ABSTRACT
With a population of over a billion people, India offers a potentially large domestic market for foreign airline companies to establish their operations. Estimates by the National Council of Applied Economic Research in Delhi (NCAER) indicated that if air fares fall by 1 percent and the economy averages 7 percent growth in India, the international passenger market in India may grow 11-fold by 2010 from 3.5 million passengers in 1998. India’s air transportation industry offers vast potential for development of air travel because of its immense population, fast-growing middle class, vast physical size (three million sq km), and difficulty in traveling between cities and tourist sites by any form of land transportation.1 As of March 2005, approximately 16 million domestic plane tickets were sold in India, reflecting a 27 percent increase from 2004.2 The Confederation of Indian Industries (CII) has also predicted that the total passenger traffic (domestic and international) would grow by 8 to 10 percent annually until 2010, which would result in air traffic rising to between 70 and100 million passengers as against 36 million passengers in 20003 and 59.2 million by the end of 2004. In 2005, Indian airports handled 61 million passengers and this increased to 90.4 million passengers by the end of 2006.4
Executive Director of KPMG Consultancy in India, Mr. Raajeev Batra, commented, “The government has realized that the 8-9 percent gross domestic product growth which the country has been experiencing for the last two to three years will not be sustainable if the gateway to the international world is not opened, which is the airports.”5 Air travel in India is still considered a luxury because it is beyond the reach of the average Indian and spending government funds to upgrade airports was often viewed as spending scarce resources on the rich elites. The rationale that needs to be understood is that upgrading and expanding airport facilities does not mean disregarding the needs of the poor. Improving airport infrastructure works along the same lines as improving roads to ensure safe transportation and time efficiency. Moreover, airports are the gateways into India for most inbound tourists, and the tourism sector holds enormous promise for India. The Indian civil
aviation sector is wrestling with rapid growth and congestion because the domestic sector has grown from 4 percent to 18 percent per year and the international traffic is expanding at 13 percent.6 The airport infrastructure in India requires huge amounts of investments and the government is unable to provide this due to its resources constraints. India’s Civil Aviation Minister, Sharad Yadav, had admitted in parliament that Indian airports were in a poor shape, “Our airports are not definitely up to the market. Facilities in our airports cannot vie with that available in airports in the United Kingdom or Malaysia.”7 Yadav added that lack of funding is the main reason for India’s airport predicament, he said; “With so much poverty around, how can we match the facility provided in foreign airports like Singapore.”8
