PWC FICCI Knowledge Paper in Aviation Wings 2022 1648497337

March 2022
India: Emergence of a
global leader in aviation
Knowledge report on the Indian aviation industry
2 | PwC | India: Emergence of a global leader in aviation
Table of Contents
1. Executive Summary........................................................................................................ 4
2. Airports - Face of New India ........................................................................................... 7
3. Air Cargo - Resilient in Paradigm Shift ......................................................................... 14
4. Upheaval in Manufacturing and MRO .......................................................................... 20
5. Aviation Financing and Leasing ................................................................................... 25
6. Helicopter industry ........................................................................................................ 29
7. Drones and Urban Air Mobility ..................................................................................... 31

1. Executive Summary
India is one of the fastest growing major economies in the world in terms of gross domestic product (GDP).
Despite the impact of the COVID-19 pandemic, the Indian economy has displayed a high degree of resilience
and has rebounded to a path of significant growth. According to the International Monetary Fund (IMF), India’s
GDP is expected to grow by 8.5%1 in 2022, which is almost double the expected global growth.2 The civil
aviation sector plays a vital role in this growth story, since it contributes to the economy through the multiplier
effect on overall output and employment, as well as by means of logistical efficiency.
The Indian civil aviation sector has grown to become the 3rd largest in the world in terms of domestic traffic. It
was also expected to eventually become the 3rd largest in terms of overall traffic before the pandemic hit. The
Government of India has introduced several measures like the NCAP 2016, the RCS UDAN, The Drone Policy,
NABH Nirman Aircraft Leasing under the IFSC, and the announcement of the recent helicopter policy for the
sector to thrive. The Indian civil aviation sector has benefited from a number of factors that include the country’s
rising middle class, improved regional connectivity through the RCS UDAN, and the development of greenfield
airports and brownfield airport transactions to improve infrastructure in the country’s existing airports.
Currently, more than 60% of the traffic of more than 340 million passengers3 is handled by the airports in the
metropolitan cities. However, with greenfield airports in tier 2 and tier 3 towns and cities, and a large number of
existing brown-field airports at these locations expected to become major airports, the future growth of the
sector is expected to be driven by these airports. By 2033, the airports in metropolitan cities are expected to
handle only about 57% of the projected traffic (they currently handle about 62%), which accounts for about 959
million people,4 since the traffic at smaller towns/cities is forecasted to grow by almost three times over the next
decade. In order to tap into the vast potential of these airports, properly structured Public Private Partnership
(PPP) models and policy level interventions will be of significant importance. Some of the interventions to be
explored include the provision of continued support to airports under the UDAN scheme and flexibility in
regards to capital investments and regulatory measures.
1
https://www.imf.org/en/News/Articles/2021/11/02/na111121-indias-economy-to-rebound-as-pandemic-prompts-reforms
2
https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022
3
AAI traffic news
4
PwC Analysis

The air cargo industry in India has been rapidly growing and has displayed robustness throughout the COVID-
19 pandemic. Though air cargo traffic dropped significantly during the initial phases of the pandemic,
it recovered swiftly and reached more than 90% of the pre-pandemic traffic by January 2022. Once the sector’s
significance was identified, the government introduced various schemes and policies to re-vitalize the sector. In
addition to monetary and tax incentives, the NCAP 2016 and the Krishi UDAN 2.0 have also introduced other
institutional measures to boost the sector’s performance. Since the interventions and measures envisaged by
the Government can increase efficiency and remove redundancies in the air cargo supply chain, India has the
potential to become a vital player in the global air freight market.
The rising demand for air travel in India sets the stage for the country to become an attractive destination for
investment in two critical aspects of the aviation sector value chain – Manufacturing; and maintenance, repair
and operation. (MRO). Aircraft fleet size of the country is expected to quadruple, therefore, reaching about
2500 in number by 20385. The Aerospace manufacturing and Defense sector is also expected to grow by about
5 times to reach 5 lakh crores in 2047.6 With a number of Indian enterprises like the state-run Hindustan
Aeronautics Limited (HAL) and large private sector companies like Tata Advanced Systems and Mahindra
Aerospace entering into strategic alliances with major global original equipment manufacturer (OEMs) like
Boeing and Airbus (for major assemblies/sub-assemblies and even to manufacture critical components), India
has secured an important position in the global aerospace manufacturing landscape.
The MRO industry in India has also gradually picked up the pace, with different companies providing various
MRO related activities for critical hardware like airframes and engines. Due to various policy interventions and
increased private participation, the MRO industry is expected to grow by more than 4 times to reach around
USD 4 billion in the next 3 to 5 years. Considering India’s potential to become a global aviation and MRO hub,
leading OEMs like Boeing and Pratt & Whitney have partnered with Indian companies to set up MRO activities
in the country and to develop the sector by training and upskilling its workforce. Despite the huge demand for
MRO in India, there is still a dependency on other countries for these activities. As the Indian government has
introduced several interventions to reduce the cost of setting up MRO and manufacturing activities compared to
other countries, the country is expected to become a global hub for these activities in the coming decades.
Traditionally, Indian airlines have depended on foreign countries for aviation financing and leasing related
activities. Understanding the potential of these activities and the lucrativeness of the business, the Government
listed “aircraft leases” as a “financial product” under the IFSCA Act of 2019. The availability of operating and
financial leases for aircraft/helicopters and engines of aircraft/ helicopters would help to create a
comprehensive ecosystem within the Indian aviation industry.
India’s diverse landscape, and the difficulty with which remote places within the country can be accessed,
makes helicopters an important mobility related solution. With only about 250 helicopters and a low number of
private operators, India’s helicopter industry has huge untapped potential. For example, they can be used for a
variety of purposes that include mobility in cities, religious and recreational tourism, and emergency medical
services/medicine delivery, among other things. The helicopter policy announced by the Ministry of Civil
Aviation in India expects to address some of the industry’s key concerns and to build the foundation for the
development of the industry. The inclusion of helicopters in the aircraft leasing regime of the IFSC is a step in
the right direction to address the financing difficulties faced by investors.
5
https://www.investindia.gov.in/sector/aviation
6
https://economictimes.indiatimes.com/news/defence/size-of-indias-defence-aerospace-manufacturing-sector-will-increase-to-rs-1-lakh-
crore-in-2022-rajnath-singh/articleshow/88356905.cms

With some major Indian cities facing difficulties like pollution and economic losses due to road-based
congestion, mobility in the third dimension is envisaged as a sustainable alternative. Drones are already used
for numerous applications including surveillance, land surveying, photography, and medicine/vaccine delivery.
As a result, India’s drone manufacturing industry is expected to grow to INR 900 crores by FY 2024 from INR
60 crores in FY 2021 in terms of annual sales turnover. In order to build the right regulatory foundation for
drones and to expand their scope to include more advanced applications like passenger mobility, the Drone
Rules 2021 was developed by the Government. Through this initiative, as well as others including the National
UTM Policy framework, PLI schemes and certification scheme for drones, the government has addressed some
of the key issues related to drone operations in India. However, in order to facilitate the development of
passenger-carrying electronic vertical take-off and landings (eVTOLs) in the country, it is essential to build a
comprehensive ecosystem considering technology, infrastructure, regulations and, most importantly, public
acceptance.
In India’s 75 years of independence, the country’s aviation sector has reached several key milestones and has
recently become one of the largest civil aviation markets in the world in terms of domestic traffic. Due to its
growing significance in the world economy and the presence of varied resources, India’s civil aviation sector is
set to grow and become a global hub for aviation. The different measures taken by the government, together
with greater engagement by private players, academics, and other relevant stakeholders would help India
become a global leader in civil aviation.

2. Airports - Face of New India
Future of Airports’ privatization in India
Tier 2 and Tier 3 airports as future engines of civil aviation market growth
Civil aviation has become one of the most prominent and fastest growing industries in India. While India already
became the world’s 3rd largest domestic aviation market, it was also on track to become the world’s 3rd largest
international market before the COVID-19 pandemic struck.
Despite this temporary setback, the Indian civil aviation industry’s post-pandemic recovery has been a
testament to its robustness. In fact, domestic air traffic is expected to surpass the pre-pandemic traffic levels in
the first quarter of the next financial year. While increasing GDP per capita and improving the share of the
middle class have been fundamental to this growth, the successful implementation of the regional connectivity
scheme (UDAN) has been even more instrumental in connecting smaller tier 2 and tier 3 towns to the trunk
aviation markets in India.
Historically the share of the aviation market has been dominated by metro airports like Delhi, Mumbai, Kolkata,
Chennai, Hyderabad, and Bangalore, which accounted for 62% of the overall Indian aviation market. Due to
enhanced connectivity with smaller towns, future growth is expected to be co-driven by other airports in smaller
towns and cities.

Exhibit 1 – The contribution of air traffic is expected to increase in tier 1 (non-metro), tier 2 and tier 3
airports. Of them, the highest cumulative growth is expected in tier 2 and tier 3 airports
Source: Data from AAI and PwC Analysis
As highlighted in Exhibit 1 above, the total air traffic in 2033 is expected to increase to 959 million pax p.a.,
thereby constituting a cumulative increase of 281% between 2020 – 2033 (around 8% CAGR). However, in this
growth, the overall share of traffic from metro airports is expected to fall from 62% in 2020 to around 57% in
2033. On the other hand, the traffic share from other categories of airports viz. non-metro tier 1, tier 2 and tier 3
airports are anticipated to increase from 48% to 53% in the same period (2020-2033). Of these, the most
significant is the traffic at tier 2 and tier 3 airports, which is expected to almost triple in the next decade.
Major airports per category by 2033 (handling traffic of more than 3.5 million p.a.)
26
45
4
16
Existing Major Airports New Greenfield major Additional Brownfield Total

airports Airports that would
transform into major
airports by 2033

The future aviation growth story is expected to augment several tier 1 (non-metro) and tier 2 airports, and
transform them into some of the country’s most major airports.7 At present, there are around sixteen major
airports in the country, but by 2033, these are expected to increase to forty-five. Of these, four would be
greenfield airports (Navi Mumbai Airport, Noida International Airport at Jewar, GMR Goa Airport and
Bhogapuram Airport), whereas the remaining twenty six would be the existing brownfield airports in tier 2
towns, which would effectively graduate into major airports.
Exhibit 2 – The transformation of tier 2 airports into major airports, thereby fueling the industry’s
growth
Source: Data from AAI and PwC Analysis
It is clear from the above analysis that smaller airports are expected to play an important role in fueling India’s
traffic over the next decade. It is therefore pertinent to ponder ways to ensure that this development is self-
sustainable.
Structuring the privatization model of smaller airports
One of the most frequent interventions (or routes) considered by the Government is involving the private sector
to enhance the passenger experience by bringing in funding and making operations more efficient. It is,
however, equally pertinent to note that the private sector comes with a profit motive, while the public sector has
a national development mandate. On the face of it, although the motivation of the private and public sector may
not align, appropriate PPPs can be used to structure a mutually symbiotic relationship, whereby the Airports
Authority of India (AAI) can get more bottom line returns from the major airports (as compared to when it would
have operated these airports itself); this money could then be reinvested into developing smaller airports till
they are ripe for next wave of privatization.
As mentioned, twenty-six brownfield tier 2 airports are expected to graduate into major airports over the next
decades, and these could be potential candidates for development on the basis of a PPP. However, the
Government of India also wishes to rope in the private sector to develop smaller airports. From an economic
point of view, involving the private sector in the development of smaller non-profitable airports may erode the
overall value of AAI, as the cost of financing the smaller airports for the private sector is much higher than that
of the public sector.
7
A major airport is one with the minimum designed capacity to handle at least 3.5 million passengers, or has been designated a major
airport by the Ministry of Civil Aviation

Nevertheless, in regards to the policy itself, many countries have adopted the privatization route to develop
smaller airports. It is, however, important to keep in mind that given the loss-making nature of these smaller
airports, handing over these airports on a stand-alone basis is out of the question. In global terms, governments
have looked to bundle smaller airports with larger (relatively more attractive) airports as one of the options of
development.
Exhibit 3- Governments have adopted the bundling strategy to develop smaller airports on the basis of
PPPs. In each of these bundles, 1-2 major airports acted as the “anchor airport(s)” that contribute the
majority of the air passenger traffic in the bundle
Source: PwC Research
In the simplest terms, the basic idea behind “economic bundling” is to consider two airports (the major airport
and the smaller unviable airport) as single economic assets for the purpose of arriving tariffs via the regulatory
building block approach. This is explained in the schematics shown below:

Source: PwC Analysis
The government of India is also planning to develop not only medium, but also smaller (and at times unviable)
airports using this PPP approach. It is in this context that the economic bundling may be considered an
effective option. Nevertheless, given the current regulatory landscape of a cost-plus approach, any such
bundling of smaller unviable airports with relatively larger tier 2 airports may have to be assessed from the
following perspectives:
1. Whether the combined yield is within the customers’ willingness to pay range?
2. What would the proportion of the yield be as a percentage of average ticket prices on the routes generally
served by these airports?
3. Would the overall bundle financing be attractive and viable for equity holders and lenders?
Accordingly, a framework must be developed to maintain the balance of factors including traffic, expected
capital expenditure, time of such capital expenditure, potential for non-aeronautical revenue generation vs. the
ultimate yield in terms of INR/pax, which may get generated as an outcome of such bundling. One such
framework is reflected in the Exhibit below:

Exhibit 4 – The framework for selecting the ideal range of unviable airports for economic bundling with
relatively large tier-2 airport
Source: PwC Analysis
As demonstrated in the above framework, for economic bundling to work in the Indian context, an unviable
airport should meet the following criteria:
1. The starting traffic should be a minimum of 0.2 million per annum
2. Ideally, the capital expenditure should not be more than INR 200 cr.
3. The occurrence of this capital expenditure should ideally be beyond 5 years from the date of the private
player’s take over
Although there can be other permutations of bundling, the fundamental principles of the economic viability of
the bundle (i.e., the provision of self-sustainable debt service and appropriate long-term returns to the equity
holders) reign supreme. To further augment the viability and attractiveness of any bundle, the following non-
qualitative parameters may also be considered:
1. Presence of tourism potential: Proximity of a smaller/unviable airport to any tourism destination may not
only augment the tourism potential of the location, but also help generate more non-aeronautical revenues
at the smaller/unviable airport.
2. Presence of industrial activity near the smaller airport: If the location of the smaller/unviable airport can
support industrial activity, the development of such an airport may act as a catalyst for the symbiotic
development of such industrial and aviation activities. An even better option in such a case is to explore
land at or near the airport, which can be offered as part of the bundle.
3. Presence of land at the airport: The presence of a large parcel of land may allow the private player to
explore avenues for non-aeronautical (city side) revenue potential in the medium- to long-term. However, to
fully exploit this option, policy interventions like changing the AAI Act on permissible activities would be
required.

Policy and other interventions required for fast tracking airport privatization in India
In any good implementation plan blueprint, policy interventions go hand in hand with other planning measures.
India has witnessed one of the most successful waves of airport privatization, as the airports of Delhi, Mumbai,
Hyderabad and Bangalore airports have become case studies that PPP scholars study. However, the relative
size of airports is smaller (although their numbers are growing across the nation’s geography), thereby making
interventions like bundling airports imperative for future privatization projects. To make the next wave of
privatization as successful as previous ones, the following interventions may also need to be considered:
1. Moratorium in payment of a Concession Fee for the smaller airport:
- The Concessionaire may be provided a moratorium of 10 years on the payment of concession fee for
the traffic handled by smaller airport
- This would improve the airport’s cash-flow in the initial years of operation.
2. Flexibility on capital investments/ regulatory structure:
- Considering the uncertainty of traffic recovery, the Concessionaire may be provided flexibility in taking
up capital investments for a period of 5-10 years from the COD of the smaller airport. This would help to
reduce the yield requirements
- Defining the base tariff rates (i.e., the floor tariffs even when the actual tariffs could be lower) would
allow the Concessionaire to reap long-term benefits
3. Continued government support under the UDAN Scheme:
- It is likely that the Government will consider some of the RCS Airports for privatization
- Benefits under the scheme (such as concessions on excise duty and value added tax(VAT) on aviation
turbine fuel (ATF), free security and fire services, etc.) at RCS Airports have successfully provided
impetus at RCS Airports.
- Discontinuation of these benefits or transferring the load of such benefits to the Concessionaire may
strongly impact the viability of such operations.
- Hence, it is recommended that such RCS benefits continue to be provided by the government for the
tenure of the RCS Scheme in the case of airport privatization.
4. Change in the AAI Act:
- Extending the list of permissible non-aeronautical/city side activities at AAI airports
- Making it permissible to “license” airport concessions to avoid heavy stamp duty implications at the time
of registering concession agreements

3. Air Cargo - Resilient in
Paradigm Shift
Air Cargo in India – A story of growth and resilience
Between 2009 and 2019, the Indian aviation market reported double digit passenger growth rates. With about
3.6 million tons of freight transported by air in FY 2019, the Indian air cargo industry had been on a growth
trajectory, reporting an 8.9% CAGR between FY2015-2019. However, cargo had never been the airlines’ focus,
as they generally paid more attention to passenger services and sold some share of their belly space to freight
forwarders.
Air Cargo Traffic in India

12.72%
4,000 10.12% 15%
3,560
3,500 6.95% 3,357 3,329 10%
2,978
3,000 6.05% 5%
2,705 -6.50%
2,529 2,474 0%
2,500 2,144 2,200
2,003 -5%
Thousands MT
2,000 1,855
1,542 1,658
1,521 -10%
1,500 1,360 1,326
1,123 1,213
986 1,047 952 -15%
1,000 -20%
500 -25%
-25.68%
- -30%
Apr 14 - Mar 15 Apr 15 - Mar 16 Apr 16 - Mar 17 Apr 17 - Mar 18 Apr 18 - Mar 19 Apr 19 - Mar 20 Apr 20 - Mar 21
International Cargo Domestic Cargo Total Cargo Y-o-Y Growth Rate
Source: AAI traffic news
However, the recent COVID-19 pandemic changed the dynamics in the market. Despite the difficulties and
disruptions that the pandemic caused in the global supply chain, the air cargo industry remained resilient.

Whereas air passenger traffic fell by 67%, the air cargo traffic in India only fell by 26% during FY 20218. Based
on recent statistics, it is also clear that the industry is on the path of recovery: In January of FY22, the total air
cargo traffic recovered to approximately 92% of the traffic level during the same period in FY20.
With the pandemic and associated nationwide lockdown, the air cargo sector gained prominence in transporting
medical supplies, food, and other essential commodities both domestically and internationally. In addition,
passenger airlines refocused their business model to remain viable. Airlines operated cargo on seat flights,
whereby cargo is transported using passenger aircraft (in both the belly of the aircraft and the
passenger cabin).
Total Freight April to January

3,500
3,000
Apr 18 - Jan 19 --2,982
133 362
2,500
1,035
Thousands MT
2,000
1,500 2,848
2,619
1,000 1,947
500
-
Apr 19 - Jan 20 Apr 20 - Jan 21 Apr 21 - Jan 22
Source: AAI traffic news
Airlines such as SpiceJet reported a 518% jump in cargo revenue aggregating to INR 1420.5 crore for FY
2020-21, with a profit of INR 131 crore (against a loss of INR 134 crore in the previous year). Similar revenue of
Rs. 1100 crore was also reported by Indigo’s cargo operations. Given the suspension of commercial passenger
flights for nearly two months (starting from March 2020), cargo became a key lifeline for airlines. Building on
this success, airlines are now investing in freighters to further strengthen their product and services in the cargo
business. For instance, SpiceJet had a fleet of 16 cargo aircrafts in FY21 and has plans to further grow its
cargo carrying capacity. Similarly, Indigo is in the process of sourcing four A321 aircraft that will be used as full
freighters. It remains to be seen whether air cargo can sustain its growth in this way in the post-pandemic
world.
Interventions to support sector growth

Understanding the air cargo sector’s potential and its contribution to the national economy, the Government of
India has taken various measures to vitalize the industry. Through NCAP 2016 and Krishi UDAN 2.0, monetary
incentives, digitization measures and other operational enablers were introduced to support the sector’s growth
and to align with the larger objective of becoming a significant player in the global value chain.
8
AAI traffic news

1. National Civil Aviation Policy (NCAP 2016)
The NCAP 2016 was developed to improve regional air connectivity in the country, creating an integrated
aviation ecosystem, and enhancing the ease of doing business across key components of the aviation value
chain. Due to its relevance in generating employment, achieving the “Make in India” initiative’s objectives and
supporting the growing potential of e-commerce in India, the NCAP 2016, listed the air cargo sector as one of
its major focus areas; as part of this, it envisioned growing air cargo volumes to 10 million tons by 2027. To
realize this vision, the document laid out several policies covering monetary incentives, and institutional and
infrastructure development, among other things. Some of the key policies and schemes envisaged for the air
cargo sector in NCAP 2016 are as follows.9
Policy Area Schemes
Regional Connectivity Terminal Navigation Landing Charges(TNLC) and Route Navigation Facility
Charges (RNFC) - Waiver of TNLC and nominal charging of RNFC for operations
under RCS
ATF – Excise duty of 2% on ATF for cargo operators from RCS airports for a
period of 3 years after receiving notification
9
https://www.civilaviation.gov.in/sites/default/files/Final_NCAP_2016_15-06-2016-2_1.pdf

Policy Area Schemes
Air Cargo Categorization – categorization of cargo facilities at airports under the

“Harmonized List of Infrastructure,” thus providing the benefits of infrastructure
Institutional framework and efficiency:
• Constitution of Air Cargo Logistics Promotion Board (ACLPB) to promote
growth in air cargo by introducing measures like reduction in dwell times and
improving inter-ministerial coordination
• Service Delivery Modules (SDMs) for all components of the cargo value chain
and creation of an Air Cargo Community System to avoid delays
Ease of operations:
• Simplifying customs procedure by shifting to paperless air cargo processing
through the use of digital signatures
• Creation of an SWS at the cargo terminals to process clearances more quickly
• An Advance Cargo Information (ACI) system is envisaged to be developed in
order to help process more rapidly
• Simplification of security procedures for air to enhance ease
Capacity Building and Space-Augmentation
• The creation of Free Trade and Warehousing Zones to promote trans-
shipments at airports.
• The creation of norms for space allocation for air-cargo, including express
cargo for all greenfield airports
Bilateral Traffic rights The policy envisages amending Air Service Agreements (ASA) with certain
countries to tackle the restriction on Indian cargo airlines with 74% foreign direct
investment (FDI) to undertake scheduled international Operation.
2. Krishi UDAN 2.0
Agriculture is another major source of income for Indian households and one of the largest contributors to the
county’s GDP, accounting for 20.2% of the gross value added (GVA) of the total economy.10 To ensure the
sustainability of the agriculture value chain and to incentivize the movement of Agri products through air, the
Government of India developed the Krishi UDAN 2.0 in 2020. The key benefits of the scheme are detailed
below.11
Category Incentive/ Support

Monetary Incentive Full waiver of Parking, Landing, TNLC and RNFC Charges for domestic freighters
and passenger to cargo at selected AAI Airports. The primary focus will be on
North-east region (NER), Hilly and tribal regions.
Hub – Spoke Model Facilitating the development of a hub, spoke model, and a freight grid. This will be
done across 4 phases, each spanning 1 year from 2021 till 2025. A total of 32
airports will be added to this grid and have been identified as airports for
Cargo Terminals
Sales Tax on ATF Seek support and encourage States to reduce Sales Tax to 1% on ATF for
freighters/P2C aircraft as extended in UDAN flights.
10
https://www.pib.gov.in/PressReleasePage.aspx?PRID=1741942
11
https://pib.gov.in/PressReleasePage.aspx?PRID=1767005

Category Incentive/ Support
E-KUSHAL The development of E-KUSHAL (Krishi UDAN for Sustainable Holistic Agri-
Logistics). The platform to be developed will facilitate the dissemination of
information to all stakeholders. Furthermore, the integration of E-KUSHAL with the
National Agriculture Market (e-NAM) is proposed.
Resource Pooling Collaboration with regulatory agencies and government departments to provide
incentives and concessions to airlines, freight forwarders, and other stakeholders
to enhance transportation of Agri-produce by air
Air Cargo Sector - The way forward

The air cargo industry plays a prominent role in the supply chain of the country,and is a major source of
employment for its population. Despite this, the modal share of air accounted for less than 5% of the country’s
total freight in 2021.12 Road had the largest modal share at 71%, followed by rail, which accounted for 17.5% of
the total freight volume. Out of the Global Air Freight Market, which was valued at USD Billion 270.20 in 2019,
India contributed only USD Billion 5.75, thereby accounting for 2.13% of the global air freight market.13
Source: Allied Market Research
Due to various factors like the growing middle class, the burgeoning e-commerce industry, the growth in
manufacturing due to Make in India initiatives and PLI schemes, the logistics sector in India is poised to
undergo a major upheaval in the coming decades. The air cargo industry would have a major role to play in
meeting the supply and demand requirements of the country. Though the Government has taken significant
and pro-active measures in the form of policies and schemes to nurture the industry, the different stakeholders
of the sector must work together to tap into this potential. Some of the key recommendations are as follows:
• Reduce paperwork in cargo operations: Most of the large airports have deployed web-based cargo
community systems. Deployment of this community system has digitalized some of the key processes in
the air cargo supply chain, including the generation of e-airway bill, carting order, vehicle slot management,
TSP payment, CARR message, and issuance of delivery orders. However, there are still other avenues that
can make the air cargo process more efficient.
For instance, there are typically around 17-20 unique documents required for each air cargo movement.
However, multiple submissions result in ~3X increase in the number of copies submitted throughout the
entire supply chain.14 Although this number may have been reduced as a result of the changes introduced
during the pandemic, there should be a concerted effort to continue reducing the required paperwork and
move towards a paperless ecosystem.
12
https://www.niti.gov.in/sites/default/files/2021-06/FreightReportNationalLevel.pdf
13
Allied Market Research, Air Freight Market- Global Opportunity Analysis and Industry Forecast, 2020 -2027, March 2021
14
Based on an independent study conducted at three major airports in India. The number is based on the study too, which was
conducted in 2019.

• Simplify the transshipment process: In case of transshipment, upon arrival of aircraft, airlines are
required to file an application for cargo transshipments (known as Cargo Transfer Manifest (CTM)). CTM is
prepared on the letter head of the airline and it contains details like the IATA code of the airline, destination
site code, IGM no. and date, as well as the list of cargo lines as specified in MAWB/HAWB under the IGM
that are to be transshipped.
There is no provision for the CTM amendment in a case where the aircraft mentioned in the transshipment
permit departs before being approved by customs. As airlines are required to mention the details of the
aircraft that will carry the transshipped cargo to the next destination in the permit, a new CTM needs to be
filed in such cases, which is time consuming for the airlines. As such, it is necessary to simplify the
transshipment process if India is to be established as a preferred transshipment hub.
• Integrated approach to promoting air cargo movement: Some of the major special economic zones
(SEZs) such as Incheon Free Zone, Shanghai FTZ, JAFZA are successful because of their proximity to
gateways such as airports and ports (see the table below). India also needs to promote integrated industrial
and infrastructure development. For example, the airport land bank may be utilized to establish
SEZ/assembly units, etc. This development of SEZ at the existing gateway airports may require a revision
of the Special Economic Zones Rules, which defines minimum land area requirements for the
establishment of SEZs. Incentivizing industries to set up units on the airport land may support industrial
growth as well as cargo movement.
Zone Distance to Airport
Incheon Free Economic zone On-site
Istanbul Ataturk Airport Free Zone-ISBI On-site
Shanghai FTZ On-site
Dubai Airport Free Zone On-site
Abu Dhabi Airport Free Zone On-site
Bahrain International Investment Park 11 kms
• Extension of Krishi UDAN 2.0 – The Krishi UDAN reflects the Government’s vision of utilizing the
potential of air cargo in the Agriculture industry, and thus creating an avenue that supports the growth of the
agriculture and air cargo sector in the country. The Government could also explore the creation of similar
schemes for other high-growth sectors like e-commerce, pharmaceuticals/medical equipment, etc.
• Availability of Participating Government Agencies at the airport & the requirement of a single
window system: Participating government agencies (PGAs) are the government agencies responsible for
verifying cargo related documents, examining and testing the cargo, and giving clearance for import/export
of cargo. Customs only issues final clearance for cargo once it receives clearance from the PGAs.
Therefore, having PGAs present at the airports may reduce some of the air cargo processing time.
Moreover, single window systems linking Customs and PGAs can improve the efficiency in the current
supply chain. For instance, although Customs and PGAs are linked through a single window system in the
case of imported cargo, this system is not operational in the case of exports. The integration of existing
systems could further streamline the cargo clearance process.

4. Upheaval in Manufacturing
and MRO
Manufacturing and MRO – Opportunities Ahead
Manufacturing and Maintenance, Repair and Overhaul (MRO) are two key elements in the aviation industry
value chain. While a robust manufacturing ecosystem ensures that the demand for aircraft is being met, the
presence of MRO facilities within the country ensures the airworthiness and safety of these aircraft. Despite
being one of the largest civil aviation markets globally, India has limited full-scale aircraft manufacturers and
MRO players to cater to its growing demand. This gap in terms of supply and demand coupled with the
abundance of resources and policies, presents India with the opportunity to become a global hub for aircraft
manufacturing and MRO activities.
The Indian aviation industry has been growing steadily, with the total number of passengers handled at Indian
airports (reaching 341 million in 2020) growing by more than 79% (CAGR - 12%) in five years.15 Despite the
aviation industry being severely affected by the COVID-19 pandemic, India has become the 3rd largest civil
aviation market in terms of domestic traffic. Due to various factors such as, rising middle class, and impetus
through policy, the passenger traffic is expected to reach more than double the size by 2037.16 To cater to this
rising demand for air travel, the aircraft fleet size of the country is expected to quadruple to 2500 (605 as of
January 2022) by that time. Indian MRO industry can also cater to aircraft of other south east (SE) Asian
markets such as Bangladesh, Sri Lanka, Maldives, Thailand, Vietnam, and Philippines.
The Government of India has launched measures such as the Make in India initiative and relaxation in foreign
direct investment (FDI) norms to boost manufacturing in the nation’s aerospace sector. Many Indian companies
have become major players in the value chain for large global OEMs, with a number of civilian and military
aircraft relying on these components. Moreover, the MRO industry has attracted several local and a few
prominent international players over the years, to cater to the expected increasing demand for MRO services in
the country.
15
https://www.aai.aero/sites/default/files/traffic-news/Mar2k20Annex3.pdf
16

Manufacturing
The government’s push for domestic production together with the availability of skilled manpower and other
resources have attracted leading global OEMs like Boeing, Airbus and Lockheed Martin to India. These
companies have entered into joint venture agreements with leading Indian enterprises like Tata and Mahindra
for manufacturing and/or assembling of aircraft components. Moreover, few Indian companies like Dynamitic
technologies and Aequs Aerospace are also tier-1 suppliers for Airbus.17 The government-owned HAL has
recently entered into civil aviation space with the introduction of the 19-seater Hindustan-228 (Dornier-228).
Some of the key aircraft, subcomponents or subsystem manufacturers in India and their key capabilities are
given below.
Company Type Area of expertise Key Products OEMs served
Hindustan Public Sector • Aircraft and Military Aircrafts Apart from being an
Aeronautics Enterprise helicopter OEM itself, HAL also
Hawk, SU-30 MKI,
Limited (HAL) Manufacture serves the below
Military/Commercial IJT, etc.
OEMs:
• Avionics, engines,
Military Helicopters:
and components • Airbus
manufacture Dhruv, Cheetah,
• Boeing
Chetak, etc.
• Eurocopter
Civil Products
Dhruv helicopter, D0-
228
Aerospace
components:
Power plants,
castings etc.
Tata Private Sector • Aerostructures Aerostructures and • Sikorsky (JV)

Advanced Enterprise and Aero engines Aero engines:
• Lockheed
Systems assembly and Helicopter cabins for
Military/Commercial Martin (JV)
Limited sub-assembly Sikorsky S-92,
Empennage for • Boeing (JV)
• Unmanned Aerial
Lockheed Martin C-
Systems
130 J, Fuselage for
• Composites Boeing AH-64
UAVs: Sky-I RPA
(fixed wing fully
autonomous
platform), Rakshak
VTOL
Mahindra Private Sector • Aerostructures Aerostructures for • Airbus

Aerospace Enterprise and components large OEMs like
• Boeing
assembly Airbus, Boeing etc.
Military/Commercial
and other Tier • Dassault Aviation
suppliers
• HAL
• GE Aviation
17
https://www.moneycontrol.com/news/business/made-in-india-flying-all-over-the-world-7398771.html

Company Type Area of expertise Key Products OEMs served
Taneja Private Sector • Aerostructures Aerostructures: • HAL

Aerospace Enterprise sub-assembly
Airframe for Saras • NAL
and Aviation and
Military/Commercial Aircraft of NAL,
Limited
• Final assembly airframe for Nishant
(Pilotless vehicle of
• Composites
ADE)
manufacturers
Other products:
• Aircraft sub-
components Sheet metal parts and
manufacturer composites for HAL
aircrafts,
Dynamitic Private Sector • Airframe Aerostructures: • Boeing

Technologies Enterprise structures
Flap-track beam • Airbus
assembly
Military/Commercial assemblies to Airbus
• Bell
• High-Precision A-380, Aft Pylon
aerospace assembly and cargo • HAL
components ramp assembly for
Boeing CH-47
helicopters, major
airframe assemblies
for Bell-407 fuselage,
airframe structures for
HAL aircrafts
Several other Indian companies such as Aequs, Quest Global, Wipro, HCL have gained a foothold in the global
aerospace value chain. Besides supplying critical hardware and software services to global OEMs, they
function as prominent contributors to a few leading commercial jets in operation across the globe.
In its endeavor to promote manufacturing and to make India an aerospace hub, the government of India has
taken significant measures to build a self-contained ecosystem. Some of the key policies and initiatives to
promote manufacturing in aerospace are given below:18 19
• FDI for aero parts and components: The FDI policy allows for foreign investment up to 49% through
automatic route and 100% through government route if it aids access to modern technology.
• Strategic Partnership Model: To allow for the transfer of technology and domestic manufacturing
infrastructure and engage with global OMEs, Indian enterprises can tie up with them through a transparent
and competitive process.
• Skill Development: Formation of the Aerospace and Aviation Skill Sector Council (AASC) and the Aviation
Multi Skill Development centre at Chandigarh for building the skills necessary for critical job roles.
• National Civil Aviation Development Programme: The program envisages designing, developing and
manufacturing a 90-seater Regional Transport Aircraft (RTA).
In addition to the initiatives mentioned above, revision of the Defence Procurement Procedure (DPP),
liberalization of Industrial Licensing Regime, etc. have been introduced to increase aerospace manufacturing in
India. The growing demand for air travel and aircraft fleet, absence of a large-scale local civil aircraft
manufacturer, defense expenditure etc. would be the major drivers for the growth of aircraft and aerospace
manufacturing in the country.
18
https://www.makeinindiadefence.gov.in/admin/webroot/writereaddata/upload/recentactivity/Indian-Aerospace-Taking-Off.pdf
19
https://pib.gov.in/newsite/PrintRelease.aspx?relid=169612

Maintenance, Repair and Overhaul (MRO)
The aviation industry in India is on a growth trajectory, with its fleet size expected to quadruple and reach more
than 2500 by 2038. The MRO industry is also expected to grow at a faster rate and reach more than USD 4
billion from the current USD 900 million.20 In order to capture this growth potential, several local and global
OEMs have entered the country’s MRO market. These companies undertake a range of activities including
engines, airframes, components and line MRO services.
Line MRO Base MRO Component/ Engine MRO

Avionics MRO
• AI engineering • AI engineering • AI engineering • AI engineering

services Limited services Limited services Limited services Limited
(AIESL) (AIESL) (AIESL) (AIESL)
• Air Works • Air Works • Max MRO • Hindustan
Aeronautics Limited
• GMR Aero Technic • GMR Aero Technic • Indamer
(HAL)
Limited Limited
• Taj Air
• Indamer • Indamer
• Hindustan
• Taj Air • Taj Air Aeronautics Limited
(HAL)
• Hindustan • Hindustan
Aeronautics Limited Aeronautics Limited • Deccan Charters
(HAL) (HAL) Engineering Services
• Deccan Charters • Deccan Charters
Engineering Services Engineering Services
Major global OEMs like Boeing and Pratt & Whitney have entered into strategic partnerships with Indian
companies for MRO activities. Boeing has collaborated with Air Works for the MRO activities of P-81 platform of
Indian Navy and VIP transport fleet of the Indian Air Force.21 Boeing also announced the Boeing India Repair
Development and Sustainment (BIRDS) Hub, which intends to build a robust MRO ecosystem by developing
the required skill sets and capabilities through training programs. Similarly, Pratt and Whitney, a leading aircraft
engine manufacturer has entered into a partnership with AIESL for providing Maintenance services to its
geared turbofan engines.22
Key Government Policies/initiatives in MRO

Realizing the potential of the MRO industry in India, the government (both central and state) has
introduced/announced various policies and initiatives to develop the sector.
• NCAP 2016: Key policies under the NCAP include,
- Exemption of customs duty for tools and tool-kits used by the MRO
- Allowing foreign aircraft, brought to India for MRO activities, to stay for the entire period of maintenance
or up to 6 months, whichever is lesser, providing it undertakes no commercial flights during the stay
period.
- Provision for adequate land for MRO service providers in future airport/heliport projects
- Waiver of Airport royalty and additional charges for MRO service providers for a period of five years
from the date of approval of the policy
20
21
https://www.boeing.co.in/news-and-media-room/news-releases/2021/february/boeing-and-air-works-announce-strategic-collaboration-
for-maintenance-support-of-key-defence-platforms.page
22
https://www.aerospace-technology.com/news/aiesl-to-provide-pratt-whitney-gtf-engines-mro-in-india/

• Reduction of goods and service tax (GST): In 2020, the GST for MRO activities was reduced from 18%
to 5% 23
• Longer duration for land allotment: The land allotment for setting up MRO facilities has been extended to
a period of 30 years from the current 3-5 years and the land will be leased through open tenders.24
• Reduction of land lease rental escalation: The lease rentals for land would escalate only at 15% after 3
years instead of 7.5%-10% per annum. Moreover, the lease rates will be determined through bidding
instead of fixed rates
• Dedicated MRO facilities: The government has identified 8 airports for setting up MRO for aircraft and
helicopters by also attracting private investments
Despite having a large fleet of more than 600 aircraft, at present, more than 80% of the MRO activities are
outsourced to other countries such as Sri Lanka, Malaysia, Singapore. Interventions from the Government to
develop necessary MRO infrastructure would provide the impetus for industries and investors to establish their
activities in the country. This coupled with upskilling of the workforce and drawing on its digital and information
technology (IT) capabilities would help India position itself as a “Global MRO hub” in the coming years.
23
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1778440#:~:text=Goods%20and%20Services%20Tax%20(GST,
financing%20environment%20has%20been%20enabled.
24
https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/government-announces-new-mro-
policy/articleshow/86064968.cms?from=mdr

5. Aviation Financing and Leasing
Given the untapped potential of the aviation financing and leasing industry, the Ministry of Civil Aviation
constituted a working group to undertake a 360-degree review of the prevailing regulatory environment. In early
2019, the efforts culminated into “Project Rupee Raftaar – Development of Aircraft Financing and Leasing in
India,” wherein the working group identified the roadblocks from regulatory as well as a tax perspective to
develop aviation financing and leasing in India.
The COVID- 19 pandemic severely disrupted the global economy, including the aviation industry. Despite
having a good growth trajectory pre COVID-19, strict travel restrictions imposed by the Governments in various
countries and declining demand for travel impacted the Indian aviation industry as well.
As the growth is now picking up, the Indian aviation industry is on its way to recovery and expects an increase
in demand for leased aircraft in comparison to the rest of the world. As per the Oliver Wyman report,25 released
in January 2021, India’s air fleet expects the growth to double or more by 2031. The need for attractive
financing arrangements, to combat financial fragility, gain optimum operational advantage while providing
tickets at affordable prices to its customers is driving the firms to lease rather than own the aircrafts.
IFSCA and GIFT City

India has become the third largest domestic aviation market globally and is expected to overtake the United
Kingdom to become the third largest air passenger market by 2024.26 Taking a cue from its Asian peers, the
Indian Government recognized the need to develop a self-reliant aviation industry. This is envisioned to create
employment opportunities in aviation finance, and leverage on the business opportunities available in India’s
financial Special Economic Zones, namely, International Financial Services Centre (IFSC).
The Indian Government designed a road map for developing India as a hub for aircraft leasing and financing
activities. The IFSC, set up under the SEZ route, aims to help India unlock its potential in the international
financial services space. It predominantly caters to customers outside the domestic economy and deals with
the flow of finance, financial products and services across borders. It extends across the entire financial
services spectrum including Banking, Capital Markets, Insurance, Asset Management & other ancillary
services.
25
Global Fleet and MRO Market Forecast – 2021-2031
26
https://www.ibef.org/industry/indian-
aviation.aspx#:~:text=India%20has%20become%20the%20third,passenger*%20market%20by%202024%5E.

The International Financial Services Centres Authority Act (IFSCA Act), 2019, authorized the IFSCA as a
unified regulator, with representation from India’s key regulators – the Reserve Bank of India (RBI), Securities
and Exchange Board of India (SEBI), Insurance and Regulatory Development Authority (IRDA), Pension Fund
and Regulatory and Development Authority (PFRDA) – and the Government on its critical decision-
making bodies.
Currently, Gujarat International Finance Tec-City (GIFT City) is the only approved IFSC in India. It is a globally
benchmarked IFSC developed by the Government of Gujarat through a joint venture.
Aircraft leasing and financing regulations in the IFSC:

In 2020, the Central Government notified “aircraft leases” as “financial product” under the IFSCA Act, 2019.
This aircraft lease includes operating and financial leases and any hybrid of operating and financial leases of
aircraft or helicopters and engines of aircraft or helicopters, or any other part thereof. The development of the
aircraft financing and leasing industry in the IFSC would help create a comprehensive ecosystem for the Indian
aviation industry.
Pursuant to the notification, the IFSCA introduced the IFSCA (Finance Company) Regulations,
2021 (IFSCA FC Regulations), outlining the framework applicable for the Finance Company/Finance Unit set
up in IFSC. Under the IFSCA FC Regulations, the financial lease arrangement for aircraft lease is considered
as “permitted core activity,” whereas the operating lease arrangement for aircraft lease is considered as
“permitted non-core activity.”
Under IFSCA FC Regulations, an entity would be required to obtain certificate of registration as “Finance
Company” from the IFSCA for carrying out the prescribed permitted activities. To qualify for registration as a
Finance Company with IFSCA, the entity should satisfy the following criteria:
• Set-up operations in IFSC by way of a subsidiary/joint venture/a newly incorporated company under Indian
corporate laws (Finance Company) or a branch (Finance Unit) of investing entity or in any other form as
may be specified by the IFSCA.
• Investing entity to obtain No-objection certificate from its home country regulator for setting up a Finance
Company/Unit in IFSC if it carries out a regulated financial activity in its home jurisdiction.
• Maintaining minimum owned funds,27 depending on the activity proposed to be undertaken, or such other
higher amount as may be specified by the IFSCA.
• The entity and/or its promoters shall be from a Financial Action Task Force (FATF) compliant jurisdiction
and comply with international standards set by the FATF.
• Only permitted to transact in a foreign currency, however, may defray its administrative expenses in INR by
maintaining a separate INR account.
An aircraft lessor undertaking an aircraft financial lease arrangement is required to maintain the prescribed
prudential regulatory ratios. However, the aircraft lessor undertaking aircraft operating lease arrangement is
exempted from maintaining these ratios given the framework for aircraft operating lease has been outlined
separately by the IFSCA. Further, IFSCA (Banking) Regulations 2020 has also permitted IFSC banking units to
undertake equipment leasing, including aircraft leasing.
27
This has been noted as “minimum capital” requirement in the Framework for Aircraft Operating Lease

Tax framework of aircraft lessors in the IFSC
The tax treatment for the aircraft lessors that choose to set up aircraft financing and leasing operations in the
IFSC are tabulated below:
Particulars Finance Company/ Finance Unit in IFSC
Corporate tax rate • 100% profit linked deduction for any 10 consecutive years out of the first 15
years of operations, at the option of the entity
• Depreciation on aircraft and aircraft engines allowed at 40% on a written
down value (WDV) basis
• Unabsorbed depreciation can be carried forward to the subsequent years to
be set off against future profits, without any time limit
• Post tax holiday, 22% (plus applicable surcharge and cess) for domestic
companies that opted to forego certain deductions (with an exception of
deductions available to IFSC)
Minimum alternate tax • MAT at 9% (plus applicable surcharge and cess) of book profits applies to a
(MAT) Company setup as an IFSC unit- Not applicable to companies in IFSC opting
for a new tax regime of 22%
Withholding tax (WHT) • No WHT on interest paid to non-residents by the IFSC unit
on interest payment i.e., interest income exempted from tax in the hands of non-residents
WHT on lease rentals • No WHT on aircraft lease payments, in the nature of royalty, paid to non-
residents by the IFSC unit (provided operations commence before 31 March
2024) i.e., operating lease rentals exempted from tax
Capital gains on • 100% profit linked deduction available on capital gains arising on transfer of
disposal of aircraft aircraft or aircraft engine leased by the IFSC unit to the domestic company
(provided operations commences before 31 March 2024)
Import of goods/ • Import of aircraft/aircraft engine into the IFSC is not subject to basic custom
services into the IFSC: duty (BCD). However, aircraft/aircraft engine required to be landing in SEZ
for such exemption to apply.28 Leasing of aircraft/aircraft engine into the
Procurement on outright
IFSC is not subject to Integrated Goods and Services Tax (IGST), provided
purchase basis /
services are procured for authorized operations in an SEZ
operating lease basis
Leasing (operating • Import of aircraft/aircraft engine by an airline company in India (operator)

lease) of aircraft/ aircraft from an Indian lessor located in the IFSC is not subject to BCD, provided the
engine to an airline aircraft is imported by the operator (or on behalf of the operator) for
company in India by a scheduled air operations
unit in the IFSC
• Leasing of aircraft/aircraft engine by a unit in the IFSC to an airline company
in India is subject to IGST under forward charge at the rate of 5% on lease
rental payments
Stamp duty • Exemption on all activities related to setting up of units in the IFSC and
acquisition of any movable property (including aircraft) or immovable
property for a period of 10 years commencing from 4 August 2020, may not
be available for the sale of an aircraft
28
Currently, Multi-Model International Passenger and Cargo Hub Airport at Nagpur (MIHAN, Nagpur) is a designated SEZ

Furthermore, certain state level subsidies are granted by the Government of Gujarat to the eligible
IFSC entities.
Currently, no Indian aircraft leasing companies deal in commercial aircraft, which compels domestic airlines to
look for overseas aircraft lessors. The presence of aircraft lessors in the IFSC would help airlines companies in
India in terms of creating greater opportunities for better leasing terms and conditions, and aid them to navigate
currency depreciation risks better, thus removing uncertainties from their operational framework. The central
Government along with the state government has undertaken significant regulatory and tax reforms to
incentivize the growth of the Indian aviation industry. These reforms reflect strong commitment of the Indian
Government to make India “Aatmanirbhar” in the aviation industry.

6. Helicopter industry
The ability of helicopters to take-off and land vertically with minimal infrastructure requirements, compared to
fixed-wing aircraft, and their ability to hover in the air, makes them one of the most versatile vehicles for air
transport. These capabilities of a helicopter help in accessing difficult terrains and areas that are affected by
natural disasters. In India, the armed forces use helicopters to navigate through the Himalayas and other
remote areas, otherwise inaccessible. They also serve a variety of purposes including air ambulance
services/medicine delivery, airlifting people from disaster affected areas, carrying people to religious pilgrimage
destinations, and most recently for transporting COVID-19 vaccines. They are also used by enterprises and
individuals for mobility purposes in metro cities and by large oil companies like ONGC, Indian Oil Corporation
for travelling to their offshore facilities.
Presently, there are approximately 250 helicopters in the country with about 72% of the fleet belonging to Non-
Scheduled Operators (NSOP), while the rest belongs to Governments/PSUs and private parties.29 Pawan Hans
Limited, a mini-Ratna, under the administrative control of the Ministry of civil aviation is the leading helicopter
service company, with a fleet size of more than 40. Though there is an inherent demand for helicopters owing
to road mobility related issues in Indian cities and also due to the huge potential for religious and recreational
tourism, their supply is highly limited. Many countries with a lower population in comparison to India have a
larger fleet. Brazil for instance, has about five times the number of helicopters in India while the United States
has a 50 times larger fleet.30
HAL, TASL, and Mahindra Aerospace are a few prominent players in the helicopter manufacturing industry in
the country. The state-run HAL is the only company in the country that designs and manufactures indigenous
helicopters. It has developed platforms used by Defense forces in India and abroad. In order to cater to civilian
requirements, the company upgraded its Dhruv platform to develop a version that finds its application in ferrying
people and goods. TASL and Mahindra Aerospace have entered into strategic partnerships with Boeing and
Airbus to develop some of their marquee products.
29
https://www.civilaviation.gov.in/sites/default/files/GM-CIVIL-HELICOPTER-E-Book.pdf
30
https://theprint.in/economy/with-less-than-300-choppers-indias-helicopter-market-dwindles-industry-wants-better-rules/629474/

A new wind of change
Taking into account the potential of the helicopter industry and the benefits it might bring to various sectors,
the government of India announced the new helicopter policy in October 2021. It is a key step to reduce the
gap in the supply and demand for helicopters in the country and develop an ecosystem to support the growth of
the sector.
Some key policy related announcements which will usher the helicopter industry to a trajectory of growth are as
follows:31 32
• Establishment of a dedicated Helicopter Acceleration Cell to provide regulatory and policy direction to aid
ease of doing business for the helicopter industry.
• Helicopter companies or heliports to be exempted from paying parking deposits and landing charges.
• Engagement between Airports Authority of India, Air Traffic Control, and other helicopter industry
stakeholders to train individuals regarding helicopter issues.
• To create awareness about helicopter operations among the district administrations and ensure ease of
operations at all levels, the district collectors will be given Heli-Disha, a booklet containing regulations and
issues related to helicopter operations.
• To integrate various departments and ensure ease of operations, the centralized Heli-Sewa portal will be
suitably upgraded. The portal will act as a single-window platform to facilitate all permissions for helicopter
operations.
• Establishment of one Heli-Hub and training institute each in Juhu, Guwahati, Delhi, and Bangalore
(HAL Airport).
• Establishment of helicopter corridors covering 10 cities and 82 routes in the country. The first three
corridors are envisaged to be developed across Juhu-Pune-Juhu; Mahalakshmi Racecourse-Pune-
Mahalakshmi Racecourse; Gandhinagar-Ahmedabad-Gandhinagar.
• To provide the necessary impetus to develop Helicopter Emergency Medical Services in India, heliports will
be developed alongside three expressways viz. Delhi-Bombay Expressway, Ambala-Kotputli, and Ambala-
Bhatinda-Jamnagar. These would ensure timely evacuation and medical treatment for accident victims
The establishment of aircraft/helicopter leasing under IFSC has also opened the opportunity for Indian
Enterprises to tap into a lucrative business and acts as a vital component of the aviation value chain. Vman
Aviation Services IFSC Limited recently announced its first helicopter lease transaction by leasing out an Airbus
H-125 helicopter to Thumby Aviation Private Limited.33
Path Ahead
Currently, helicopters are treated similar to fixed-wing aircraft, and there are no separate set of rules for their
operation. Despite their ease of operations, they are constrained by the infrastructural and operational
regulations applicable to fixed wing aircraft. Since most of the helicopters are imported from other countries,
their acquisition is capital intensive. High capex and higher cost of operations makes it an expensive mode of
transport, thus leading to less number of passengers and an unviable investment for the operators. Given these
circumstances, India’s helicopter industry largely remains untapped with huge growth potential.
The announcement of a policy for helicopters reflects the view of the government to revitalize the helicopter
industry and to realize its true potential. However, a greater degree of engagement between the policy makers
and the industry would be required for the industry to prosper. This would help in identifying the key challenges
faced by the industry and in developing adequate measures to address the same.
With the renewed impetus to the civil helicopter industry by means of the new helicopter policy along with the
ongoing Regional Connectivity Scheme like UDAN (Ude Desh ka Aam Nagrik), the environment is conducive
for the helicopter industry to take-off.
31
https://www.thehindu.com/news/national/dedicated-corridors-hubs-scindia-announces-new-helicopter-policy/article36901576.ece
32
https://www.theweek.in/news/biz-tech/2021/11/23/new-helicopter-policy-to-propel-growth-of-civil-aviation-sector-
.html#:~:text=Under%20the%20new%20policy%2C%20the,for%20heliports%20or%20helicopter%20companies.
33
https://vman.aero/vman-indias-first-leasing-company-in-gift-city-starts-its-lease-transaction-lease-airbus-h125-helicopter-to-thumby-
aviation/

7. Drones and Urban Air Mobility
Urban Air Mobility in India - An overview
The concept of Urban Air Mobility (UAM) involves the transportation of passengers and goods in urban areas
through air. Since the beginning of the 20th century, when the first helicopter that carried humans was invented,
UAM has rapidly evolved to include technologies like drones and e-VTOLs. Various endeavors worldwide aim
to create fully automated passenger carrying drones. Due to its reliance on electric/hybrid propulsion,
governments and enterprises consider UAM as a solution to growing problems such as, pollution and long
travel time associated with road traffic congestion.
For several years now, Indian cities have been grappling with issues related to road congestion. According to
TomTom Traffic Index Ranking 2021, Mumbai was ranked 5th in terms of congestion level, while Bengaluru
was ranked 10th and Delhi 11th.34 Traffic congestion has several negative impacts like increased travel time,
high fuel consumption and pollution. Delhi, for instance, was among the top 10 most polluted cities in the world
in 2020, with the other 8 cities in the top 10 were also from India.35
UAM is considered to be a sustainable alternative for road modal transport as it primarily utilizes electrically
propelled aircraft for transportation of goods and passengers. There have been a number of developments in
recent years in terms of technology and regulations in UAM in India, which encourages its adoption in the
country. However, building enabling infrastructure, creation of sturdy policies, focus on improving public
acceptance and commercial viability would be of importance for the rapid development of UAM in India.
Assessment of UAM ecosystem in India

In India, several start-ups have developed advanced drones that find applications in delivery and military
applications. Few companies have designed, developed and tested their passenger e-VTOL prototypes. The
Drone Rules and the National UTM Policy framework, both of which were introduced in 2021, pave the way for
the development of UAM and exploration of its different usage in India. Through the liberalization of a number
of earlier rules and procedures to improve the ease of operations and through the introduction of a few new
rules to improve safety, these policies have taken the interests of the public, industry and other stakeholders
into account.
34
https://www.tomtom.com/en_gb/traffic-index/ranking/
35
https://www.iqair.com/in-en/world-most-polluted-cities

The current situation of UAM across factors like technology, regulation, infrastructure, and public acceptance is
addressed below in order to evaluate the developments in the area and to provide recommendations for
the future.
A. Technology:
Technologies utilized in the area of UAM include aircraft viz. drones and e-VTOLs, propulsion systems,
batteries and communication and navigation systems. Though commercial drone operations in India are
restricted in the Vertical Line of Sight (i.e., VLOS< 500 meters) region, few indigenous drones have even flown
in the range of 20-50 kms36 during their test flights. Such longer range would support the application of drones
in food, grocery, and medicine delivery in the future.
Indian companies have also recently designed, developed and tested prototypes for VTOLs/e-VTOLs with
several proprietary technologies. Companies like ePlane.ai, and VTOL aviation India have tied up with premium
institutions like the IITs in order to build the technology for their VTOL aircraft. Some of the key technological
features of the aircraft designed in India are given below.
Key Features
Range and speed • ePlane’s e-200 - designed for a range of 200 km
• Vinata’s hybrid VTOL - designed for a range of 100 km and a maximum speed
of 100 kmph
• VTOL Aviation India Pvt Ltd.’s ABHIYAAN_ENM800 - intended to have a

radius of operation of 600 km for its hybrid variant and 250 kms for its all
electric variant
Propulsion System • e-200 - All-electric propulsion system
• Vinata’s VTOL - Hybrid-electric propulsion system
• Abhiyaan_ENM 800 - Hybrid and all electric propulsion variants
Capacity • e-200 – 2-seater capacity and 200 kg
• Vinata – 2-passenger capacity and a maximum take-off weight of

1300 kilograms
• Abhiyaan ENM_800 – 2-seater capacity and a maximum take-off weight

of 800 kg
Development stage • e-200- Subscale prototype (e-50) completed test flight in 2021
• Vinata- Currently at concept stage and likely to complete trial by 2023
• Abhiyaan_ENM800- Launched design in 2021
*source – websites of respective companies
However, most of these aircraft, are at the early stages of their development and would require extensive
testing before large-scale commercialization to carry passengers. Extensive support from the government in
terms of development of type certification guidelines, testing infrastructure, etc. are a few key measures
required for accelerated development of the UAM technology in India.
36
https://www.hindustantimes.com/cities/gurugram-news/indias-longest-drone-flight-conducted-in-haryana-for-hpcl-claims-robotics-firm-
101636287161593.html

B. Regulation/Policy:
With varying measures like the development of Digital Sky Platform-as a single-window platform, reducing the
number of forms, guidelines for training and certification, etc., the Drone Rules 2021 emphasize the ease of
drone operations and public safety.37 Whereas, the National UTM Policy framework, lays the foundation for a
digitally integrated UTM system and increased public-private participation in unmanned traffic management.
The government has also introduced Production linked incentive (PLI) scheme to incentivize manufacturing
drones in India.
37
https://pib.gov.in/PressReleseDetailm.aspx?PRID=1749154

Though the rules and monetary incentives discussed above address the concerns of the industry and the public
alike, large scale adoption of the UAM requires building policies to catalyze the development of aircraft,
addressing public concerns and the creation of charging and other enabling infrastructure. The latest drone
rules have envisioned the inclusion of flying taxis; commercialization of the technology would also require
creation of certification scheme/guidelines.
C. Infrastructure
With an increasing fleet of drones and e-VTOLs envisaged in India in the current and the next decade, various
infrastructure like charging stations and Droneports/Vertiports need to be developed. In India, policies like
FAME II, which include monetary incentives for developing charging stations and producing charging
infrastructure components38 had led to a 250% increase in the number of EV chargers in 9 Indian cities in a
span of 3-4 months.39 The current chargers for EVs may be utilized for smaller e-VTOLs; however, for aircraft
with higher seating capacity, mega-charging infrastructure (more than 1 MW) would need to be built in the
future. Such large power systems would require the upgradation of the current utility infrastructure.
In the case of Indian cities, due to high population density, a larger number of vertiports needs to be
constructed to cater to the demand. In order to build such vertiports effectively and efficiently with the requisite
safety mechanisms, strong regulations need to be developed. In countries like the United States, e-VTOL
developers tie up with infrastructure players to develop vertiports. A higher level of participation from the private
players, encouraged through suitable policies and incentives would support the development of
vertiports/drones and charging infrastructure in the country.
D. Public Acceptance
For large-scale operationalization of UAM technologies and commercial viability for the e-VTOL developers,
public awareness and acceptance of the concept is necessary. In a recent survey conducted, more than 45% of
the respondents in India expressed their willingness to adopt Advanced Air Mobility (AAM) for commutation as
against less than 15% in countries such as Germany and the USA.40 The drone rules and National UTM policy
framework emphasize the safety of operations through the establishment of guidelines for type certification,
pilot training and other in-flight safety mechanisms. However, for wider adoption of the technology, a national
roadmap needs to be prepared by engaging all the key stakeholders. Pilot operations like medicine and food
delivery would help in building public confidence.
Although India has taken significant steps in terms of regulations and policies for adopting the UAM, several
novel concepts like e-VTOLs capability of carrying passengers are still at a nascent stage. Whereas, in
countries like Europe and the United States, few companies are at much advanced stages in terms of
technology and are looking forward to commercialization of passenger carrying e-VTOLs in the near future. For
e.g., Lilium, a German e-VTOL manufacturer and Joby Aviation, a United States based company, are both in
the process of receiving type certification from European Union Aviation Safety Agency and Federal Aviation
Administration, respectively and plan to commercialize operations in 2024.
38
https://pib.gov.in/newsite/PrintRelease.aspx?relid=191377
39
https://economictimes.indiatimes.com/industry/renewables/electric-vehicle-charging-stations-expand-2-5-times-in-9-mega-cities-in-
india-power-ministry/articleshow/89680137.cms
40
https://www.mckinsey.com/industries/aerospace-and-defense/our-insights/up-in-the-air-how-do-consumers-view-advanced-air-mobility

The development and wider adoption of UAM in India would require an integrated approach across all aspects
of the ecosystem viz. technology, regulations, infrastructure, and public acceptance. Some of the key
interventions that might help in developing the industry include:
• Pilot Projects and large-scale demonstrations to improve public confidence - Large scale demonstration of
pilot use cases like medicine deliveries and transportation of commodities would help in building
public confidence.
• Monetary incentives like grants to universities for research and development – Most of the drones used in
India are assembled using imported components. Though PLI’s would incentivize large-scale production of
drones in the country, support needs to be provided to encourage the invention of drone components in
the country.
• Standardization of charging technology - Standardization of charging connectors similar to that followed by

many manufacturers in the automobile industry would increase the adoption of e-VTOLs in the country.
• PPP in infrastructure development – Public private participation would accelerate the development of
vertiports and charging infrastructure required for the large fleet size envisioned in the future.

About FICCI
Established in 1927, FICCI is the largest and oldest apex business organization in India. Its history is closely
interwoven with India's struggle for independence, its industrialization, and its emergence as one of the most
rapidly growing global economies.
A non-government, not-for-profit organization, FICCI is the voice of India's business and industry. From
influencing policy to encouraging debate and engaging with policymakers and civil society, FICCI articulates
the views and concerns of the industry. It serves its members from the Indian private and public corporate
sectors and multinational companies, drawing its strength from diverse regional chambers of commerce and
industry across states, and reaching out to companies.
FICCI provides a platform for networking and consensus building within and across sectors and is the first port
of call for Indian industries, policymakers and the international business community.
Contact us
Manoj Mehta Raunak Sharma
Director & Head - Civil Aviation Consultant
[email protected] [email protected]
About PwC
At PwC, we aim to build trust in society and solve important issues. We are a network of firms in 156 countries
with over 295,000 people who are committed to delivering quality in assurance, advisory and tax services. Find
out more and tell us what matters to you by visiting us at www.pwc.com.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal
entity. Please see www.pwc.com/structure for further details.
© 2022 PwC. All rights reserved.
Contact us
Sonal Mishra Kanika Chawla
Executive Director and Leader Director
- Aviation
PwC India
PwC India
[email protected]
[email protected]

Data Classification: DC0 (Public)
In this document, PwC refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity
Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each
member firm of which is a separate legal entity.
This document does not constitute professional advice. The information in this document has been obtained or derived from sources
believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is
accurate or complete. Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject
to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action
or decision, for which they are entirely responsible, based on the contents of this publication. PwCPL neither accepts or assumes any
responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may
take or decide not to or fail to take.
© 2022 PricewaterhouseCoopers Private Limited. All rights reserved.
GG & MA/March 2022 – M&C 18050

PWC FICCI Knowledge Paper in Aviation Wings 2022 1648497337

Uploaded by

Copyright:

Available Formats

PWC FICCI Knowledge Paper in Aviation Wings 2022 1648497337

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PWC FICCI Knowledge Paper in Aviation Wings 2022 1648497337

Uploaded by

Copyright:

Available Formats

March 2022

2. Airports - Face of New India ........................................................................................... 7

3. Air Cargo - Resilient in Paradigm Shift ......................................................................... 14

4. Upheaval in Manufacturing and MRO .......................................................................... 20

5. Aviation Financing and Leasing ................................................................................... 25

6. Helicopter industry ........................................................................................................ 29

7. Drones and Urban Air Mobility ..................................................................................... 31

3 | PwC | India: Emergence of a global leader in aviation

4 | PwC | India: Emergence of a global leader in aviation

5 | PwC | India: Emergence of a global leader in aviation

6 | PwC | India: Emergence of a global leader in aviation

7 | PwC | India: Emergence of a global leader in aviation

Source: Data from AAI and PwC Analysis

Existing Major Airports New Greenfield major Additional Brownfield Total

8 | PwC | India: Emergence of a global leader in aviation

Source: Data from AAI and PwC Analysis

9 | PwC | India: Emergence of a global leader in aviation

Source: PwC Research

10 | PwC | India: Emergence of a global leader in aviation

11 | PwC | India: Emergence of a global leader in aviation

Source: PwC Analysis

1. The starting traffic should be a minimum of 0.2 million per annum

12 | PwC | India: Emergence of a global leader in aviation

1. Moratorium in payment of a Concession Fee for the smaller airport:

2. Flexibility on capital investments/ regulatory structure:

3. Continued government support under the UDAN Scheme:

4. Change in the AAI Act:

- Extending the list of permissible non-aeronautical/city side activities at AAI airports

13 | PwC | India: Emergence of a global leader in aviation

Air Cargo Traffic in India

International Cargo Domestic Cargo Total Cargo Y-o-Y Growth Rate

Source: AAI traffic news

14 | PwC | India: Emergence of a global leader in aviation

Total Freight April to January

Source: AAI traffic news

Interventions to support sector growth

15 | PwC | India: Emergence of a global leader in aviation

Policy Area Schemes

16 | PwC | India: Emergence of a global leader in aviation

Air Cargo Categorization – categorization of cargo facilities at airports under the

2. Krishi UDAN 2.0

Category Incentive/ Support

17 | PwC | India: Emergence of a global leader in aviation

Air Cargo Sector - The way forward

Source: Allied Market Research

18 | PwC | India: Emergence of a global leader in aviation

Zone Distance to Airport

Incheon Free Economic zone On-site

Istanbul Ataturk Airport Free Zone-ISBI On-site

Shanghai FTZ On-site

Dubai Airport Free Zone On-site

Abu Dhabi Airport Free Zone On-site

Bahrain International Investment Park 11 kms

19 | PwC | India: Emergence of a global leader in aviation

20 | PwC | India: Emergence of a global leader in aviation

Company Type Area of expertise Key Products OEMs served

Tata Private Sector • Aerostructures Aerostructures and • Sikorsky (JV)

Mahindra Private Sector • Aerostructures Aerostructures for • Airbus

21 | PwC | India: Emergence of a global leader in aviation