacts airline profitability. Airlines must balance competitive pricing for a price-sensitive market with maintaining operational margins. Additionally, disruptions due to material shortages and supply chain constraints, exacerbated by global geopolitical conflicts, pose significant hurdles. While the Indian aviation sector demonstrates resilience, addressing these challenges will be imperative for sustained growth. Streamlining regulations, fostering a stable business environment and ensuring the timely execution of infrastructure projects will be vital for the industry’s long-term success. Despite these challenges, the Indian aviation sector remains strong and is poised for continued growth in the coming years, driven by strong domestic demand, infrastructure development and continued government support.
Binit Somaia
Supply chain constraints remain a key challenge and are likely to persist in financial year 2026. A significant portion of the Indian fleet remains grounded due to engine issues, maintenance problems and other challenges. There are still some unknowns, which could have a material impact on the industry’s growth and structure. The shortage of pilots, aircraft maintenance engineers, cabin crew, flight despatchers and others is far more serious than currently estimated or visible. The introduction of new flight duty time limitation guidelines, likely this year, and poaching by Middle Eastern carriers are expected to exacerbate the labour shortage issue.
What progress has been made in developing smart and sustainable airport infrastructure? What are the key initiatives being taken?
Sonal Mishra
The supply-side growth in airports or airlines is further complemented by technological advancements aimed at enhancing the passenger experience, with the most notable example being the deployment of DigiYatra at 13 airports so far, with more in the pipeline. On the environmental front, airports are proactively adopting measures to limit emissions and integrate sustainability into their operations. For instance, Navi Mumbai airport is pioneering the storage and procurement of sustainable aviation fuel (SAF), setting a new benchmark for sustainable practices and encouraging other major airports to follow suit. At the same time, airports undergoing terminal renovations are employing passive measures to improve the passenger experience while reducing their carbon footprint and energy costs. A notable innovation at the upcoming Noida airport involves a patented smart activator that enhances the binding efficiency of cementitious materials, thereby reducing cement usage, enhancing asset life, and lowering Scope 1 and Scope 2 carbon emissions.
Christoph Schnellmann
At the Noida International Airport, we are committed to developing a world-class airport with a strong focus on environmentally conscious development and an ambitious net zero emission philosophy. Sustainability has been an important consideration for airport design from the outset and some of the key criteria based on which we selected the airport’s planning and design teams, construction partners and concessionaires. To improve passenger experience and reduce the carbon footprint and energy costs, we have implemented passive measures such as natural lighting, natural ventilation and glare protection at the terminal. We also plan to implement technologies and processes such as zero emission fuels, green (renewable) electricity, wastewater management and environmental management systems to achieve our sustainability goals. Future initiatives also include rainwater harvesting, onsite waste management plant, sewage treatment, electric vehicle charging infrastructure and electric ground support equipment. Special precautions have been taken during construction to reduce the impact on the environment. Over 580 trees have been transplanted at the construction site with over 133 hectares of green area planned within the airport. Additionally, our engineering, procurement and construction contractor has leveraged breakthrough technology from Nanogence Catalyst, which is a patented smart activator that enhances the binding efficiency of cementitious material, providing high material performance while reducing carbon emissions.
Binit Somaia
Indian airports are recognised for taking a proactive approach to sustainability, which includes the use of renewable energy, the development of green buildings and the adoption of waste management practices. Delhi and Bengaluru airports are two of just 16 airports worldwide that have achieved the highest level in the Airport Council International’s Airport Carbon Accreditation programme. They are also seeking to collaborate with stakeholders such as ATC, airlines and ground handlers to implement practices that reduce taxi time and holding patterns, which can significantly reduce aircraft fuel consumption.
What is the sector outlook for the next one to two years?
Sonal Mishra
The Indian aviation ecosystem is poised for growth over the coming years, with the Government of India setting ambitious targets such as achieving 10 million tonnes per annum of cargo trade by 2030, developing an indigenous aircraft manufacturing ecosystem and making India the third-largest aviation market in the world. While several initiatives have already been undertaken in alignment with the government’s vision, a multifaceted, sector-agnostic approach is essential to further fuel this growth and support sustainable development of the Indian aviation sector. A key strategy will be to transform select airports into global cargo and passenger hubs over the next decade. This strategic shift may be further supported by the strengthening of the MRO industry, starting with leveraging synergies between the defence and civil MRO sectors. One effective approach may be incorporating offset clauses in defence deals to ensure indigenous assembly and repair of defence aircraft, thereby cultivating a strong MRO ecosystem that can also support civil aviation upkeep. To fully capitalise on the upcoming infrastructure and achieve operational efficiency, supportive enabling of cutting-edge technologies will be crucial. For instance, employing high-throughput machinery for cargo screening and weighing, digitising passenger and cargo value chains, and encouraging start-ups in aerospace components manufacturing and urban air mobility can revolutionise aviation operations.
As these rapid technological advancements take hold, the focus on sustainability becomes paramount, steering the aviation sector towards more eco-friendly practices. Initiatives such as the storage of SAF and the development of solar-powered airports will not only align with the global environmental standards, but also enhance the sector’s long-term viability and public acceptance. By addressing existing challenges and leveraging emerging opportunities, India is well positioned to solidify its status as a global aviation hub, offering world-class services and infrastructure.
Christoph Schnellmann
The outlook for the Indian aviation sector is optimistic, with significant growth expected in both domestic and international travel. This recovery is supported by strong government initiatives, increased capacity and rising passenger traffic. Indian airlines have collectively placed orders for nearly 1,000 aircraft, which will enhance capacity and improve connectivity both domestically and internationally. The government is also pushing for better air connectivity and infrastructure development with initiatives such as the UDAN scheme to make air travel more accessible.
Binit Somaia
In financial year 2025, domestic traffic is expected to grow at a relatively slow rate of 6-8 per cent year on year. However, this reflects capacity constraints rather than a lack of demand. Meanwhile, international traffic is likely to increase by 9-11 per cent year on year due to increased capacity deployment by Indian airlines on international routes, which will stimulate traffic. The overall traffic is expected to accelerate from financial 2026 as supply-side constraints are likely to ease by then.
