Outlook for key aspects of the aviation sector in India

By Nimish Vakil and Sneha Rao, Tyabji Dayabhai
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The Indian aviation sector until recent years was a public sector stronghold. Liberalization and the introduction of private players have led to slow but significant changes. On the domestic front, private scheduled aircraft operators command the domestic skies today, while international passenger traffic to and from India has risen steadily since 2004, with Indian carriers showing a higher growth rate than foreign carriers. However, profit margins in the sector have failed to take off due to the current fiscal regime and heavy operating costs.

Low cost airline boom

Low cost carriers (LCCs) have aggressively expanded operations with a tremendous increase of passengers on domestic routes as a result of accessibility to low fares. Increased connectivity within the country has resulted in significant development in the trade, tourism, hotel and construction sectors.

Nimish Vakil
Nimish Vakil

The regulatory authority’s plan to let airlines operate in remote areas where they are comfortable rather than forcing them to operate in other areas has encouraged some LCCs to import smaller aircraft with a view to starting regional carriers. which in turn will boost regional connectivity. This may also be seen as a strategy to help LCCs to retain market share, in the light of negotiations between some full-service carriers and foreign airlines with respect to foreign direct investment (FDI).

India’s LCC boom coupled with a relatively deregulated framework has, over the years, attracted a trickle of investments by private equity groups in various aspects of the sector.

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Nimish Vakil is a partner at Tyabji Dayabhai, where Sneha Rao is an associate. Tyabji Dayabhai was established in 1872 and has over 25 years’ experience in handling all types of aviation transactions and litigation.

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Lentin Chambers

Dalal Street
Mumbai – 400 001

India

Tel: +91 22 2265 0342

Fax: +91 22 2265 8209

Email: nimish.vakil@tyabjidayabhai.com

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