Indian Aviation Industry : The Indian Domestic Aviation Market

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Indian Aviation Industry
The Indian Domestic Aviation market registered a growth of 5% in FY 2013-14 with a total of 60.3 million domestic passengers carried during the year. Market share of Low Cost Carriers ("LCC") comprising SpiceJet, Indigo, Jet Lite, Go Air continued to increase at the cost of the Full Service Carriers. The market share of the LCCs increased to 64% in the domestic space, with ~25% CAGR for domestic passengers carried over the last 4 years. Indian LCCs (Indigo, SpiceJet) have also increased their foothold on International routes, making up ~20% of the passengers carried by Indian carriers on International routes. This clearly demonstrates that LCCs have the business model to drive growth and sustain its operations.
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Greater liberalization of air markets has the potential to increase global air traffic growth by over 1 percentage point per year.

Growth Prospects
The commercial passenger aviation industry currently supports over $2.4 trillion economic activity. Growth of aviation industry is highly correlated with GDP of the countries. Increase in GDP leads to the rise in disposable income levels and hence increasing the propensity to fly. With IHS predicting a 6.5 percent GDP CAGR till 2030, Indian aviation is one of the fastest growing industries in the world. (Exhibit1).
Along with the GDP growth, other factors that drive demand are the demographic distribution, price and availability. With more than half of its population under age group of 40, burgeoning Indian youth are set to drive aviation industry.

As per data from the Airports Authority of India (AAI), passenger throughput grew to 159 million (FY 2013) registering a growth of 13 per cent over FY 2003-2013. Currently the 9th largest market, India will see a total of 367 million passengers by 2034, an increase by 266 million annual passengers from today. It will overtake the United Kingdom (148 million extra passengers, total market 337 million) to become the 3rd largest market in the global Aviation Industry.
Regulatory Environment
The largest decision driving the current industry growth is the decision to allow 49 % Foreign Direct Investment into Indian airline carriers. This
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