India plans to open 100 new airports in the next five years

India is planning to open 100 additional airports by 2024, as part of a plan to revive economic growth in Asia’s third-largest economy, according to people with knowledge of the matter.

The proposal, which includes starting 1,000 new routes connecting smaller towns and villages, was discussed at a meeting last week to review infrastructure needed by 2025, the people said, asking not to be identified as the discussion is private. Steps to start a plane-lease financing business in the country was also discussed, they said.

The news comes as Indian carrier IndiGo announced a contract for 300 Airbus A320neo jets – one of Airbus' biggest-ever deals, worth more than $33 billion at sticker prices – and includes the latest A321XLR long-range variant, allowing IndiGo to offer single-aisle flights between city pairs that can’t support larger jets.

The purchase will widen IndiGo's lead in the world’s fastest-growing major aviation market as the carrier embarks on an ambitious expansion plan, seeking to eventually provide flights to cities such as London.

Founded in 2005 by ex-US Airways Chief Executive Officer Rakesh Gangwal and former travel agent Rahul Bhatia, IndiGo has quickly outpaced rivals to grab almost half of the local market. Yet the picture isn’t entirely rosy: IndiGo posted its biggest-ever quarterly loss last week and the two billionaire founders are engaged in a legal battle.

Airport expansion

With economic activity at a six-year low and prospects of further slowdown looming, Prime Minister Narendra Modi is keen to double down on infrastructure projects in a bid to revive growth and achieve a target of making India a US$5 trillion economy by 2025.

Last month, the government cut corporate tax rates, putting India on par with some of the lowest in Asia, to help compete with the likes of Vietnam and Indonesia for investments amid global trade tensions.

India’s plans to expedite airport development still trails that of China’s, which has set a goal of having 450 commercial airports by 2035, almost double the number at the end of 2018. A spokesman at India’s civil aviation ministry was not immediately available for a comment.

The proposal by India’s state think tank also includes boosting the number of locally trained pilots to 600 a year and double the domestic aircraft fleet to 1,200 during the period, the people said.

The Indian government has committed investments of 1 trillion rupees (US$14bn)  to build airports in the next 5 years.

Just three years back, only 75 of India’s 450 runways were functional, as airlines avoided flying to smaller, World War-era airstrips in smaller towns. But Modi’s subsidy program, which partly funds airline losses while capping fares on remote routes, has helped add as many as 38 airports to the nation’s aviation map at the start of this year, while contracts were given to airlines to start flights to a further 63 airports with no or limited connectivity.

While the lure of India – with an emerging middle class flying for the first time – has attracted companies such as Singapore Airlines and AirAsia to set up local units, provincial taxes in the nation make jet fuel one of the most expensive in the world, while intense competition has often driven fares below cost, making profits elusive for most airlines.

The government is aware of the high taxation burden and higher jet fuel prices, and will rationalize the tax regime as soon as next year, the people said.

Businessweek