Indian Logistics Industry Insight

Aviation

May 2007

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CONTENTS
1. Executive Summary ................................................................................... 6 2. Highlights ................................................................................................. 10 3. Logistics Industry Structure ..................................................................... 11 3.1 Global Logistics Industry Overview ...............................................................11 3.1.1 Components of Logistics Cost.............................................................. 11 3.2 Indian Logistics Industry Overview ................................................................13 3.2.1 Spending on Logistics in India ............................................................... 14 3.2.2 Cost Component of Indian Logistics Industry ......................................... 14 3.2.3 Infrastructure Development – Boost to Logistics Industry ........................ 15 4. Air Transport System In India.................................................................. 16 4.1 Overview..................................................................................................16 4.2 Air Transport Sector & India’s GDP.............................................................19 4.3 Airports ....................................................................................................19 4.3.1 Airport Infrastructure Status in India ..................................................... 20 4.3.2 Infrastructure Status of Major International Airports ............................... 22 4.4 Air Cargo Market......................................................................................30
Indian Logistics Industry Insight - Aviation

4.4.1 Opportunities Galore.......................................................................... 31 4.4.2 Performance of Top 46 Airports........................................................... 32 4.5 Airport Authority of India ...........................................................................34 4.5.1 Role of AAI........................................................................................ 34 4.6 Carriers ....................................................................................................36 4.7 Recent Trends............................................................................................38 5. Intermediaries and Support Service Providers......................................... 40 5.1 Reasons to Outsource Logistics Functions .....................................................40 5.2 3PL Market Size ........................................................................................41 5.3 Function of Third Party Logistics ..................................................................41 5.4 State of 3PL in India...................................................................................42
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© Cygnus Business Consulting & Research 2007

.8 Liberalization and Deregulation ............................................3..................3.....3..............3..... 64 8...........................3 Jet Airways .. 53 7.. 63 8.................4 Financial performance..................................2 Air India Ltd..........................5 Growth in the manufacturing sector and retail boom................. 54 8........................ 45 6.......................................2 Global trade........ 52 6.....................................60 Indian Logistics Industry Insight .........1...................... 52 6..........4 Improved infrastructure..............................1................................................................................................................9 Development of E-commerce.................................3 Growth drivers .................................................................................................... 60 8........ Market Dynamics ..............................................3........................... 60 8..........7 Information technology................................ Major Players................................................................ 67 8.....1 Indian (Indian Airlines Ltd) ............ 50 6........................................................... 65 8............1 Global Air Cargo Forecast ..3...........................................6 Clearing & Forwarding Agents .................2................................3...........................1.............. Technology and Innovation ......... 51 6... 64 8........................................49 6.............1 Economic growth ........1 Corporate Profile .................2..........................Aviation 8...........................5 Fourth Party Logistics (4PL) ...3...........................2....1 Corporate Profile ............43 5............3........43 5.......................2..................................2 Business Profile ................................. 66 8.......... 48 6..3 Corporate Trend..6 Emergence of global manufacturing networks and increased FDI .................. 49 6...............4 Financial Performance......... 51 6.......5...............................................................................................................................................5 Business Strategies...................................... 59 Introduction........................................................ 61 8............2 Business Profile .............................3 Physical Performance of Air India Ltd ...............3..................................................1.......................1.......................3 Physical Performance of Indian.............................................................................................................................................. 61 8...........64 8...................................................................................................................................................................59 8............................7 Warehousing .................................... 51 6..69 2 © Cygnus Business Consulting & Research 2007 ........................44 6...........................4 Business Strategies......................................2................. 49 6...............................................................

....................................................3 Cargo Operations.................................. 84 11....4 Financial Performance...2 High Waiting Time and Congestion in Airports ........... 91 3 © Cygnus Business Consulting & Research 2007 .............................3 Guidelines for Foreign Equity Participation in the Domestic Air Transport Sector............................................1 Guidelines for the movement of hazardous goods by air transport ............................6 Initiatives for Safety .........................3....................................2 Business Profile .....................1 Corporate Profile .....................................3 Financial Performance.....6 Business Strategies...............5 Aviation Growth through Air Cargo.4.................................................................. Government Initiatives........... 78 10................1 Air Transport System in India ..................................................... 70 8......................................................3........................4 PPP in Airport Infrastructure. Schemes & Regulations ....................................1 Cost Drivers .............80 10.................................................1 Introduction.........8..........5.................5 Aviation Security ...................81 Indian Logistics Industry Insight ........... Issues and Challenges ...............................................................83 11...3.............................4 Blue Dart .................................... 72 8......................................................................74 8.....81 10.........................................84 11............... 80 10. 69 8..........................................................................6 Lack of Human Power ...................82 10................4..................................... 70 8......4..............2 Business Profile ..7...........................................Aviation 10........ 74 8.........4 Recent Developments & Business strategies .................................................91 11........... Financial Highlights .................................................90 11.......................4 Taxation ........................ 75 8........................................................................4......................89 11....................................... 74 8..................................80 10.......................................................3 High Fuel Cost...............................................................1 Corporate Profile ...........88 11.............................................. 71 8................................................ 76 9.................................7 Regulations ........................85 11...........................78 9...............................3..............................................................................1 Major Indian Airports Running Out of Capacity .......... 78 9.......................... Cost Structure......86 11....................................................................... 69 8...................3..................................................................................2 Requirements for Becoming Air Cargo Operator ..........3....1.............................................

.......1: Global Logistics Costs as % of GDP................1 Global Air Cargo Market........3: Composition of Airports managed by A.......................A..9 Profit After Tax (Rs m) 4 © Cygnus Business Consulting & Research 2007 ......................................................1: Revenues (Rs bn) Figure 8........3: Logistics Industry Structure Figure 3...I............................7 PAT (Rs bn) Figure 8...6: India's GDP Growth Rate Figure 6. Outlook ...........2: Elements of Logistics Costs Figure 3.1: Air Transport System and its share in GDP (%) Figure 4..............4: Market Share in Q2 2006 Indian Logistics Industry Insight ...5: Elements of Logistics Costs In India (%) Figure 4.........................2 Indian Air Cargo Outlook .......... Figure 6...... 94 12................3: Chart..............2: Air Cargo Capacity Utilisation (In percentage) Figure 6....................... 97 Annexure II: Bibliography ....2: Air Cargo Market in India (‘000 tonnes) Figure 4.........1: Industry Size of Air Transport System in India (at 1999-2000 prices) Figure 6..5 operating revenue break-up (2005-06) Figure 8.......4: Spending on Logistics in India (Rs bn) Figure 3.................8: Sales (Rs bn) Figure 8...........2: PAT (Rs bn) Figure 8... 2005 Figure 3......94 12...95 Annexure I: List of Abbreviations....3 : Revenue (Rs bn) Figure 8..............6 Total Revenue (Rs bn) Figure 8............4 Net Profit (Rs bn) Figure 8......Market Share in Q1 2006 Figure 6......12........................5: Market Share in Q3 2006 Figure 6....Aviation Figure 6..7: India's Export-Import Growth Rate Figure 8. 99 LIST OF FIGURES Figure 3.......

4: Financial Highlights Table 8.3: Domestic Terminal Table 4.Aviation Table 10.1 Global Air Cargo Market (FTKs bn) Figure 12.1: Comparative Airport Charges Table 11.1: Financial Highlights Table 8. of Counters Table 4.7: Operational Fleet of Indian Airlines/Alliance Air Table 6.4: Mumbai Airport cargo handling facilities Table 4.3: Financial Highlights Table 8.1: Airport Development Programme in India 5 © Cygnus Business Consulting & Research 2007 .2: Physical Performance of Air India Ltd Table 8.1: Terminal Areas and No.6: Cargo traffic handled at top 46 airports in India (tonnes) Table 4.2: International Terminal Table 4.5: Cargo Facilities Table 4.1: Total Cargo Traffic Trends (’000 tonnes Table 6.1: Cost Component of Air Transport in India Figure 12.2: Global Air Cargo Forecast – 2007-2009 Table 8.2 Indian Air Cargo Market (FTKs bn) LIST OF TABLES Table 3.5: Financial Highlights Indian Logistics Industry Insight .Figure 9.1: Spending on Infrastructure from 2005-06 to 2011-12E (Rs bn) Table 4.

packaging 11%. In India. Indian aviation industry is one of the fastest growing sectors in the country. transportation accounts for 39% of the total logistics costs. Executive Summary Logistics Industry The global logistics industry was estimated to be about US$3.1.Aviation 6 © Cygnus Business Consulting & Research 2007 . Logistics costs in India are estimated to be around 13% of GDP. In 2006-07.5% since the last three years. The manufacturing sector has registered a growth rate of 9.5%) and Japan (10. inventory 24%. followed by inventories 25%. while US logistics industry size is around US$900 billion.71% of the total global logistics industry.57% from 2001-02 to 2006-07.2% to the country’s GDP (at 1999-2000 prices). order processing 6% and administration 4%. The growth was driven by buoyant economy. handling and warehousing 9% and customers and shopping 6%. The sector contributes 0. The Indian economy has been growing at a rate of over 7.5%). followed by warehousing at 27%.226. rise in exports of gems and jewellery and special chemicals and highvalue pharmaceuticals.21 billion (US$94bn) in 2005-06.5 trillion in 2005. which is Rs4. However.1% in 2005-06 (at 1999-2000 prices). registering a growth rate of 14. Domestic air cargo traffic has been growing at CAGR of 12. Air Transport Industry in India Today. Indian Logistics Industry Insight . which accounts for more than 25. India’s spending on logistics industry is much higher than that of the developed economies like the US (9. losses 14%. transportation accounts for around 35% of the total logistics costs.56m tonnes against 1. which further enhances the prospects of the Indian logistics industry. total air cargo traffic is estimated to be over 1. whereas international air cargo traffic has been moving at CAGR of 13% during the same period. Globally.65%.4m tonnes during 2005-06. Total logistics activities make up 15-20% of finished product costs.

Flyington Freighters Private Limited. FedEx Express. Cathay Pacific. has also decided to start six new freighter services in India in view of the growing Indo-US and Indo-China trade. 3PL in India In view of the growing competition. private regular airlines contributed around 48. accounting for 58% of the total air cargo handled by all airports in India. In view of the booming economy and Indian air cargo market.7%. whereas international passenger traffic was 50. the Hong Kong-based airline service provider.9%. Besides.5%. Air transport industry (at 1999-2000 constant prices) has been growing at CAGR of 7. the Secunderabad-based air cargo company. followed by lowcost airlines at 32. particularly for passenger segment. In January 2007. These include Air India. In addition.6% to the total passenger traffic.6% from 2001-02 to 2006-07.Mumbai and Delhi airports together have handled 814. driven by growing demand for air transport system over the last five to six years. the largest express transportation company in the world. There are some important factors that can be 7 © Cygnus Business Consulting & Research 2007 . government-owned airlines at 18.Aviation the previous year.98m. The acquisition order of cargo aircrafts is one of the biggest orders so far by an Indian aviation company. growing at 23. In 2005-06.9% against the same period of Indian Logistics Industry Insight . decided to expand its network in India and to operate 17 flights weekly on Mumbai-Delhi route. several airline operators have decided to intensify their air cargo operations in India. whereas Delhi airport witnessed a growth rate of 11. has placed an order to acquire four Boeing 777F cargo aircrafts for an estimated cost of US$945m.1% in air cargo during 2005-06. Third Party Logistics (3PL) business is emerging as a potential segment of the logistics.373 tonnes of cargo. Private airlines continue to dominate the domestic market.19% in the same period. growing at 27.34m passenger traffic. domestic passenger segment has handled 73. as companies are increasingly outsourcing their noncore activities for gaining efficiency. which has decided to convert its two A310 aircrafts into freighter aircrafts by the end of 2007. Mumbai airport registered a growth rate of 7.

Indian 3PL market was estimated at about US$890.Aviation to touch Rs92.com. The adoption of modern manufacturing practices such as just-in-time and built-to-order. reduction of costs are some of the factors. B2C e-commerce market is expected Indian Logistics Industry Insight . improving customer services.55 billion by 2009. smaller Indian airports continue to be underutilised. optimum utilisation of technology and most importantly. together with the rise of global manufacturing network. leaving enough opportunities for supply-chain management and logistics companies to grow. According to the Ministry of Civil Aviation. With the economy positioning itself as the fourth largest economy (in terms of PPP) and second fastest growing economy in the world. which is one of the major growth drivers for aviation sector in India.3m in 2005. intensifying flexibility of business operations. The capacity utilisation at AAI airports in 2005-06 is more than 140%.59 billion in 2009. Major Growth Drivers • Indian economy grew at 9% in 2005-06 and as per advanced estimates.9% to reach US$3. 8 © Cygnus Business Consulting & Research 2007 . it witnessed a growth rate of 9. which is expected to grow at a CAGR of 21.7m by 2012.2% in 2006-07. According to estatsIndia. whereas B2B is expected to touch Rs13. which is further increasing. • • The other important growth drivers of the air cargo sector are liberalisation and deregulation of the economy Development of e-commerce industry has also facilitated the air cargo segment. This is owing to the growing presence of multinationals and the renewed thrust on exports. Issues and Challenges Major Indian airports are facing huge capacity constraints in terms of passenger traffic as well as cargo traffic. an internet research agency. it gives enough scope for the logistics industry to grow. is also driving the demand for 3PL services. Emphasizing core competency. On the other hand.attributed to rise in 3PL activities. airports at Delhi and Mumbai are either fully utilised or close to full utilisation. Indian e-commerce market was around Rs41 billion in 2005-06.556.

Indian aviation industry is emerging as one of the fastest-growing markets in the world. resulting in huge losses for the sector. more than 96% of world FTKs moved within the three pillars of the world economy—Asia Pacific. while the average dwell time of imports is 24 hours. there is a rise in congestion and waiting time. In 2004. According to AAI. The ATF in India is around 70% higher than the global figure. ATC delays cost the sector immensely. the ATF prices continue to be much higher than global rates.11 days (50 hours. the average dwell time of exports is about 12 hours.53% during 2001-06.5% from 2007-08 to 2011-12.Aviation activity. especially during peak hours due to lack of adequate technological development among other factors. Industry consulting firm Air Cargo Management Group projected that world air cargo volume would reach 208 billion Freight Tonne Kilometres (FTKs) by 2009 from the present 175. it is around 7. of which the CAGR of international air cargo is expected to be 12. 37 minutes) and for import cargo. both in terms of passenger as well as cargo traffic. A 5-10% additional flying time cost is around US$80m per annum.6 billion FTKs. The air freight demand is concentrated geographically since it is based on economic Indian Logistics Industry Insight . airports suffer from high waiting time and congestion. In India. Indian air cargo market (in terms of volume) is expected to grow at CAGR of 11. making ATF account for 35-40% of operating cost as against global average of 20-25%. 9 © Cygnus Business Consulting & Research 2007 .15%. At the best of international airports.58 days (182 hours. Outlook Global air cargo traffic has gone up at a CAGR of 5.In India. Europe and North America. As a result. 32 minutes). Average waiting time for export cargo is 2.2% and domestic air cargo would be 10. In India.

65% • Mumbai Airports registered a growth rate of 7.34m passengers.2% 2006-07 • During 2005-06. domestic passenger traffic was 50.71% of the total Global Logistics Industry • Logistics costs in India is estimated to be around 13% of GDP.6% of GDP • Air transport sector contributes over 0. Out of the total passengers handled.226.Aviation 14. registering a growth rate of 23.2% to the country’s GDP at constant prices (1999-2000). it is expected to have increased at 9.1% to 22. 89 domestic airports and 26 civil enclaves at defence airfields • Indian 3PL market was estimated at about US$890. total air cargo traffic is estimated to be over 1. while US logistics industry size is around US$900 billion. accounts for more than 25. whereas international air cargo traffic has been moving at CAGR of 13% from 2001-02 to 2006-07.5 trillion in 2005.1% in air cargo during 2005-06. which is expected to grow at a CAGR of 21.7%. During 2006-07.36m against the previous year • Domestic air cargo traffic has been growing at CAGR of 12. Indian airports have handled total 73. Indian GDP grew at 9% in 2005-06 and as per advanced estimates.3m in 2005.2. a growth rate of 27. while Delhi airport witnessed a growth rate of 11.556. which is Rs4.98m. Highlights • The global logistics industry was estimated to be about US$3.21 billion in 2005-06 is less than China which is 18.7m by 2012 • India would spend around Rs400 billion in airport development under several programmes by 2010 10 © Cygnus Business Consulting & Research 2007 .19% in air cargo in the same period • Airport Authority of India (AAI) manages 126 airports that include 11 international airports.9% to reach US$3.56m tonnes against 1. registering a growth rate of Indian Logistics Industry Insight .41m tonnes during 2005-06.9% and international passenger traffic went up by 15.57% from 2001-02 to 2006-07.

inventory management. labelling and order processing (see Figure 3. packaging. As operations spread to new geographies. Having realized the importance of seamless flow of men and materials.1. 3.1: Global Logistics Costs as % of GDP. which accounts for more than 25.6 13 13 12 10 . Total logistics activities make up 15-20% of finished product Indian Logistics Industry Insight . 2005 30 25 20 15 10 5 0 an y da a a ia ru n nt in In d Pe Ch na pa m Ca Ja U SA in 24 22 18 .5 ge Ar Source: Edelweiss research. Cygnus Research corporations used logistics knowledge to manage the flow of materials. and forwarding. while US logistics industry size is around US$900 billion. customsclearing. as a specialized function covers a range of services such as transportation.Aviation costs. Cygnus Research 11 © Cygnus Business Consulting & Research 2007 G er . The application of logistics in business.3. Logistics Industry Structure 3.5 9.1 Components of Logistics Cost Now logistics. warehousing. these Figure 3.2). began with the advent of multinational and multi-locational corporations. the armed forces developed logistics into a specialized field. The global logistics industry was estimated to be about US$3. meanwhile.2: Elements of Logistics Costs 6% 4% Source: World Bank.71% of the total Global Logistics Industry.5 trillion in 2005.1 Global Logistics Industry Overview Logistics evolved into an independent function thanks to armed forces. 27% Trans portation Inventory Carry ing A dm inis tration W arehous ing Order P roc es s ing 24% 39% Figure 3.

It has three principal components: • Infrastructure providers • Key transportation service providers • Support service providers While infrastructure providers include airports. the number of support service providers are increasing—adding a new dimension to Indian Logistics Industry Insight .3. and Road carriers. Of late.According to The Council of Logistics Management. Consider Indian logistics industry. logistics helps companies manage the flow of goods. Support Service Providers are the ones that link customers and Key service providers. and controls the forward and reverse flow and storage of goods. key service providers include transportation organisations like Airlines. companies have begun to pay as much attention to logistics as they do to other managerial functions like production and marketing. implements. services and information. Logistics Management is “that part of supply chain management that plans. USA. roadways and railways. Shippers. The structure of the Indian logistics industry is illustrated in Figure 3. 12 © Cygnus Business Consulting & Research 2007 . Worldwide.Aviation the Indian logistics industry. ports. services and related information between the point of origin and the point of consumption in order to meet the customers' requirements.” In other words.

Figure 3.3: Logistics Industry Structure

Logistics Industry

Key transportation Service Providers

Infrastructure Providers

Support Services

Airlines

Shippers

Road Carriers

Railways

Airports

Ports

Road s

Railways

3PL

4PL

Independent Logistics Service Providers

C&F Agents

Warehousing & Distribution Agents

Multiple Service Providers

3PL – Third Party Logistics, 4PL –Fourth Party Logistics, C& F agents- Clearing and Forwarding agents Source: Cygnus Research

3.2 Indian Logistics Industry Overview
Indian Logistics Industry Insight - Aviation

The Indian economy has been growing at a rate of over 7.5% since the last three years. The manufacturing sector has registered a growth rate of 9.1% in 2005-06 (at 1999-2000 prices), which further enhances the prospects of the Indian logistics industry. The major logistics functions for the Indian industries include transportation, warehousing, freight forwarding and other value-added operations like Management Information Systems (MIS). Of these functions, transportation and freight forwarding have been traditionally outsourced to external service providers with relevant expertise and infrastructure. Warehousing and MIS functions have been mostly managed in-house by the industries.

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3.2.1 Spending on Logistics in India Logistics costs in India are estimated to be around 13% of GDP, which is Rs4,226.21 billion
4000 3500 2944.90 3000 2500 2000 1500 1000 500 0 2001-02 2002-03 2003-04 2004-05 2005-06 2730.24 3314.24 3712.71

Figure 3.4: Spending on Logistics in India (Rs bn)
4500 4226.21

in 2005-06. However, India’s spending on logistics industry is much higher than that of the developed economies like the US (9.5%) and Japan (10.5%). The reasons for this high spending can be attributed to the poor infrastructure facilities, lack of implementation of Information Technology (IT) in logistics and transportation costs.

Source: MOSPI, Cygnus Research

due to frequent checking points at the national highways which invariably increases the

3.2.2 Cost Component of Indian Logistics Industry Basically, the Indian logistics

Indian Logistics Industry Insight - Aviation

Figure 3.5: Elements of Logistics Costs In India (%)
Cus to mers Sho pping 6% Trans po rtati on 35%

industry is dominated by the unorganised market. The major players of the industry can be broadly categorised as local transporters, transporters providing some kind of value-added services such as warehousing services, and completely integrated players providing 3PL services. The major elements of logistics cost for Indian industries include

Handling & Wareho us in g 9%

P ackaging 11%

Lo s s es 14%

Invento ries 25%

Source: Edelweiss Research, Cygnus Research

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© Cygnus Business Consulting & Research 2007

transportation, warehousing, inventory management, and other value-added services like packaging (See Figure 3.5). 3.2.3 Infrastructure Development – Boost to Logistics Industry At present, India is spending 13% of its GDP on logistics. The reason for this huge spending is inadequate infrastructure, leading to periodic bottlenecks along the routes. Another major reason is the regulatory obstacles, which not only increases the cost of service but also results in frequent delays and thereby higher logistics costs. To overcome this situation, the
Table 3.1: Spending on Infrastructure from 2005-06 to 2011-12E (Rs bn) Roads 1,520 Power 4,812 Railways 1,100 Telecom 1,226 Aviation 370 Ports 800 Oil & Gas 2,210 Urban Infrastructure 1,974 Total 13,973
Source: Edelweiss Research

Government of India is taking initiatives to improve the infrastructure in the country by spending around Rs14 trillion across the sectors (See Table 3.1).

Indian Logistics Industry Insight - Aviation 15

© Cygnus Business Consulting & Research 2007

Air Transport System In India 4. on the other hand. continue to operate alongside the private players. have been largely immune to the flip-flops in the domestic sector. The government-owned Indian Airlines and Air India. 16 © Cygnus Business Consulting & Research 2007 . Kingfisher Airlines. Spicejet and Paramount have started operations in the domestic sector. Indigo Airlines.1 Overview Liberalisation of Indian economy has empowered the Indian aviation sector. The first lot of new private airlines included Jet Airways. they (private operators) could not publish time schedules. The Air Corporation Act of 1994 had started a new era in Indian aviation sector by allowing private players to operate schedule services in the domestic market. Today. private airlines were allowed to operate charter and non-scheduled services under Air Taxi Scheme under which it was allowed to operate ‘inter-alia’ i. meanwhile. Later on. which removed restrictions on air transport Indian Logistics Industry Insight . NEPC Airlines and East West Airlines of which only Jet Airways and Air Sahara survived.4. it is one of the fastest growing sectors in the country. The Indian government nationalised the aviation industry in 1953 by enacting the Air Corporations Act. Damania Airways. Since 1986 up to the repeal of the Air Corporations Act 1953 in March 1994. The operations of foreign airlines are governed by the bilateral agreement between India and the country of their origin. the Air Taxi Scheme was further liberalised in March 1994. Air Sahara. The Air Taxi Scheme was introduced in 1986 to boost tourism and enhance domestic air services. Their operations in the country date back to pre-independence years. Air Deccan joined Jet Airways and Air Sahara in the private airlines segment. The government relaxed its hold on the industry after the liberalisation of Indian economy began in 1991. Foreign airlines. Till the early nineties.Aviation services for private players. In August 2003. which has undergone a sea-change. Go Air. Modiluft. or issue tickets to passengers.e. More recently. Indian aviation industry was dominated by two government-owned organisations: Indian Airlines (domestic sector) and Air India (International sector).

• A fleet of minimum five aircrafts with all-up-weight of aircraft more than 5.000kg • • Indian Logistics Industry Insight .Aviation Not less than three sets of flight crew and cabin crew per aircraft An approved maintenance organisation and facilities to carry out maintenance of aircraft up to 500 hours inspection or Check 'B' for Boeing 737 aircraft Approval manuals for operations. if they meet airworthiness. and fulfil the routes dispersal guidelines and all other requirements of a scheduled operator. and Its substantial ownership and effective control is vested in Indian nationals. training and quality control-cum-maintenance The permit is not transferable. or o A company or a body corporate provided that It is registered and has its principal place of business within India. reliability analysis of aircraft components and systems. flight planning and dispatch. The Chairman and at least two-thirds of its Directors are citizens of India. defect investigation. compliance of service bulletins and modifications and records of major components • • • • • Security programme approved by Bureau of Civil Aviation Security and trained security personnel at all operating stations Scheduled operators of trunk routes are required to provide certain minimum capacity on various routes including North-Eastern region.000kg and not less than Rs100m for operators having aircraft of all-up-weight not exceeding 40. Andaman and Nicobar and Lakshadweep. air safety and operational requirements for such operation. • Not less than Rs300m subscribed equity capital in respect of operators having aircraft or all-up-weight exceeding 40.700kg each to be acquired in one years' time from the date of securing operators' permit. 17 © Cygnus Business Consulting & Research 2007 .Requirements to become a Scheduled Air Transport Operator • A Scheduled Operator's permit is granted to: o A citizen of India. Jammu and Kashmir. Cells for pre-flight medical examination of crew.

who transport cargo and mail 18 © Cygnus Business Consulting & Research 2007 . even if it exceeds the total period of one and half year. and • Air cargo service operators. extension of NOC is allowed for the actual lead time of delivery. A Scheduled Operator's permit shall be renewable every year Characteristics of Indian aviation sector The Indian aviation sector can be broadly divided into following four categories: • Domestic airlines run scheduled flights within India besides servicing select international destinations. • • Scheduled Operator's permit shall not be transferable.• The validity of No Objection Certificate (NOC) for operating air transport services is for one year. However. • International airlines operate scheduled international air services to and from India. Extension of validity of NOC is granted up to a period of six months on merits of each case. Indian Logistics Industry Insight . • For import of aircraft: o pressurised aircraft not to exceed 15 years of age or 75% of its designated economic cycles or 45.Aviation • Non-scheduled operators includes charter operators and air taxi operators. These restrictions are applied both in respect of dry lease and outright purchase of aircraft. o Unpressurised aircraft normally not to be more than 20 years of age.000 pressurisation cycles. when the aircraft proposed to be imported is a new one with a definite delivery schedule. whichever is less.

2 Air Transport Sector & India’s GDP Air transport sector contributes over 0. Transport sector’s contribution to the GDP has been firming up over the last couple of years.2 7.2 0.2% to the country’s GDP at constant prices (1999-2000 prices) (See Figure 4. Air Transport *Quick Estimates.1: Air Transport System and its share in GDP (%) 10 9 8 7 6 5 4 3 2 1 0 8.2 2003-04 0.2 6.1).1 3. the number of airports/airstrips in the country is 449.3 Airports Indian Logistics Industry Insight . Although 0. It is also significant in the country’s booming economic growth.6 9. 19 © Cygnus Business Consulting & Research 2007 . ** Advanced Estimates Source: Planning Commission.2 2001-02 0.4.8 growing economic activities in the especially sector.2 2002-03 0. The structure of Indian airport infrastructure is shown in map below. Currently.4 9 6.5 6.9 5. the sector is in economic activities.5 6.2 200607** 2004-05 2005-06* transport sector’s contribution’s to the GDP remains constant over the last couple of years.2 0.8 6. MOSPI emerging and gaining significance in country’s overall economic development due to rise 4. country.Aviation The airport infrastructure plays a decisive role in shaping a nation’s competitiveness and the inflow of foreign investment. transport mostly because the of the road air GDP Transport Sector Figure 4.

3. The premier authority also provides Air Traffic Management Services over the entire Indian air space and adjoining oceanic areas with ground installations at all airports and 25 other locations to ensure the safety of aircraft operations.Map of Airports in India Indian Logistics Industry Insight . 89 domestic airports and 26 civil enclaves at defence airfields.Aviation Source: Airports Authority of India 4. 20 © Cygnus Business Consulting & Research 2007 .1 Airport Infrastructure Status in India Airport Authority of India (AAI) manages 126 airports that include 11 international airports.

Amritsar and Ahmedabad. Nagpur. Patna. Gaya. Thiruvananthapuram. Kolkata and Chennai airports primarily aiming to upgrade these to follow the international standards. Privatisation of the Delhi and Mumbai airports is in progress. In addition. the new international airports at Bangalore and Hyderabad are being built by private consortia with a total investment of about Rs40. International Airports: There are 12 international airports in the country namely.00 billion and 25 other city airports are being considered for private investment. Delhi. These airports can handle international services. the Government of India aims to attract private investment in aviation infrastructure. Custom Airports: This category includes domestic airports with customs and immigration facilities for a limited range of international services. Cochin. This category includes domestic airports with a minimum runway length of 7.5bn) for both the projects. Imphal and Indore. Kolkata. Mumbai. the Ministry of Civil Aviation decided to lease out. Indian Logistics Industry Insight . Coimbatore and Tiruchirapalli. Bangalore. Varanasi. the four most important airports in the country viz. Vadodara. if necessary. Civil Enclaves in Defence Airfields: There are 28 civil enclaves in Defence Airfields.Significantly. Goa. Kozhikode. Mumbai.Aviation Model Airports: The model airports are located in Bhubaneshwar.00 billion (US$3. Thus. Delhi.500 feet and terminal capacity to handle an Airbus 320. Other Domestic Airports: The remaining airports in the country. Hyderabad. Agra. Lucknow. Guwahati. Concessions have already been awarded and it is expected that there would be an investment of about Rs157. on global tender basis. Such custom airports are located in Jaipur. Chennai. fall in this category. not included in the above-mentioned category. which serve as a base for international services of domestic and foreign carriers. 21 © Cygnus Business Consulting & Research 2007 .

Other major airports that have the potential to emerge as hubs include airports at Chennai.24m passengers during 2005-06 out of which.2 Infrastructure Status of Major International Airports Indira Gandhi International Airport.410 tonnes of international cargo during 2005-06. Terminal 1A is dedicated to serve the domestic flights of Indian Airlines and its subsidiary. Indira Gandhi International Airport is well equipped with state-of-the-art technology to Indian Logistics Industry Insight . The international airport co-ordinates flights of 35 airlines. Delhi Indira Gandhi International (IGI) Airport is one of the busiest and most important airports in India.Aviation operate even in dense foggy weather. international passengers account for 35. Kolkata and Bangalore. It utilises the IIIA landing system.100 domestic and 9. It handles nearly 13. 4. The airport handled 16.92% over the previous year. Alliance Air. connecting India to different major cities of the world. Three domestic terminals include Terminal 1A. a growth of 14. Mumbai and Chennai airports together handled over 73% of the total air cargo in the country.3. Terminal 1B and Domestic Arrival Terminal.Airport Hubs The airports at Delhi and Mumbai serve as hubs of India’s airport network. Flights of different scheduled private airlines operate from Terminal 1B along with other executive aircraft/private aviation activities. The airport currently operates one international and three domestic terminals.31% of the total passengers. It acts as a crucial linkage between the country’s capital and rest of the world. 22 © Cygnus Business Consulting & Research 2007 . The Delhi airport handled 273.500 international passengers everyday. In 2005-06. Delhi.

3: Domestic Terminal Parking Bays Type of Bay In contact Power in Power Out Power in Push back Hydrant Refuelling System Nil 55 01 Available only at Intl. No checks after clearance from customs Table 4. Apron 10 Rwy 10 Rwy 09 Runway Lights Total Bays Runway No.2: International Terminal Parking Bays In contact Remote Cargo Indian Logistics Industry Insight . N. 23 © Cygnus Business Consulting & Research 2007 .A. Edge Lights Centre Line Lighting 204 W Lamp -doAvailable Available -doN.A.49) 12 (81-92) 6 (98-103) RWY 28 Runway Lights Elevated High Bi-directional Intensity 200W Bi-directional Halogen Lamps Type of Bay Total Bays Runway No. of Counters Terminal Area In sq metres Check Immigration In 1-A 1-B Terminal -II (Departure + (Arrival) 8.090 11.000 33 17 81 Nil Nil Nil 28 28 Nil Nil 02 Red & Green channels are available No. Edge Lights Centre Line Lighting Table 4.Aviation 9 (41 . of counters Customs Security Check At the entrance of the security hold area At the entrance of security hold area At the entrance of security hold area.Airport Facilities Table 4.1: Terminal Areas and No.700 64.

000 passengers and 892 tonnes of Indian Logistics Industry Insight . it is the major gateway to international traffic into India. system for data processing Elevated Transfer Vehicle with 350 stacking slots for 3 Level Storage of ULD's Pick and carry cranes. which is the financial capital of India and the capital of Maharashtra. and Terminal-1B is dedicated to private airways and other private aviation activities.2A and Terminal-2C. The airport carried 17. The airport handles nearly 45 landings and take-offs per hour. truck . The airport manages around 469 aircraft movements. Terminal-1A serves the Indian Airlines and its subsidiary Alliance Air.Doc 84 Nos and auction hall for disposal of unclaimed cargo Special facilities offered by Delhi Airport • • • • Strong rooms for valuable cargo Centre for perishable cargo/cold room (3 Chambers. cargo trolleys. The international terminals of the airport co-ordinate the flights of 36 airlines from different parts of the world. 24 © Cygnus Business Consulting & Research 2007 . resulting in handling about 37% of India's air traffic. Mumbai The ISO 9001: 2000 certified Chhatrapati Shivaji International Airport is the busiest airport in the country.Aviation cargo everyday on an average basis. It currently has two modules Terminal.66m passengers and handled the movement of over 490.Cargo Information • • • • • • IGI cargo terminal area is 27 acres Y2k Compliant Online Integrated Cargo Mgt. forklifts. 0-12°C) Hazardous cargo shed Live animal shed Chhatrapati Shivaji International Airport. Located in Mumbai. The domestic airport has two terminals i. high reach stackers Electronic/mechanical weighing scales. 50. power pallet trucks Idle ULD parking area.e.000 tonnes of cargo in 2005-06. Terminal-1A and Terminal-1B.

960 New Cargo Terminal Phase -2 AI Terminal 2005-06. cargo trollies. restaurants. Nearly 74. snack bars and foreign exchange counter. which noticed a growth of 5.436 FACT Sheds 6. Departure counter has marginally better facilities like shops.Aviation Online Integrated Cargo Mgt System for clearance X-ray scanning.74% Marol Import Complex metric tonnes of international cargo during over the previous year.402 11. Table 4.783 AI Terminals 6.445 Centre for Perishable Cargo 2.3% of the total freight movement from this airport was carried by different private airlines and the rest by nationalised airlines during August 2006.568 7. ULD packing slots Auction hall. hotel bookings and pre-paid taxi services. The emigration counter is usually chaotic due to over-loading of traffic.000 IMPORT Module 2 10. General facilities • • • Indian Logistics Industry Insight . Terminal metres) Module 1 9.364 4.500 Mumbai Airport handled total 288. Truck Dock 33 nos 5 cargo bays in cargo apron area • Special facilities offered by Mumbai Airport • • • • • 24 hours clearance facilities for special type of cargo Strong rooms for valuable cargo Centre for perishable cargo/cold room and walk in type cold storage Hazardous cargo shed Packer services 25 © Cygnus Business Consulting & Research 2007 . forklifts .Present status and facilities available at Mumbai Airport The international arrival area is equipped with exchange counters.4: Mumbai Airport cargo handling facilities EXPORT Area (In Sq.

now called Netaji Subhash Chandra Bose International Airport.364 Phase -2 4. Druk-Air.e. meters) 9. Singapore Airlines. processing of shipping bill and pay documentation charges Obtain custom exam order on the shipping bill © Cygnus Business Consulting & Research 2007 . Kolkata Kolkata International Airport.164 tonnes of international cargo and 42. a growth of only 5. Thai Airways. is situated at Dum Dum. Facilities at NSCBI • • • 26 Export cargo (baggage) and export general / perishable cargo facilities Registration. Biman Bangladesh.402 Module 2 11. It acts as the prime gateway to northeastern part of the country. This is a major airport in the eastern part of the country and currently handles two terminals—Terminal 1 and Terminal 2—for domestic and international airways.311 domestic and 9.Aviation and Terminal 1B caters to the private airlines.500 AI Terminal Marol Import Complex Airways.560 aircrafts. Lufthansa.000 FACT Sheds AI Terminals IMPORT 10.5 : Cargo Facilities EXPORT Terminal Area (In Sq.311 tonnes of domestic cargo during 2005-06. about 18km from the city. Besides Air India. comprising 42.36% and 8. KLM. Royal Brunei Airlines and Royal Jordanian.436 Centre for Perishable 6. The international terminal has 36 airlines and operates from two modules Terminal-2A and Terminal-2C. the airport has handled total 51.249 international aircrafts. Present Status During 2005-06.783 Cargo 6.3% respectively over the previous year.Netaji Subhash Chandra Bose International Airport. This IS/ISO 9001:2000 certified airport is connected directly to all the major cities in the country. The airport handled a total of 32.568 New Cargo Terminal 7.445 Module 1 2. Terminal-1A and T-1B. connecting most of the major cities in the world. international airlines include British Table 4. The domestic airport has two terminals i. Terminal-1A caters to domestic flights of Indian Airlines and its subsidiary Alliance Air Indian Logistics Industry Insight .

which increased by 16. up from 43. submission/Registration of BOE along with AWB. DO. out of which international cargo accounts for 81. about 7km south of Chennai. Assessment of duty./AO (Custom) Unaccompanied baggage (Import) facilities Registration and noting of baggage declaration form with customs Obtain exam order from Supdt/ACC Complete custom exam and assessment of duty Pay custom duty Obtain out of charge from custom Supdt. Kamraj Domestic Terminal.122 in 2004-05 and 21.870 tonnes in 2004-05. letter of authority. first ISO-9001-2000 certified airport of the country. Singapore Airlines and Sri Lankan Airlines. handling all domestic flights and Anna International Terminal managing all the Indian Logistics Industry Insight . It has two terminals.111 in 2004-05.900 domestic aircrafts. Emirates. import licence etc. whereas Anna Terminal is utilised by all international airlines. Oman Air. Lufthansa. Obtain clearance from custom gate officer Import general cargo facilities Declaration. Present status and facilities available at Chennai Airport During 2005-06. audit and issuance Collect the print out of appraised BOE from appraisal counter Payment of custom duty Chennai International Airport Chennai International Airport. is located at Tirisulam. Malaysia Airlines.971 tonnes from 185.5% of the 27 © Cygnus Business Consulting & Research 2007 . Cargo traffic in 2005-06 has increased to 205. Chennai International Airport handled total 47. Other than Air India. packing list. Kamraj Terminal is used by all domestic airs and Malaysian Airlines. British Airways.• • • • • • • • • • • • • Complete exam and obtain "Let Export Order" from Supdt.8% from 18. Gulf Air. the other flights that operate from this international airport are Air Mauritius.155 international aircrafts. Kuwait Airways. Saudi Arabian Airlines.Aviation international flights. invoice.

also called ‘HAL Airport’.750sq meters. Terminal 1 has the departure lounge for all the domestic flights and Terminal 2 handles arrival of domestic flights. Cathay Pacific. The airport is the premier civil airport with modern ATC systems equipped for CAT-I IFR operations round-the-clock. as well as international connectivity.6m in 2005-06.total air cargo. Japan Airlines. The Chennai Airport has two warehouses for export and import cargo. with over 70 international and domestic flights flying everyday. Quantas. offers the following facilities: • • • • • Strong room Cold storage Electronic cargo shed Unaccompanied baggage Heavy cargo shed Bangalore Airport Bangalore Airport. The airport currently operates two domestic terminals—Terminal 1 and Terminal 2. Swiss Air and Thai Airways. The Airport is situated about 6km from MG Road that is at the centre of the city. This is a major hub in southern part of the country for domestic. Pakistan International Airlines.17m from 3. Passenger traffic has gone up by 20. Ethiopian Airlines. Export cargo has two AI and AAI warehouses. the other Indian Logistics Industry Insight . Bulgarian Airways.004sq metre.6% to 2. covering an area 8. These warehouses have one-time holding capacity of 40 tonnes and the temperature is maintained at 2–18 degree centigrade. KLM Airlines. British Airways.23m in 2004-05 and international passenger traffic has witnessed a growth rate of 8. Kuwait Airways.8m in 2005-06. covering a total area of 5. Other than Air India. Malaysian Airlines.34% to 6. Domestic passengers have increased by 29% to 4. is one of the busiest in India. 28 © Cygnus Business Consulting & Research 2007 . The import warehouse.Aviation airlines that operate through this international airport are Air Lanka. The international terminal manages departures and arrival of all international flights together.

covering an area of 41.852 tonnes in 2005-06 against 1.12. Container Corporation of India Ltd. export. The warehousing complex is named as Joint Air Cargo complex (JACC). transshipment cargo and unaccompanied baggage with a total ground storage area of 28. out of which international cargo constitutes 59% of the total cargo handled by the airport..44% to 69. Air freight traffic at the airport increased by 19% to 1. Bangalore Airport has one export cargo terminal.47% to 5. public waiting area and business centre 29 © Cygnus Business Consulting & Research 2007 .38. Passenger traffic at Bangalore airport has increased by 37. Warehousing Facilities at the Airport JWG-JACC has been formed as a joint working arrangement of Hindustan Aeronautics Ltd (HAL). Following facilities are available JACC: Indian Logistics Industry Insight . It has X-ray baggage handling facility.Aviation • • • • • • • Facilities for processing of import. provided by MSIL. Full-fledged customs facilities and EDI connectivity for processing of customs documents Adequate handling equipment and systems Online Integrated Cargo Management System for on line data processing Special facilities for valuable cargo and dangerous / hazardous cargo Well-trained customer-friendly personnel Facilities like photocopying. Lufthansa and Singapore Airlines operate through this terminal. (CONCOR) and Mysore Sales International Ltd (MSIL) with a view to augmenting and providing state-of-the-art warehousing and handling facility for air cargo at Bangalore airport. packer services.374 tonnes during the previous year.000 sq m.65m in 2005-06.Present Status The total aircraft movement from Bangalore Airport has significantly increased by 25. out of which domestic passenger traffic constitutes around 85% of the total passenger traffic in the airport. canteen.680 during 2005-06. public telephone.000sq ft.

15 483. FedEx.57% from 2001-02 to 2006-07.226 646. Indian Airlines. 30 © Cygnus Business Consulting & Research 2007 333.2). Secunderabad-based Flyington Freighters Private Limited and Jet Airways. whereas international air cargo traffic has been moving at CAGR of 13% from 2001-02 to 2006-07.Aviation According to Planning Commission. which has attracted many foreign logistics as well as airline service providers to plan their air cargo operations in India such as Cathay Pacific.222 294.56m tonnes against 1. Both domestic and international air cargo traffic at all Indian airports have registered an exponential growth rate over the last 5–6 years. special chemicals and high value pharmaceuticals.4.4m tonnes during 2005-06. India’s air cargo movements would grow at over CAGR of 11.79 Figure 4.4 Air Cargo Market Indian aviation industry has been experiencing an exceptional growth rate over the last five years.66 531.223 920. Increasing economic activities have fostered Indian aviation industry. registering a growth rate of 14. Indian Logistics Industry Insight .662 800 560. TNT and many Indian companies have also decided to start exclusive air cargo movements in India such as Air India.64 1000 823.137 600 400 200 0 2001-02 2002-03 2003-04 2004-05 2005-06 200607* Domestic 693. driven by booming Indian economy. total air cargo traffic is estimated to be over 1.608 International 456.436 .Planning Commission Estimates Source: Airport Authority of India During 2006-07.5% from 2007-08 to 2011-12. DHL. flourishing 1200 1028.05 375. international air cargo traffic at all Indian airports has been growing rapidly. Riding high on export of gems and jewellery. Domestic air cargo traffic has been growing at CAGR of 12.65% (See Figure 4.2: Air Cargo Market in India (‘000 tonnes) trade (both export and import) and the pharmaceutical industry. *2006-07.

decided to start six new freighter services in India in view of the growing Indo-US and Indo-China trade.4. is planning to launch a freighter service connecting Shanghai with Mumbai and Chennai. GoAir and Kingfisher Airlines have also decided to venture into air freight market and play a bigger role in the booming aviation sector. the Hong Kong-based airline. is in the process of converting two of its A310 aircraft into freighter aircraft by September 2007. has placed an order to acquire four Boeing 777F cargo aircrafts for an estimated cost of US$945m. decided to expand its network in India and to operate 17 flights weekly on Mumbai-Delhi route. • Last Year. This is likely to enhance its cargo capacity. Cathay Pacific currently lifts 155 tonnes of cargo per month. BDAL’s total freighter aircraft fleet will reach seven. the largest express transportation company in the world. The services will be 31 © Cygnus Business Consulting & Research 2007 . a Sino-Singaporean joint venture.4. • Great Wall Airlines. which has leased belly space on Falcon Aviation to fulfil the demand on the Kerala-Gulf and the India-Germany sectors. The company is expected to start its air cargo operation with three leased aircrafts by April 2007. The freighters will increase the capacity of the BDAL’s regular night flights to 250 tonnes from 166 tonnes. • Cathay Pacific Cargo. The new aircrafts will be positioned at Chennai and Kolkata. new players such as Jet Airways. the Secunderabad-based air cargo company. With the two new freighter aircrafts. Blue Dart Aviation Ltd (BDAL) added two leased Boeing 757 freighters to their fleet. In addition. several domestic as well as international air carriers have decided to start air cargo operations in India and some of them have already started flying freighter aircrafts in the country.1 Opportunities Galore In view of the present boom in air cargo segments in India. • Air India. Besides the stateowned carriers Indian Airlines and Air India. the airline is expecting addition of some new fleet for the quarter ended December 2006. The new Indian Logistics Industry Insight . The deliveries of the Boeing 777-200 freighters would start in the end of 2009. the public sector airline operator. The acquisition of cargo aircraft is one of the biggest orders so far by an Indian aviation company.Aviation freighters will be B747-400 Extended Range Freighters. • Flyington Freighters Private Limited. • FedEx Express.

099 42.083 19.642 2.923 273.853 14.9 237.924 16.172 2.949 21.572 -2.960 5.180 14.7 Delhi 106.410 14.9 18.356 10 Thiruvananthapuram 1.118 -3.2 2.287 23.308 4.178 1. The quantum of international cargo traffic handled was concentrated in the major internal hubs ie Mumbai.300 -5. Great Wall Airlines has a fleet of two Boeing 747-400 freighters.233 1.529 32.9 Chennai 39.535 3.861 18. Indian Airlines is also looking at converting five of its Boeing 737-200 passenger aircrafts into freighters.3 Kolkata 39. • Another important feature of ecstatic growth of Indian aviation industry is aircraft maintenance.6 Goa 3. has plans to start a domestic cargo airline.342 0.361 10.00 32 © Cygnus Business Consulting & Research 2007 Indian Logistics Industry Insight .4 0 0 Cochin 3.443 167.5 Kozhikode 1. The company would initially convert its old passenger aircraft into freighters to cater to the booming domestic air cargo market.853 21.0 0 0 Amritsar 34 68 100 1.335 8.0 9. Delhi.368 1.7 Ahmedabad 14. • Jet Airways.6 : Cargo traffic handled at top 46 airports in India (tonnes) Domestic International Airport Percentage Percentage 2004-05 2005-06 2004-05 2005-06 Change Change Mumbai 129.206 -11.941 56.3 30.00 Srinagar 2.3 146. The airliner has mooted a feasibility study for this purpose. • In addition. India’s largest passenger private sector airlines. Table 4.0 22.665 22.Aviation .157 13.6 Bangalore 47.900.450 142.578 109.2 Performance of Top 46 Airports The major international airports accounted for a majority of domestic cargo traffic between 2002-03 and 2003-04.427 38. Chennai and Bangalore.265 288.531 1.280 4.the first and only direct scheduled freighter services between China and India.193 -2.812 5.164 5.991 27.5 13.2 1.4 Hyderabad 20.8 2 140 6.433 81.210 16.411 9.615 42.437 22.1 Nagpur 2.3 Guwahati 4.0 273.278 1.273 -6.780 3.331 4. 4.965 5.1 Jaipur 1. repair and overhaul (MRO) industry.4.0 240 509 112. The domestic cargo traffic at major international airports is given in Table 11.623 3.031 26.6 64.

925 2.1 0 0 Imphal 1.064 1.599 5.150 11.017 7.4 0 0 Jodhpur 74 43 -41.949 102.6 : Cargo traffic handled at top 46 airports in India (tonnes) Domestic International Airport Percentage Percentage 2004-05 2005-06 2004-05 2005-06 Change Change Pune 8.0 626 552 -11.868 2.1 965 1.435 5.035 1.7 Source: Airport Authority of India 33 © Cygnus Business Consulting & Research 2007 .7 0 0 Mangalore 233 270 15.720 3.345 -10.0 0 0 Madurai 429 361 -15.4 0 0 Lucknow 1.7 0 0 Agartala 2.4 0 0 Visakhapatnam 670 504 -24.948 2.8 Coimbatore 3.6 0 0 Silchar 247 275 11.9 0 0 Rajkot 1.662 483.0 0 0 Bhubaneswar 945 875 -7.5 0 0 Patna 1.3 301 692 129.2 0 0 Trichurapalli 31 21 -32.2 0 0 Indore 2.040 4.794 5.420 37.3 0 0 Ranchi 237 247 4.2 0 0 Others 842 805 -4.962 2.4 0 0 Bhopal 323 308 -4.Indian Logistics Industry Insight .031 825 -20 0 0 Leh 827 716 -13.6 0 0 Chandigarh 440 477 8.349 -19.063 -0.666 -1.9 0 0 Raipur 865 905 4.9 0 0 Bagdogra 420 567 35.4 0 0 Total 456.9 Gaya 0 0 0 0 Vadodara 3.517 1.9 0 0 Dibrugarh 503 593 17.791 8.4 0 0 Juhu 395 239 -39.608 920.8 0 0 Udaipur 1 15 650.265 3.9 0 0 Jammu 944 1.8 0 0 Port Blair 1.Aviation Table 4.736 1.442 -16.5 0 0 Aurangabad 1.0 Varanasi 627 574 -8.9 823.

terminal and cargo facilities at the airports. it manages 126 airports. expansion and modernisation of operational.4. The scheduled clearances of such civilian aircrafts. The AAI is also responsible for managing the entire Indian airspace and provides air traffic control services over the Indian airspace and adjoining oceanic areas.3: Composition of Airports managed by A.73% Domestic 70. Internation al 8. It also looks after terminal-building facilities at military airports for civilian aircraft. Although the AAI continues to be a major provider of airport infrastructure in the country.63% Note: Total may not add upto 100 due to rounding off Source: Airport Authority of India Indian Logistics Industry Insight .3). the government has permitted private sector companies to take up Greenfield projects such as Hyderabad International Airport and Bangalore International Airport. however. Civil Enclaves 20. AAI looks after the development. which include 11 international airports.63% Figure 4.5. At present. 4.1 Role of AAI The Airports Authority of India was set up in 1995 to develop airport infrastructure in the country.A.I. 89 domestic airports and 26 civil enclaves at Defence Airfields (See Figure 4.5 Airport Authority of India The Airport Authority of India (AAI) is the nodal agency for managing airports in India and provides air traffic control services over the entire Indian airspace and adjoining oceanic areas. The Airports Authority of India owns and manages most airports in India. come under the purview of Defence authorities.Aviation 34 © Cygnus Business Consulting & Research 2007 .

In addition. the AAI provides parking bays and the space for setting up facilities such as administration offices and dispatch centres. AAI provides services such as route navigation and Xray baggage. For example. Indian Logistics Industry Insight . domestic airports and civil enclaves at Defence Airports Development and management of international cargo terminals Vigilance Provisioning of passenger facilitation and information system Expansion and strengthening of operational areas such as runways. operate and maintain international airports.Aviation 35 © Cygnus Business Consulting & Research 2007 .Other functions of AAI • • • • • • • To design. construct. Providing visual aids The AAI provides facilities and services to airlines for a fee. apron and taxiways Providing communication and navigational aids such as Instrument Landing System and Doppler Very High Frequency Omni-Directional Range (DVOR).

Air France and Japan Airlines. Some of the prominent ones include British Airways United Airlines.6 Carriers The Indian aviation sector is witnessing rapid development since deregulation as a number of private players started up their operations in domestic market.5%. The Indian Airlines primarily serves the domestic market though its services extend to about 17 international destinations. private regular airlines contributed around 48.7% against the same period previous year.4. regular airlines’ share was 72.6. Competition The competition in domestic sector is fierce with the major players being Indian Airlines. Aeroflot.9% followed by governmentowned airlines at 26.4% and low-cost airlines at only 0. Kingfisher Airlines and Spice Jet. The domestic Indian Logistics Industry Insight . Due to rise in competition.Aviation sector excludes “on carriage” services provided by government-owned Air India. • Indian Airlines & Air India The Indian Airlines and Air India are fully-owned by the Indian Government. Air Sahara and Air Deccan. Go Air and Indus Air. The international sector comprises 45 carrier run services to and from India. Paramount Airways. Jet Airways. In recent times. state owned airline service providers share has been eaten up by the private players. Spice Jet. 36 © Cygnus Business Consulting & Research 2007 .9% against the same period of the previous year. on the other hand. the domestic sector has experienced stiff competition due to the entry of low-cost airline service providers such as Air Deccan. Qantas. government-owned airlines at 18. primarily serves the international sector though it also services the domestic sector in a small way. followed by low-cost airlines at 32. Indigo Airlines. In terms of cargo traffic. In January 2007. The fleet size of Indian Airlines and Air India is given in Table 4.6% to the total passenger traffic. Air India. Private airlines continue to dominate the domestic market. Lufthansa.

It currently operates five A320s along with its original fleet of 13 ATR42 aircrafts. almost all the airline service providers are enhancing their fleet strength. Air India Ltd with 38. 37 © Cygnus Business Consulting & Research 2007 . Air Sahara 28 among others to total 308.Aviation Jet Airways Jet Airways is the largest private domestic airline in India with a fleet of 62 airplanes comprising 28 Boeing737-800s. It was promoted by Air Deccan Pvt Ltd in 2002. making the operator maintaining youngest aircraft fleet in Asia. 13 Boeing737-700s. • Indian Logistics Industry Insight . two B737-900s.3 years. followed by Air Deccan with 41. Air Deccan hopes to add another 30 A320s and possibly 30 ATR42s to its fleet in the next five years.Table 4. six B737-400s. The average age of the fleet is 5. both Jet Airways and Indian Airlines are leading with 59 aircraft owned/operated. Recently. which is expected to increase to 415 by 2012. Currently. Air Deccan slashed its fares on select routes in a bid to attract premium customers of Indian Railways.7 : Operational Fleet of Indian Airlines/Alliance Air Airbus A-300B4 Airbus A-320 Airbus A-319 DO-228 Source: DGCA Total Fleet 4 2 8 1 19 34 No. one A330-200. • Air Deccan Air Deccan is the first low-cost airline in India. of Aircraft 3 48 06 2 B777-200 B747-300 (COMBI) B747-400 B747-400 (COMBI) A310-300 Total Source: Air India Owned 2 6 8 20 Leased 4 2 1 11 14 In view of the booming aviation sector. three S340-300s and eight ATR72-500.

A closer interaction with Federal Aviation Authority and other related organisations in the US will lead to an improvement in safety and security standards as well.New Low-cost Carriers • • • • Go-Airways: Spice Jet Indigo Paramount 4. Indian players had limited access to the international airspace. higher flight frequency. Private carriers to fly on international routes From December 2004. For instance. Chennai. to provide 38 © Cygnus Business Consulting & Research 2007 . lower fares and stronger ties with the US. Mumbai. Indeed the upshot of open skies agreement is improved air connectivity. Sri Lanka has been allowed to operate daily services to Delhi. the Indian government started allowing private carriers in India to operate services to select destinations in the South Asian Association for Regional Cooperation region(SAARC). A recent open skies agreement with the US. ASEAN The Indian government has decided to permit designated airlines from ten nations belonging to the Association of South East Asian Nations (ASEAN) to operate up to Indian Logistics Industry Insight . Hyderabad and Kolkata and unspecified number of services to 18 other destinations in the country. Chennai and Kolkata—subject to receiving equal reciprocal rights.Aviation seven services to four metros—New Delhi. operating continuously for five years and possessing a fleet of 20 aircraft. The airlines from ASEAN countries can also operate unlimited services to 18 other destinations in India. Mumbai. Bangalore. however. The government permitted Indian scheduled carriers. subject to receiving equal reciprocal rights. provides Indian airlines unrestricted access to key American destinations such as New York and Los Angeles.7 Recent Trends US opens skies for India Till recently.

which would place the merged entity at 35th position in the world ranking as against the present ranking of 48th in case of Air India and 70th in case of Indian Airlines. The acquisition is the largest deal in Indian aviation industry.50 billion. With the acquisition. Kuwait and Saudi Arabia as they have been reserved for Air India and Indian Airlines for three years. Bahrain. India’s largest private sector airline service provider has acquired Air Sahara Indian Logistics Industry Insight . which will lend the competitive advantage for the government-owned airline service provider to improve their market share. However. Jet-Sahara would change the Indian aviation industry business scenario in the coming years. The Union Cabinet has recently cleared the merger of the two national carriers.Aviation in all cash deal for Rs14. 39 © Cygnus Business Consulting & Research 2007 .services to other international destinations. The ranking of the merged entity would further improve to 20th with induction of new fleet. Jet Airways acquires Air Sahara Jet Airways.40 billion. 40% less than the price Rs23. The combined revenue in 2004-05 of the two airlines was around Rs130.00 billion that Jet Airways had agreed to pay for the acquisition of Air Sahara in January 2006. Oman. private carriers are not allowed to operate services to Middle East destinations such as UAE. The market power that would accrue from the financial muscle would fortify the ability of the merged unit to take on competition even in the international market. which has been witnessing increasing dominance of global airlines alliances. Merger of Air India-Indian (formerly Indian Airlines) Ministry of Civil Aviation’s proposed merger of Air India and Indian is likely to take place during the first quarter of 2007-08. Qatar.

if they choose to. delegating supply chain management to specialists • Improve customer service • Enhance flexibility of business operations 2. the outsourcing of logistics function is motivated by both cost benefits and efficiency gains in the supply chain management.Aviation 1. can outsource their logistics function thanks to the emergence of third party logistics (3PL) service companies. operational and financial (see box). logistics has emerged into a separate function. Strategic Factors • Focus on core competency. Operational Factors • Improved process execution at all levels • Optimum use of technology for improving operations 3. most of the companies understand the importance of logistics in the overall cost structure and competitiveness. Intermediaries and Support Service Providers With the rapid changes in the business environment.1 Reasons to Outsource Logistics Functions The factors that drive the outsourcing of logistics function to the 3PL provider can be grouped into three categories: strategic. A large number of companies have already gone ahead and set up a separate department for handling the logistics functions. Unlike the outsourcing of other business processes where cost reduction is the prime driver. Financial Factors • Significant reduction in costs • Reduction in capital costs 40 © Cygnus Business Consulting & Research 2007 . 5. the importance of logistics function will increase and so will the practice of outsourcing logistics function to the 3PL provider.5. Presently. As the business environment grows ever more complex and dynamic. instead of getting bogged down in non-core activities. Now such companies. This option enables companies to focus on their core activities. The third party logistics involves hiring of outside specialists to handle the logistics function. Indian Logistics Industry Insight .

their basic major logistics domestic functions. “Third Party Logistics – the Way Forward for Indian Logistics Market”. which is expected to grow at a CAGR of 21.9% to reach US$3. Along with their multinational counterparts. 5. shipment optimization. the 3PL providers extend services such network design.3m in 2005.2 3PL Market Size With the starting of operations by multinational companies in the Indian market.3 Function of Third Party Logistics The services of 3PL providers can encompass the entire supply chain or parts of it. If a company opts for the outsourcing of the transportation process. the Indian 3PL market was estimated at Indian Logistics Industry Insight .7m by 2012. a large numbers of small and medium companies are also gearing up to use 3PL services in their logistic functions. 5. According to Frost & Sullivan’s research report entitled.Aviation Services frequently outsourced to 3PLs • • • • • • • Direct Transportation Services Customs Brokerage Freight Payment Services Freight Forwarding Warehouse Management Distribution Facilities Shipment Consolidation about US$890.556.The adoption of modern manufacturing practices such as just-in-time and built-to-order together with the rise of global manufacturing network is also driving demand for 3PL services. This is owing to the growing presence of multinationals and the renewed thrust on exports. companies also started outsourcing Realising the significant benefits like cost reductions and just-in-time delivery gained by these companies. shipment tracking and freight payments. 41 © Cygnus Business Consulting & Research 2007 . carrier contracting. the 3PL market is blooming in India.

Other sectors that have contributed substantially to 3PL market in India include the IT hardware and electronics. The 3PL providers undertake core warehousing activities besides providing value-added services such as kitting and packing. Since it requires huge investments. the largest end-user industry for 3PL services in India. Apart from these factors. and Wal-Mart etc in India is expected to fuel the growth of 3PL market and contribute to considerable growth of 3PL usage in their respective industry sectors. the 3PL provider’s co-ordinate global freight movements and handle customs clearancefreight forwarding. According to Frost & Sullivan’s research. as of 2005. with multinational companies in all industries being the predominant users of these services.In the distribution sphere. 5. India’s increased focus on improving logistics infrastructure is expected to have a huge positive impact on 3PL market in the country.a uniform tax regime that is expected to drive Indian industries towards using more 3PL services. Hyundai. A full implementation of this regime would necessitate having centralized large warehouses to achieve best Indian Logistics Industry Insight . is the automobile and auto component industry.Aviation efficiency in logistics. In this context. fast moving consumer goods.4 State of 3PL in India The 3PL market in India is relatively still in an emerging stage. Flextronics. Indian governments Value Added Tax . the 3PL providers design the distribution facility and take care of project management. In the overseas trade. The factors that are driving the Indian logistics industry towards 3PL market are. which creates immense potential for 3PL service providers. the entering of multinational companies like BMW. government has invested US$17 billion to upgrade highways with the implementation of two major projects. textiles and retail. Honda and Ford have set up their manufacturing bases in India and have been the major users of 3PL services. most domestic companies would like to outsource the warehousing function. 42 © Cygnus Business Consulting & Research 2007 . namely the Golden Quadrilateral Network and the North-SouthEast-West (NSEW) Corridor. This is because multinational automobile giants like Suzuki.

The 4PL service providers serve as single-point reference for all logistics services.Aviation To help companies in fulfilling legal formalities of transportation a separate class of clearing agents or freight forwarders have emerged over the years. the 4PL service providers extend comprehensive supply chain solutions to clients. the Indian market is witnessing the emergence of fourth party logistics (4PL) service providers. 3PL service providers failed to deliver total supply chain management solution.6 Clearing & Forwarding Agents Indian Logistics Industry Insight . possess quality manpower resources to supervise vendors and ensure continuous process improvements. Such providers have the logistics expertise to provide effective solutions. A freight forwarder is at once a customer and sales partner of the airlines. meanwhile. 5. 43 © Cygnus Business Consulting & Research 2007 . The 4PL service providers may fare better on this count. In the developed markets. Therefore. and information technology skills to network customer systems. The 4PL service providers provide the entire logistics solution on their own or take the help of multiple 3PL providers. In short. The 4PL service provider takes over the entire logistics function. An integrator controls the sales channel and the transportation processes. The freight forwarders specialize in routing shipments on scheduled flights even while organizing chartered flights for shippers. So far. The cargo clearing agents or freight forwarders also acts as a consolidator of shipments.5 Fourth Party Logistics (4PL) Recently. organize all-cargo charter flights. The integrators offer door-to-door services to shippers. obviating the need to deal with multiple 3PL service providers. the freight forwarder serves in two ways.5. The freight forwarders deliver most air cargo shipments to airlines in consolidated bundles. The freight forwarder. The rise of 4PL service represents the next step in the evolution of supply chain management in India. such 4PL providers procure total supply chain management mandates from companies and hive them off to multiple 3PL service providers.

5.The freight forwarders offer a range of logistics services to the shipper. and Gati Limited. Safe Express. The Indian companies involved in freight forwarding business include Patel Roadways. Warehousing refers to the systematic storing of goods with the goal of making them available on demand. Balmer Lawrie. warehousing refers to the storing of goods from the time of their purchase or production to their actual use or sale. It creates time utility by bridging the time gap between production and the consumption of goods.7 Warehousing The warehousing discharges an important role in business. Blue Dart. Types of Warehouses The warehouses can be classified into the following categories: • • • • • Indian Logistics Industry Insight . In other words. DHL.Aviation Private Warehouses Public Warehouses Government Warehouses Bonded Warehouses Co-operative Warehouses Functions of warehouses Warehouses perform the following functions: • • • • • • • Storage of goods Protection of goods Bearing risk Financing Processing Grading and branding Transportation 44 © Cygnus Business Consulting & Research 2007 .

9% and international passenger traffic went up by 15. Indian air cargo market has also achieved an excellent growth rate over the last couple of years.1 Overview of Indian Aviation Industry Increased competition. mainly due to ecstatic growth of IT/ITES. 6. whereas international air cargo registered a growth rate of 11. Out of the total passengers handled.34m passengers. retail and manufacturing.6% from 2001-02 to 2006-07.7% to 1. 45 (In Rs bn) *Cygnus Estimates Source: Planning Commission of India © Cygnus Business Consulting & Research 2007 .98m. registering a growth rate of 23.2 Market Size of Air Transport System in India Figure 6.29m tonnes in 2004-05. Air transport Indian Logistics Industry Insight .Aviation 50 40 30 20 10 0 2001-02 2002-03 2003-04 2004-05 200506* 200607* industry at constant (1999-2000 prices) has been growing at CAGR 7.6. tourism.1: Industry Size of Air Transport System in India (at 1999-2000 prices) 60 Air transport has been emerging as one of the major mode of transport system in India. economic expansion and capacity augmentation have bolstered Indian aviation industry. Indian airports have handled total 73.9%.1% to 22.4m tonnes against 1. domestic passenger traffic was 50.7%. During 2005-06.7% and domestic air cargo of 5. a growth rate of 27. driven by growing demand for air transport system over the last fivesix years. During 2005-06. Market Dynamics 6.36m against the previous year. it registered a growth rate of 9.

7 Airports Twenty three 21. both vegetables domestic has the and and been fruits. Kolkata and Bangalore—grew at a CAGR of 9.24 -4.3.27 1. The implementation of Greenfield projects in the international segment.15%.1: Total Cargo Traffic Trends (’000 tonnes) Airport Percentage 2004-05 2005-06 Category Change Fifteen Int'l 1. Significantly.7 Source: Airport Authority of India encouraging in the last few government strikes new cross-border trade agreements.845 0.217. Mumbai.96 21.9% between 2002-03 and 200506.280. whereas minor airports are under-utilised. 160 140 120 100 80 60 40 20 0 2002-03 2003-04 2004-05 2005-06 followed by Chennai International Airport at 10. however. years.93% between 2002-03 and 2005-06. Demand-Supply Scenario The air cargo traffic is currently limited to low-volume and high-value products such as garments and pharmaceuticals in addition to perishables such as flowers. holds out hope. Indian Logistics Industry Insight .6..57 10.26 6.2: Air Cargo Capacity Utilisation (In percentage) The combined air cargo traffic of five major airports—Delhi. international. Bangalore International airport has witnessed the highest CAGR of 14.07 -4.805 -4.17 21. the cargo traffic is bound to rise.403.341. The major Indian airports are running out of capacity.94 9. is highly skewed.0 Domestic Airports Other 0.2 (CIAL) Seven Custom 18. Source: Planning Commission & Cygnus Research 46 © Cygnus Business Consulting & Research 2007 . The growth in cargo traffic.Aviation Figure 6.2 Airports Cochin Int’l Airport 22.23 1.7 Domestic Airports Total 1.06 19. The capacity of Indian airports. however. Chennai. The expansion of major airports is easier said than done due to financial constraints and physical limitations such as availability of land. As Table 6.

1 5.Aviation Deccan. 30. 7.28% share. 6. 33. 1 9.90% Jet A irways.90% Kingfisher.80% Indian A irlines. 8.30% Indian A irlines. 1 0% 9. Air Deccan’s market share is increasing gradually over the last couple of years due to its promotional and location activities.20% Jet A irways.60% Source: DGCA Indian aviation sector has been experiencing rapid expansion in terms of number of players as well as fleet.40% Indian Logistics Industry Insight .5: Market Share in Q3 2006 Spice Jet. 4.20% Sahara. 6. location etc.4 Market Share Figure 6.30% Deccan.90% Spice Jet.30% Spice Jet. 8.3: Chart. particularly Air Deccan. 34.Mumbai International Airport accounts for more than 30. In India.1 Others. 3.30% Sahara. Indian aviation sector has been revolutionised with the entry of Low Cost Carriers (LCC) in the domestic route. all the 15 international airports have a significant contribution in India’s booming air cargo market. 8. 21 .4: Market Share in Q2 2006 Kingfisher. followed by Delhi International Airport with 27. the LCCs in the domestic route are 47 © Cygnus Business Consulting & Research 2007 . 6% Others.80% Indian A irlines. 7.70% Deccan.80% Others.20% Jet A irways.Market Share in Q1 Figure 6.72% of the country’s total air cargo traffic in 2005-06. 1 .90% Sahara. 22% Source: DGCA Figure 6. Moreover. 23.90% Kingfisher. 9. 6.

A/Caribbean 3. 6.6% 4.0 5. In addition. retail industry and tourism sector.4% Trans-Pacific 5.3% 5.1% 8.3% 7.8% 6. driven by resurgent global economic conditions. mainly due to emergence of LCCs such as Go Air.A. Similarly.8% 48 © Cygnus Business Consulting & Research 2007 . Paramount.9% in first quarter of 2006. Spice Jet and essentially.Aviation AAGR 4.5% 7. There has been a sharp shift in market share of Indian Airlines.9% 4.1% in first quarter of 2005 to 34.9% Within LA/Caribbean 6.2% Within Asia Pacific 8.Middle East 4.4% 5.4% N.7% 3. The AsiaPacific region would have the key trade routes for global air freight market. During first quarter of 2005. its market share was 34.7% 5.1% 5. The market share of Deccan Airlines has increased manifold from 7% in first quarter of 2005 to 15.3% 5.3% Europe. Jet Airways’s market share has also come down sharply from 44. Deccan Airlines in the domestic market.7% Total International Source: IATA Indian Logistics Industry Insight . Table 6.8% between 2007 and 2009.6% 3.5% 4. – L.5% 4.5% 5.2% Europe-Asia Pacific 5. which came down to 23.3% 4.1 Global Air Cargo Forecast International air cargo traffic is expected to grow at average annual growth rate of 5.2% in the corresponding quarter of 2006 due to promotional fare concessions and location.4% 5.6% 5.6% 4.5% 3.0% 5.4.8% 3. booming international trade and several open sky policies signed between the countries.5% Within Europe 3.7% 8.0% Europe-Africa 4.6% 3.9% in first quarter of 2006. particularly countries like China and India.3% 4.8% 5.7%.7%% Middle East –Asia Pacific 7.5% 4. Middle East air freight is also expected to show strong growth over the next three years.2 : Global Air Cargo Forecast – 2007-2009 Region 2007 2008 2009 North Atlantic 4.4% 7.4% 3.immensely getting benefited by boom in IT/ITES sector.4% 8.4% 7.

52 billion (Rs 5. of goods traffic. it gives enough scope for the logistics industry Indian Logistics Industry Insight . on economic 3. Demand for shipping is also dependant growth. 49 © Cygnus Business Consulting & Research 2007 . Australia. uncut gems.5 9. 6.17 billion (Rs 6.6 trillion) in 2005-06 as compared to US$111.5 Growth drivers 6. machinery. Belgium. Switzerland and Germany. capital goods. For instance. spending on increases.01 trillion) in 200405. and fertilizer while major import destinations include USA. India’s imports totaled US$149.98% share of the global trade in 2005. The major imports include petroleum and petroleum products.2 Global trade The foreign trade of India has been rising over the years though considerable scope for improvement exists.6.Aviation to grow.8 2002-03 2003-04 2004-05 2005-06* 200607** *Quick Estimates.6: India's GDP Growth Rate economy grows.2 services will increase and so passenger surging economy places huge demands on the air and surface transport industries.5.5. India had a 0. As the The and A (In Percentage) Figure 6. With the economy positioning itself as the fourth largest economy (in terms of PPP) and 2nd fastest growing economy in the world. China. ** Advanced Estimates Source: MOSPI The Indian economy has been consistently growing over 7% for four consecutive years.5 9 7. 10 9 8 7 6 5 4 3 2 1 0 8.1 Economic growth Economic growth drives the logistics logistics transport will industry.

As a result companies preferred to outsource the logistics activities to 3PL. engineered export leather finished goods and leather gems and and Figure 6.Aviation 6. Japan. the companies today are focusing on core operations to cut down on cost and time.75 trillion) in 2004-05. especially the road transport sector.54 billion (Rs 3.10 2003-04 2004-05 2005-06 Export Grow th Rate Import Grow th Rate Source: DGFT 4.09 billion (Rs 27.85 33.25 21. India’s entry into the WTO and the signing of several ASEAN Free Trade Agreement (AFTA) and bi-lateral FTAs will increase foreign trade. Moreover the Indian logistics industry is dominated by the unorganized sector. In response to the present scenario it leaves a huge opportunity for contract logistics market. China. As foreign trade increases.5.29 19. the demand for logistics services will increase. The road transport sector is being dominated by truck owners having less than 5 trucks but contributes around 80% of the revenues.45 iron and steel) while major destinations USA. Indian Logistics Industry Insight . goods. Similarly freight forwarding segment is also being dominated by small players who generally cater to the local requirement.7: India's Export-Import Growth Rate chemicals 45 40 42.76 23. and the European Union (particularly Germany). the United Kingdom.The principal exports include textiles.56 trillion) as compared to exports of US$83. 50 © Cygnus Business Consulting & Research 2007 .41 (including include (In Percentage) 35 30 25 20 15 10 5 0 2002-03 20. In 2005-06. jewellery. which in turn will drive demand for logistics industry upwards. total exports were valued at US$103.70 30.3 Corporate Trend With competitive pressure across the verticals.

railways. The government has undertaken mega projects such as the National Highways Development Project to improve infrastructure.5. Organised retail.5.9%. A company might source components from one 51 © Cygnus Business Consulting & Research 2007 . Indian Logistics Industry Insight .6. is expected to grow to US$64 billion by 2015. The growth in manufacturing sector and retail sector will definitely benefit the logistics sector. the retail sector is expected to grow 40% to US$427 billion by 2011. power sector. 6.6% in January 2007 as compared with same period last year. which is presently around 3% of the whole. According to the data published by CSO.5. The Index of Industrial production (IIP) in December 2006 went up by 11. ports and airports. pressure on margins and the lowering of trade barriers together with advances in information technology and global transportation has led to the proliferation of global manufacturing networks. GOI India’s manufacturing output increased by 11. has sought the help of private sector.4 Improved infrastructure The Indian Government is stepping up investment in roads. Intense competition.Aviation The strengthening of With estimated investments of US$22 billion over the next five years.1% as compared with the same period previous year. The government is also focusing on improving the rail-road-port connectivity.6 Emergence of global manufacturing networks and increased FDI The rise of global manufacturing networks will increase demand for logistics services.5 Growth in the manufacturing sector and retail boom India with its 300m plus middle class and relatively low cost workers with technical skills backed with positive framework for infrastructure development is poised to becoming a manufacturing powerhouse in the next 5-10 years. The government. realizing the enormity of the task. infrastructure is a big positive for the logistics industry. Now companies worldwide are intent on driving down costs by harnessing cheaper resources. The manufacturing sector which has around 80% weightage in the index went up by 11. 6.

India is likely to receive US$12 billion of FDI during the current financial year as compared to US$5.8 Liberalization and Deregulation The government initiative is in right direction.3 billion.7 Information technology Information technology has forced companies to become more customer-oriented and make their services more efficient.country. It has reduced both time-to-order and time-to-market. Total FDI inflows during April-December 2006 stood at US$9.5. The government is liberalizing the logistics sector. Global manufacturing networks lead to higher productivity. For instance. 6. an increasing number of companies are focusing on their core operations and outsourcing non-core operations. such as packaging.5 billion in the corresponding period last fiscal. as compared with US$3. The information technology is triggering far-reaching changes in the logistics industry as Indian Logistics Industry Insight . According to certain estimates. assemble them in another country and sell them across the globe. draft maritime policy.04 billion as against US$350m in the same period in 2005.Aviation well. the Public Private partnership (PPP) model in the road sector is likely to hasten the growth and 52 © Cygnus Business Consulting & Research 2007 .5. electricity act. online order-processing and other value-added services. It has played a critical role in the advent of third-party logistics providers (3PLs). In addition. This marked the highest ever FDI inflow into the country in a single month. who offer an entire range of services from warehousing to transportation and include tracking. labelling and bar coding. The MNC eying India is very much evident from the fact that the country witnessed a nearly six-fold increase in Foreign Direct Investment (FDI) inflows in December 2006 at US$2.5 billion in the previous fiscal 6. draft civil aviation policy and liberalization in financing pattern of infrastructure projects (Public Private Partnership) will add positive framework for infrastructural development. reduced workforce and lower costs for companies—and increased revenue for logistic companies.

Aviation as well as in service range.modernisation of the roads sector. At the same time end users are also forcing vendors to expand their service-mix and to adopt new business models at a very fast pace. meanwhile. The B2B market on the other hand is also re-inventing new business models and has already begun to offer end-to-end e-commerce platform for the entire buy-cycle to business users. User demands drive the growth patterns for the e-commerce market. Retail on Internet is witnessing very positive growth trends and end users are having numerous choices to buy from. According to estatsIndia. the corporatisation of railways and ports will also make them commercially as well as transparent. The open-sky policy in the aviation sector. B2C e-commerce market is expected to touch Rs92. Increasing the foreign direct investment limit in aviation sector will improve the capacity and operational efficiency of airports.9 Development of E-commerce The E-commerce Industry in India has come a long way since its early days. The government is also mulling over the corporatisation of airports at Delhi.55 billion by 2009 leaving enough opportunities for supply chain management and logistics companies to grow. Indian e-commerce market was around Rs41 billion in 2005-06. Chennai. Market has matured and new players have entered the market space.5. Similarly. will enable domestic airlines to spread their wings to countries outside India. offering urban rail services in Delhi. Mumbai. Better roads will help logistics industry improve the quality and the speed of services. 6.59 billion in 2009 whereas B2B is expected to touch Rs13.com. In the present dynamic scenario e-commerce market in the B2C space is growing in demand Indian Logistics Industry Insight . and Calcutta airports to raise capital for upgrading them to global standards. Recent examples of corporatisation include Konkan Railway Corporation (KRC) and The Delhi Metro Rail Corporation. an internet research agency. 53 © Cygnus Business Consulting & Research 2007 .

Radar Data Processing Systems. Automatic Message Switching Systems (AMSS). which has benefited the Air Transport System in India to a great extent. Chennai. the air transport network is characterised by many deficiencies and a major exercise in expansion of capacity and modernisation is necessary. This has led to a situation of high cost. Some technological developments in Indian aviation sector are given below: 7. low energy efficiency. This will have to be accompanied by technological upgradation in many critical areas. Automatic Self Briefing Systems (ASBS). Technology and Innovation There has been a rapid improvement in technological development in the country. 12 VORs/DVORs with Remote Monitoring and Maintenance facility co-located with High Power DMEs for unidirectional airways. Thiruvananthapuram. The need for new technology acquires greater urgency because the transport sector in India has been suffering from slow technological development for a long time. 54 © Cygnus Business Consulting & Research 2007 .7. Guwahati and Ahmedabad. Flight Data Processing Systems. Airport Surface Detection Equipment. Airport Indian Logistics Industry Insight . Following systems have been provided: Air Route Surveillance Radars. Hyderabad. Despite impressive expansion over the years. Monopulse Secondary Surveillance Radars (MSSRs). The magnitude of the task of capacity augmentation and replacement of over-aged assets offers an opportunity for technological upgradation in air transport system in India. Radar Facilities Covering Major Routes: Besides above.1 Air Traffic Management (ATM) Airport Authority of India has taken various steps to modernise Air Traffic Control services at Delhi and Mumbai. six more ASRs/MSSRs have been installed one each at Kolkata.Aviation Surveillance Radars (ASRs). The modernisation work has almost been completed at a cost of more than US$100m. and slow movement of passenger and freight traffic.

55 © Cygnus Business Consulting & Research 2007 . 7.7. Electronic Data Interchange Electronic Data Interchange (EDI) is a standard format for exchanging business data. coordination with planning. post installation performance checks and organising flight calibration before equipment commissioning are the aspects intrinsically involved in the process. invitation of tenders. procuring and commissioning of all Communication. To meet the challenges posed by ICAO CNS/ ATM transition plans for SATCOM based Indian Logistics Industry Insight . In India. machineprocessable form over computer communication networks.Aviation Air Traffic Management. Navigation and Surveillance (CNS) facilities and support systems for air navigation based on short-term and long-term requirements to synchronise the organisation’s plan with International Civil Aviation Organisation's (ICAO) approved plans being managed by CNS Planning Department. It is the inter-organisational exchange of business documentation in structured. Conducting site surveys for equipment location. Preparation of qualitative requirements and system specifications in coordination with all concerned agencies / organisations.2 Communication/Navigation/Surveillance Airport Authority of India has decided for planning. placement of orders factory inspection of equipment and its subsequent installation and commissioning are the responsibilities discharged by the CNS Planning Department.3. both to be commissioned soon. Automatic Dependent Surveillance (ADS): A system at Chennai has already been installed and successfully tested for operations of ADS / CPDLC with FDPS and an additional system is under testing at Kolkata. civil and electrical engineering departments for associated construction activities for installation and commissioning. from technical and operational suitability point of view. EDI implementation agencies are Ministry of Civil Aviation and Airport Authority of India. the CNS Planning Department has already accomplished. tender evaluation of technical and commercial bids. preparation of estimates.

post 9/11. There will be a drastic reduction in the human power deployment by the agencies at the cargo terminal for processing of their consignments. Benefits of EDI The latest information and status of import / export cargo will be made available to the trader on the Internet. facilities available. Border Control Agencies have to be more vigilant due to threat poised by global terrorism. 56 © Cygnus Business Consulting & Research 2007 .• Automation of cargo processing activities introduced in 1999 at four metro airports. for the information and usage by the users are also available in the website. In addition.4 Advance Passenger Information System (APIS) The Government of India had issued a notification for implementing INDIA-APIS from October 1. Hyderabad and Thiruvananthapuram. cargo handling systems and procedures.Aviation do’s and don’ts etc. 2005 due to rise in volume of passenger traffic to India. Indian Logistics Industry Insight . customs and security also needs to be taken care of. The importing/exporting community will be able to know the AAI charges applicable on a particular consignment at any given time through Internet. Moreover. which will ultimately reduce the transaction cost of import and export cargo. 7. Information about AAI and the regulatory and the facilitating agencies. viz Delhi Mumbai Kolkata Chennai and online data capturing was AAI is assisting automation of cargo processing activities at three non-metro airports— Bangalore. AAI-prescribed charges/rates. although immigration counters and staff have not been increased at the same pace. inconvenience to passengers due to delays at immigration.

Operation process of INDIA-APIS The data in prescribed format captured at check-in time shall be transmitted by the Airlines within 15 minutes of take off of the aircraft to INDIA-APIS Data Centre Data can be transmitted to INDIA-APIS Data Centre in two ways: o o From the Airlines Network to the Service Provider Network Web-enabled data transmission.Aviation being installed at Delhi and Mumbai Airports which will further enhance the surveillance over Indian Air Space. These technologies are proposed to be taken up during the 11th Five Year Plan for the development of the Civil Aviation Sector: IT based system to assess vehicular traffic volume for airport public access LED based airport lighting and display technology Intelligent Digital Surveillance Integration techniques for Information 57 © Cygnus Business Consulting & Research 2007 . Trivandrum. Automatic Dependence System (ADS) with Control Pilot Data Link Communication (CPDLC) has been installed at Kolkata and Chennai Airports with similar systems also Indian Logistics Industry Insight . Implemented Technologies Flight Data Processing System (FDPS) have been introduced at Nagpur. wherever such facility is not available Data received by the service provider shall be transmitted to Immigration Central Hub and the Immigration system at the destination airport in India Data received at the destination airport shall be processed and checked against the lists maintained by immigration authorities. Ahmedabad and Varanasi Airports to achieve improved automation of air traffic services. Immigration authorities at the destination airport shall be ready to clear the passengers expeditiously. New Technologies The following technologies will be deployed for implementation in airport environment.

Aviation 58 © Cygnus Business Consulting & Research 2007 . Indian Logistics Industry Insight .Information dissemination and On-line Payments through Internet Radio Frequency based identification techniques Wireless information technologies Smart Card technology Common Use IT systems On-line Simulation of terminal congestion Electronic Perimeter Security System and intrusion prevention Explosive Detection technology Satellite based CNS/ATM systems.

Aviation 59 © Cygnus Business Consulting & Research 2007 . Airline companies covered represent the major ones. they are not included in the list.8. wherever needed. Although a few multinational companies (like AFL. Major Players Introduction Major players profiled in this section are selected from air transport system of logistics services in India. DHL and Fedex) are operating in India. Information about these companies is taken from published secondary sources as well as through primary surveys. as they are privately incorporated in India and hence their financial and other performance data is not published. List of the major players profiled is given below: • Indian (Indian Airlines) • Air India • Jet Airways • Blue Dart Indian Logistics Industry Insight . with significant presence in the domestic market.

with its fully-owned subsidiary Alliance Air.8.1.1 Indian (Indian Airlines Ltd) 8. two Dornier Do-228 aircraft and four ATR-42. 11 Boeing 737s. anticipated) Fleet Size: 70 Key Activities: Passenger-oriented airlines Subsidiaries • Alliance Air 8. Indian Airlines was set up under the Air Corporation Act 1953 and was fully entrusted to provide the air transportation facilities in the domestic as well as neighbouring countries. 47 fly-by-wire Airbus A320s.in Year of Incorporation: 1953 Sales Revenue: Rs62. one of the largest airline service providers in India.1 Corporate Profile Corporate Address: 113. The Airlines' network spans from Kuwait in the west to Singapore in the East and covers 76 destinations—58 within India and 18 abroad.5m passengers annually.000 tonnes per 60 © Cygnus Business Consulting & Research 2007 . It has the largest cargo capacity amongst the domestic carriers and a network capacity of 1.Aviation Indian. Indian Logistics Industry Insight . Indian Airlines carries over 7.indian-airlines.1. Along with its subsidiary. today.nic. has a fleet of 70 aircraft (3 wide-bodied Airbus A300s.48bn (Year ending 2005-06. Gurudwara Rakabganj Road New Delhi-110001 Telephone: 91-11-25675121 Fax : 91-11-23711730 Website: www. three Airbus A319s.2 Business Profile Indian (formerly known as Indian Airlines) operates along with its wholly-owned subsidiary Alliance Air. Cargo Operations The Indian Airline Cargo covers 63 destinations in India and 17 abroad.

0 65.334.7 64.84 1.2 16256.86 km (m) Rev.1 9.1.6 67.308.66 billion against Rs0.2 Factor (%) Avail. Indian Logistics Industry Insight .21 (m) Overall Load 64.168.5 61.500. 8.8 14.09 13. Indian has carried 107.04 10.777. During 2004-05.44 877.7% against the same period of the previous year. improved on-time performance.036.622.5 959.5 63 60.57 14.33 1.Aviation For the financial year ending March 31.594.07 1.1 63.8 66. 8. operating revenue of Indian Airlines increased by 14.3 Physical Performance of Indian 2002-03 Targets Ach 2003-04 Targets Ach 2004-05 Targets Ach 2005-06 Targets Ach 1.134. Seat 12. recording a growth rate of 15%.132.02 1.063.370.168.1 897.day.913.439.340. owing to cost control measures.44 billion in 2003-04 (See Figure 8.3 1.97 km (m) Pass Load 63 59. 2005.01 (m) Revenue tonne km 842.4 Financial performance For the financial year ending March 31.6 64.06 2.2 12.645.891. 61 © Cygnus Business Consulting & Research 2007 .8 8.11 13.484. and increased utilisation of aircraft.78 1.04 9. Indian Airlines recorded a net profit of Rs0.017.9413.28 845.56 71.73 67 Available tonne km 1.44 1.05 1.893.7 69.5 65 Factor (%) Source: Planning Commission 8.598.472.270 tonnes of cargo against 93.303.478.69 8.287 tonnes during 2003-04.2). 2005.32 1.1. Pass.46 7.43 13.

16 2003-04 0.4 54.4 1.7 NA NA NA NA 716.7 -1.9 5.129.625.5 0 -0.1: Revenues (Rs bn) Figure 8.28 -4.5 -2 -2. Annual Report 2005-06.7 11.7 3.69 2003-04 47.63 0.1 -3.5 -1 -1.7 -4.1 656.5 1.2 7.1 NA -3.393.927.735.88 2002-03 0.74 1 53.96 2002-03 0.48 1.267.6 -1.6 NA NA NA NA 2004-05 0.48 -3.45 2.333.941.6 3.4 31.4 2.moneypore.542.6 -1.16 1.4 54.737.1 : Financial Highlights P&L Total Revenue Employee Cost PBDIT Depreciation Interest & Financial Charges PBT 2002-03 41.469.Figure 8.Aviation PAT Cash Profit Balance Sheet Net Worth Capital Employed Fixed Assets (Gross Block ) Total Debt Net Working Capital Key Ratios Debt-Equity Ratio Current Ratio Operating Profit Margin (%) Net Profit Margin (%) Source:www.544.6 1. 2004-05 Financial Highlights Table 8.3 -1.849.965.624.22 Indian Logistics Industry Insight .061.071.229.5 1.071.44 0.953.5 481.93 Rs m 2004-05 53.26 41.8 1.2: PAT (Rs bn) 60 50 40 30 20 10 0 2002-03 2003-04 47.7 441.990.97.79.965.2 10.com 62 © Cygnus Business Consulting & Research 2007 .6 33.66 2003-04 2004-05 2004-05 Source: Ministry of Civil Aviation.256.4 11.69 0.551.

8. initially to cover Airbus A320 family aircraft. Kuwait Airways and Cathay Pacific • Strategic tie ups with M/s European Cargo Services (Asia Pte Ltd). EADS had signed an MoU with Jupiter Aviation and Logistics.Aviation Federal Express. Currently. six A319 and three A300 aircrafts. Cargo Promotion and Marketing • • Indian has signed an agreement to automate its cargo processes Indian has also signed Special Prorate Agreement (Cargo) with British Midland. Indian. Indian is a major operator of Airbus aircraft and is all set to induct 43 new Airbus A320 family aircrafts into its fleet. A strategic MoU was signed for setting up the facility. it operates 48 A320s.59 billion. formerly Indian Airlines signed an agreement with the Bangalore-based Jupiter Aviation and Logistics for the latter to set up an MRO facility for its aircraft airframe maintenance. In a major development in MRO. the premier carrier has decided to increase its fleet strength to another 43 aircrafts with an estimated cost of Rs78. UPS.1. For the 11th Five Year Plan (2007-08 to 2011-12). M/s EAS International • • Transportation (Singapore Pte Ltd) and M/s GATI on Singapore/India route were executed Special ‘on board courier’ rates ex-Indian and International stations and Indian network Tender for conversion of five B-737-200 aircraft into freighter has already been released 63 © Cygnus Business Consulting & Research 2007 .5 Business Strategies Indian has decided to augment its fleet size in view of robust demand. The MRO facility will be extended to Airbus aircraft of other airlines and also to aircraft other than Airbus family. Virgin Atlantic and Austrian Airlines and renewed the agreement with Indian Logistics Industry Insight . Aircraft manufacturer Airbus/EADS will provide necessary support.

two B74764 © Cygnus Business Consulting & Research 2007 . 1946.2. one B747-400 (COMBI) on dry lease.000 miles.) Fleet Size: 34 Key Activities: Passenger-oriented airlines Air India is India's national flag carrier. as Air India was earlier known.71 tonnes of mail. comprising eight B747400 including two aircrafts on lease. Mumbai Telephone: 91-22-2279 6666 WebSite: www.1 Corporate Profile Corporate Address: Air India Building Nariman Point. carried 155 passengers and 10. Tata Airlines flew 160.2 Business Profile Air India Ltd. 1948. Air India International launched its first service to London via Cairo and Geneva on June 08. one whole time pilot assisted by Tata and Vincent. two apprentice-mechanics and unlimited optimism. one part-time engineer. which created two nationalised corporations viz Air India International Ltd for international route and Indian Airlines to operate domestic services. the Government of India nationalised the air transport industry on the recommendation of Planning Commission. has fleet of 34 aircrafts. 1956.com Year of Incorporation: 1932 Sales Revenue: Rs93. consisted of one Puss Moth.2. In 1952. one Leopard Moth.2 Air India Ltd 8. the first full year of its operations. Tata Airlines.45bn (2005-06. In 1933.8. Tata Airlines was converted into a public company under the name of Air India in July 29. the state-owned carrier. Air India Ltd was incorporated as public limited company under the Companies Act. it had submitted a plan to the Government of India for the formation of Air India International Ltd with Government Indian Logistics Industry Insight .airindia. 8. In 1947. one palm-thatched shed. In May 1992.Aviation participation to operate international route and finally in 1948.

6 27137.2: Physical Performance of Air India Ltd Indian Logistics Industry Insight .9 61. Thiruvananthapuram.Aviation 2002-03 Targets Available tonne km (m) Revenue tonne km (m) Overall Load Factor (%) Avail.9 70.4 11121.0 71.3 14278.1 24435.0 Ach 3600.300 (COMBI).3 Physical Performance of Air India Ltd Table 8.4 2369.0 61. Internationally. 8.4 62 20256. Air India has tied up with various foreign airlines and trucking companies for smooth operation of air cargo. Seat km (m) Rev.9 1561.3 Ach 4191.3 2025.6 18950.2.2 61.2 21624.3 71. it operates to Mumbai. In India.5 1774.6 Ach 2415.6 66.9 70.9 17714.2 17351.6 2003-04 Targets 2759. Air India Express.0 69. 7 71. Air India started with three destinations during the time of nationalisation.2 68.0 61.9 1481.4 Source: Planning Commission 65 © Cygnus Business Consulting & Research 2007 . Cargo Operations Air India has the infrastructure and the network to ensure smooth transportation and delivery of cargo across the world.1 15602. 2 12962.5 2004-05 Targets 3317. Goa. it serves 13-city networks. In India.4 20558. which provide hassle-free and direct customs clearance to both export and import cargo. km (m) Pass Load Factor (%) 2393.6 18093. seven aircrafts are on dry lease. today it covers 44 destinations by operating services with its own aircraft and through code-shared flights.1 1320. four B777-200 on dry lease and 19 A310-300 and 11 of total 19 Airbus aircrafts are on lease.6 12145. the wholly-owned/operated subsidiary of Air India Ltd owns 13 B737-800 out of which.5 Ach 2897.8 62. Hyderabad. Ahmedabad.6 15249.0 64. Pass. Kolkata. Kochi. Kozhikode and Lucknow. Chennai. Bangalore. Delhi.5 30973.8 2005-06 Targets 2126.5 58.4 2218. In addition.8 1712.

45 billion.2 100 90 80 70 60 50 40 30 20 10 0 Figure 8.96 billion.96 PAT declines in FY06 For the financial year ending March 31.27% in FY06 For the financial year ending March 31.35 63.8 0.46 78. Air India recorded a net profit of Rs0.moneypore. charter and handling /services/miscellaneous was Rs93.27% against the same period previous year (See Figure 8.93 0.6 0. mail. cargo.2 0 2003-04 2004-05 2005-06 0.com 66 © Cygnus Business Consulting & Research 2007 . 2006.Aviation employee cost etc (See Figure 8. the total revenue of the company consisting of passenger.4 0. grew by 19. Source: www.4). sharp fall in net profit due to rise in international fuel prices as well rise in other operational charges.4 Net Profit (Rs bn) 1 0. 2006. particularly landing charges.3).8. 1.4 Financial Performance Revenue up by 19.3 : Revenue (Rs bn) 93. rise in Indian Logistics Industry Insight .41 2003-04 2004-05 2005-06 Figure 8.2.15 billion against Rs0.15 0. excess baggage.

5 1538.1 5549.9 4211.4 149.2 36984.7 23805.4 82885.4 PBT 925. it will have a design capacity to handle more than 150.com 2458. Air India Ltd has recently formed a joint venture with Singapore Airport Terminal Services Ltd (SATS).3 963.5 Business Strategies Air India.9 Depreciation 396.6 26016.1 Total Revenue 11130.2 12619. This is likely to enhance its cargo capacity.80 0.4 71166.4 71397.13 0.58 0.4 5223.2 93455. is in the process of converting two of its A310 aircrafts into freighter aircrafts by September 2007.76 9. The cargo-handling facility of AI-SATS will have two warehouse floors with a gross floor area of 18.51 4.03 Indian Logistics Industry Insight .6 149.7 Employee Cost 5766.moneypore.9 36228.Financial Highlights Table 8.5 5050.7 965.3 4061.000sq m.38 1.4 11821. In addition. the airline is expecting addition of some new fleet for the quarter ended December 2006.4 PAT 5358.7 78352.3 Cash Profit P&L Balance Sheet Net Worth Capital Employed Fixed Assets (Gross Block ) Total Debt Net Working Capital Key Ratios Debt-Equity Ratio Current Ratio Operating Profit Margin (%) Net Profit Margin (%) Source:www.34 5.0 3398. which currently has leased belly space on Falcon Aviation to fulfil the demand on the Kerala-Gulf and the India-Germany sectors.Aviation 8. In addition.35 1.2 3249.2.31 1. the public sector airline operator.6 1538.3 323.3 14785.82 7.8 838.27 7.1 4260. India is emerging as a major air cargo hub in Asia.4 12443.2 2003-04 2004-05 2005-06 9.1 PBDIT 4433.3: Financial Highlights Rs m 2003-04 2004-05 2005-06 63411.8 Interest & Financial Charges 936.0 1538.000 tonnes of 67 © Cygnus Business Consulting & Research 2007 .

5% and 100% respectively in 1990 to 19. Both the airlines have been competing with each other in some of the sectors and eroding market share. mainly due to rising competition from private players. The merger would be in the interest of both Air India and Indian Airlines and the advantages that are likely to follow are as under: • Competitive Strength: The combined revenue of the two airlines was around Rs130.cargo.4 billion in 2004-05 and that would place the merged entity at 35 in the world ranking as against the present ranking of 48 in case of Air India and 70 in case of Indian Airlines. The merged entity would help in eliminating number of common costs such as marketing. the merger will eliminate this kind of unproductive competition and would definitely help in improving combined market share. Therefore. • Controlling Cost: High operating cost in airline business is an important characteristic and smaller or inefficient airlines often find difficult to control cost. which would help the merged entity to be more competitive in the international market. the merger has been under consideration for quite sometime. The ranking would further improve to 20 with induction of new fleet.Aviation Improving Market Share: There has been a sharp fall in the market share of both Air India and Indian. which has declined from 24. Both the entities will jointly invest more than Rs800m in the development of this project. advertisement etc and that will help them to control the cost and stay competitive • Indian Logistics Industry Insight .5% and 31% in 2005. 68 © Cygnus Business Consulting & Research 2007 . Air India and Indian. Merger of Air India and Indian The Ministry of Civil Aviation has decided to merge the state-owned two air carriers.

35bn (Year ending Mar 31.39% Others. SM Centre.3.3 Jet Airways 8.1 Corporate Profile Corporate Address: Jet Airways (India) Ltd. three Airbus 340-300E.5 operating revenue break-up (2005-06) started its commercial operation on May 05. Director PRS Oberoi. two Boeing 737900s. Executive Director 8. India Fax: +91 22 2920 13 13 Phone: +91 22 4019 10 00 Website: www. and eight ATR 69 Passenger.54% Extra Baggage. Domestic Aviation 2. two Airbus 330-200s.2 Business Profile Jet Airways (India) Limited was established by Mr. Director Aman Mehta. Director Charles A Adams. Cargo 3. Naresh Goyal.89% Cargo. Total fleet comprises 13 Boeing 737700s. Director Vijay Laxman Kelkar.9% at end of December 2006. 5. Andheri Kurla road.3. 1993.com Year of Incorporation: 1992 Sales Revenue: Rs61.Aviation Figure 8.8. Director Victoriano P Dungca. six Boeing 737-400s. 1. Andheri (East) Mumbai – 400059. Chairman Ali Ismail Ghandour. 92. Director Saroj K Datta. Director Satyan G Pitroda. It started off with a fleet of four aircrafts and grew to become India's largest airline service provider with a market share of 34. Director Javed Akhtar. It Indian Logistics Industry Insight .18% Source: Jet Airways Annual Report 2005-06 © Cygnus Business Consulting & Research 2007 . 28 Boeing 737-800s. Recently started International Aviation Management Naresh Goyal.jetairways. 2006) Fleet Size: 62 Key Activities: 1. 0. It has a fleet of 62 planes. Director IM Kadri.

This increase in tonnage was largely due to the commencement of long-haul international operations to London using wide-body aircraft. higher load factors and rise in fleet capacity with available seat kilometres (ASKMs). 70 © Cygnus Business Consulting & Research 2007 . primarily because tonnage carried increased from 98. Revenues from carriage of cargo increased by 65. Colombo and Kathmandu.856m in 2004-05 to Rs3. In addition.moneypore.3 Cargo Operations Jet Airways with its fleet of 62 modern and next generation aircraft offers seamless connection throughout the world on its own and with its partner airline network.3. Kuala Lumpur.2 billion in 2004-05 (See Figure 8.6 Total Revenue (Rs bn) economy. which for decades dominated the domestic air services. The company has nosed ahead of state-owned Indian Airlines. and growing IT/ITES and tourism sectors.Aviation 61. Singapore.com gone up by 35. The unprecedented due to growth was achieved operational efficiency.66 44.840 tonnes in 2004-05 to 115.35 billion against Rs44.6).72-500.8% to reach Rs61. which have significantly higher cargo-carrying capacity than other aircraft in the fleet. total revenue for Jet Airways in 2005-06 witnessed an Indian Logistics Industry Insight . rise in fare has attributed to this excellent growth in total revenues of Jet Airways.3. 8. which has Source: www. 8. Jet Airways operates over 330 flights daily to 44 destinations across India and to six international destinations including London (Heathrow).715 tonnes in 2005-06.4 Financial Performance Riding high on the booming 70 60 50 40 30 20 10 0 2003-04 2004-05 2005-06 35.2 Figure 8.2% from Rs1.35 outstanding growth rate of 38.6% in 2005-06 against the same period of the previous year. Bangkok.067m in 2005-06.

65 Interest Cover Ratio 14.74 42.6% in FY06 For the year ending March 31.9 7221.9 2852.69 20. Financial Highlights Source: www.46 3.06 Current Ratio 1.1 29648.3 9824.moneypore.6 38951.7 PAT (Rs bn) 5 4 .90 Return on Capital Employed (%) 320.3 48956 4499.2 70377.91 3.PAT rises by 15.0 4570.9 3919.0 4064.moneypore.7 61354.4 1781. 2006.5 1 0 .5 2 3 .14 Debtors Turnover Ratio 27.4 44.8 13702.1 52341.0 Indian Logistics Industry Insight .9 4520.70 10.7).29 2.39 Operating Profit Margin (%) 3. Figure 8.com 71 © Cygnus Business Consulting & Research 2007 .com Table 8.7 3669.01 3.8 12927.0 5151.4: Financial Highlights P&L Sales Employee Cost Selling & Administration Cost PBDIT Depreciation Interest & Financial Charges PBT PAT EPS (Rs) Cash Profit Balance Sheet Net Worth Capital Employed Fixed Assets (Gross Block + WIP) Total Debt Net Working Capital 2003-04 35657.0 5820.04 4.52 billion as compared to Rs3.4 5457.1 27744 51770 32099.19 13.1 22.87 12.1 1631.9 7579.60 Return on Net Worth (%) Source: www.80 18.02 Debt-Equity Ratio 1.5 2891.3 5403.91 billion in the corresponding period of the previous year (See Figure 8.70 17.99 51.5 2 1 .3 14178.5 4 3 .63 6781.5.16 29.1 2536.47 2.5 3 2 .3.52 8480 8584.6 2416.Aviation 2003-04 2004-05 2005-06 Key Ratios 72.47 3.4 2770.5 4174.0 23058.1 20101.5 0 4 .51 9.6 3 2003-04 2004-05 2005-06 8.8 8995.31 Net Profit Margin (%) 11.9 1 1 . Jet Airways posed a net profit of Rs4.8 58014.5 Rs mn 2004-05 2005-06 44201.

According to the agreement. With the acquisition. giving the two airlines a very strong position. Achieves a wider and a more effective coverage of the Indian market. Unit cost savings and improved levels of productivity due economies of scale and common utilisation of facilities and resources. 2007. India’s largest private sector airline service provider.00 billion that Jet Airways had agreed to pay for the acquisition of Air Sahara in January 2006. especially in the metro markets Increased primetime departures and frequencies through a subsidiary Obtaining access to skilled personnel such as pilots and engineers.5 billion will be payable in instalments commencing from March 2008 and ending in March 2011.Aviation It offers a strong platform and a larger operational base for future growth. for which there is a significant shortage in India at present. arising particularly from common maintenance and training facilities. it will have access to available traffic rights for international operations 72 © Cygnus Business Consulting & Research 2007 . airport-handling facilities. Jet Airways is supposed to pay Rs4 billion on or before April 20. enhanced purchasing power. the balance of Rs5.6 Business Strategies Jet Airways.8.3. The transaction is 40% less than the price Rs23. Jet-Sahara would change the scenario of the Indian aviation industry in the coming years. acquired Air Sahara in all cash deal for Rs14. finance and administrative set-ups • Clear value proposition for the customers in the form of wider network coverage. The acquisition is the largest deal in Indian aviation industry. enhanced and convenient connections and better service levels on a larger scale of operations. of which a sum of Rs5 billion had already been paid to the selling shareholders in March 2006. • • Increased availability of airport infrastructure facilities Since Sahara Airlines will operate as an independent carrier with its own operating permit.50 billion. Benefits of Acquisition • • • • • Indian Logistics Industry Insight .

Jet Airways has plans to start a domestic cargo airline. Indian Logistics Industry Insight .Jet Airways has decided to augment its fleet by adding another 22 aircrafts by March 2009 to increase the total number of aircrafts in its fleet to 84. The airliner has mooted a feasibility study for this purpose.Aviation 73 © Cygnus Business Consulting & Research 2007 . The company would initially convert its old passenger aircraft into freighters to cater to the booming domestic air cargo market.

Maharashtra. it operates 14. Mumbai . India Tel: +91 22 28396444 Fax: +91 22 28244131 Website: www.8. Warehouses at 38 locations across the country as well as bonded warehouses at the six major metros of Bangalore. Director Clyde C Cooper. Chennai. indigenously developed. Director Suresh Sheth. Delhi.1 Corporate Profile Corporate Address: Blue Dart Centre.2 Business Profile Blue Dart Express Limited is a leading courier and integrated air express package Indian Logistics Industry Insight .Aviation distribution company and premium logistics service provider in the county.com Year of Incorporation: 1983 Sales Revenue: Rs6.bluedart.4.400099.400 domestic locations and more than 220 international locations.4. Managing Director Malcolm Monteiro. MIS. Currently. for Track and Trace. Kolkata and 74 © Cygnus Business Consulting & Research 2007 . ERP. It possesses vast integrated infrastructure network.4 Blue Dart 8. Alternate Director to Mr Greg Tanner Subsidiaries • Blue Dart Aviation 8. Customer Service. Director Ross Allen. dedicated capacity to support time-definite morning deliveries through night freighter flight operations. Chairman Anil Khanna. the company has evolved an infrastructure unique in the country today. Mumbai. In 1983. Director Greg Tanner. Sahar Airport Road Andheri (E).68bn (By the end of Dec 2006) Fleet Size: 7 (Freighter Aircraft) Key Activities: Courier and integrated air cargo and distribution company Management Air Marshal SS Ramdas (Retd). Space Control and Reservations Blue Dart Aviation. The main advantages associated with the company are: State-of-the-art technology. In pursuit of sustainable leadership in quality services. it started its operation.

75 © Cygnus Business Consulting & Research 2007 .58 4.com Source: www. It has joined hands with DHL Express besides forming a strategic partnership with Sri Lankan Airlines and Polar Air.3 2006 500 390. 2005. infrastructure and investments.71% growth rate and touched a record Rs502.9 Profit After Tax (Rs m) 600 502. net profit also registered a 15. the current accounting period of the company is for the nine months ended December 31. Blue Dart has handled 57m domestic and 630.15 4 3 2 1 0 2003-04 2004-05 2005 (9) 2006 3.8).Hyderabad.000 international shipments weighing 152. During 2006.Aviation Accordingly.4.93% to Rs6.8: Sales (Rs bn) 8 7 6 5 4. Indian Logistics Industry Insight . During the same period.8 Source: www.com 8.3m (See Figure 8.68 Figure 8. Figure 8.55 6.3 Financial Performance The company has changed its financial year to calendar year basis from April 1. Blue Dart has leveraged its assets. In 2006. 2005.68 billion over the Rs4.monyepore.1 2005 (9) 400 300 200 100 0 2003-04 2004-05 264. Blue Dart’s net sales grew by 60.4 434.000 tonnes. During 2006.15 billion for nine months period of 2005 (See Figure 8. resulting in improved productivity and performance.monyepore.9). The operating profits increased owing to higher sales and control over costs.

5 816.8 10.5 2027.26 2.6 220.Aviation 2005 (9Month) 0.0 264.10 29.1 24.0 428.9 2006 0.1 252.2 413.4 2006 6680.1 2004-05 0.7 502.46 39.0 2003-04 0. It is the only Indian air express company that has invested extensively in technology infrastructure to create differentiated delivery capabilities.6 290.6 131.6 2417.52 15.22 8.3 390.7 464.moneypore.3 658.47 2.67 10.6 601.1 45.03 6.57 22.07 21.0 237.14 7. Some of the technology-based business 76 © Cygnus Business Consulting & Research 2007 .1 17.52 31.62 8.76 12.75 7.3 21.00 722.6 1922.64 31.3 470.2 305.6 661.6 434.4 1016.14 17.7 538.com 2003-04 3548.2 419.67 26.6 536.3 100.15 2004-05 4583.9 573.18 Indian Logistics Industry Insight .Financial Highlights Table 8.9 1324.6 1633.52 31.22 7.08 565.46 25.0 191. quality services and customised solutions for the customer.57 364.2 237.5 : Financial Highlights Rs m P&L Sales Employee Cost Selling & Administration Cost PBDIT Depreciation Interest & Financial Charges PBT PAT EPS (Rs) Cash Profit Balance Sheet Net Worth Capital Employed Fixed Assets (Gross Block + WIP) Total Debt Net Working Capital Key Ratios Debt-Equity Ratio Current Ratio Interest Cover Ratio Debtors Turnover Ratio Operating Profit Margin (%) Net Profit Margin (%) Return on Capital Employed (%) Return on Net Worth (%) Source:www.73 7.6 2341.4 23.40 1.4 Recent Developments & Business strategies Blue Dart has made the transition from an international express consolidator to a focused domestic player.2 53.24 10.5 808.80 15.4.2 101.63 8.6 2458.1 558.8 778.4 2502.01 543.8 611.2 920.4 16.12 2.1 653.40 2005 (9) 4150.19 19.1 153.4 237.18 44.2 237.

Aviation 77 © Cygnus Business Consulting & Research 2007 . Shop Track. Blue Dart Aviation Ltd (BDAL) added two leased Boeing 757 freighters to their fleet. Ship Dart and Image Dart. Mobile Dart. The new aircrafts will be positioned at Chennai and Kolkata. The freighters will increase the capacity of the BDAL’s regular night flights to 250 tonnes from 166 tonnes. With the two new freighter aircrafts. Indian Logistics Industry Insight .offerings are as follows: Internet Dart. BDAL’s total freighter aircraft fleet will reach seven. Pack Track.

which is mainly due to the difference between demand and supply of human resources for aviation sector in India. 9. shipping. Percentage share of fuel to total cost for Air India Ltd has increased from 20. transport services that play a crucial role are aviation.91% in 2005-06. fuel cost accounts for the highest in all four segments and plays a crucial role in terms of profitability. During 2005-06. India’s largest private airline operator Jet Airways’s fuel bill was Rs16.6%.789m against Rs10. The price of this fuel is linked to international price of crude oil.1 Cost Drivers Logistics plays a crucial role in India’s booming economy.Aviation eating away the major portion of their income. which is often influenced by geopolitical issues. 78 © Cygnus Business Consulting & Research 2007 . Jet Airways’s cost of employees has increased from 8. trade and manufacturing sector. Some cost components are significant and constitute a major part of the entire operation.1. In the entire logistics market. This clearly indicates that the fuel bill is Indian Logistics Industry Insight . Undoubtedly. road transport and railways.16% in 2003-04 to 9. various supply and demand factors including periods of market surplus and shortage and government regulations.517m in 2004-05. Companies are taking several measures to reduce the attrition in the sector by providing various incentives and bonus to the employees. up by 59. Rising staff cost is another important feature in Indian aviation industry due to shortages of skilled technical people in the country as well as rising demand for technical people which constitutes around 13% of the total cost of the sector.1 Air Transport System in India Aviation Turbine Fuel (ATF) constitutes the highest cost component in air transport system. Cost Structure 9.9. The ATF cost has increased dramatically over the last couple of years due to rise in international crude oil prices.6% in 2002-03 to around 36% in 2005-06. ATF constitutes around 36% of the total cost of aviation companies (See Figure 9.1). This has increased the employee attrition rate. Transportation accounts for major share of logistics costs in India.

These charges are determined by Airports Authority of India. route navigation facility charges. Operating expenses like landing charges. There has been a dramatic rise in aircraft rentals for Jet Airways in 2005-06 to around Rs4.986m in 2004-05.6% of total expenses. a private organisation.23 years.8 Airways 5% 2% 7. Insurance expenses constitute around 2% of total expenses.60% 4% 10% 36% companies mainly due to the high average age of fleet in India. Other expenses that include advertising and sales promotion activities. Aircraft relatively rentals declined have from Airlines and Jet is 15.3 Air Turbine Fuel Repairs & Maintenance Insurance Financial charges Others Employees Rentals Landing & other related charges Depreciation Source: Cygnus Research around 11% in 2002-03 to around 7. terminal Indian Logistics Industry Insight .5% in 2005-06.Aviation navigation landing charges and aircraft parking bay form 5% of total expenses. Indian years years. except for Cochin International Airport for which charges are determined by Cochin International Airport Limited.340m against Rs1.40% 13% 12% average fleet age is 5. 79 © Cygnus Business Consulting & Research 2007 .Repairs and maintenance cost works out to about 12% for the aviation Figure 9. For instance.1: Cost Component of Air Transport in India 10. average age of Air India’s fleet is around 16. general and administrative expenses amount to 10. Financial charges form 10% of total expenses and depreciation expenses amount to around 4% of total expenses.

According the Ministry of Civil Aviation. Mumbai and Delhi airports handle lion share of the country’s passenger and cargo traffic. In India. the average dwell time of exports is about 12 hours. complex procedures. Indeed. there is rise in congestion and waiting time. insufficient cargo bays. 10. Average waiting time for export cargo is 2. especially during peak hours due to lack of adequate technological development etc. While. at the best of international airports. In India.10. airports suffer from high Indian Logistics Industry Insight . various third-party interferences in cargo processing. The sector is incurring huge losses. Both the airports handle only 30-35 aircraft take offs / landings per hour compared to 70-75 aircraft per hour in other major international airports.Aviation waiting time and congestion.11 days (50 hours 37 minutes) and for import cargo. airports at Delhi and Mumbai are either fully utilised or close to full utilisation. There are several problems including poor warehousing facilities.1 Major Indian Airports Running Out of Capacity Major Indian airports are facing huge capacity constraints in terms of passenger traffic as well as cargo traffic and on the other hand smaller Indian airports continue to be underutilised. Issues and Challenges 10. The capacity utilisation at AAI airports in 2005-06 is more than 140%. As a result. it is around 7. improper execution of 80 © Cygnus Business Consulting & Research 2007 . Both airports have parallel runways that limit aircraft movements and suffer from terminal as well as apron constraints. 5-10% additional flying time cost is around US$80m per annum. inadequate ground-handling facilities and shortage of runways are resulting in considerable delays. Therefore. Growing air cargo traffic in India has thrown a challenge for existing cargo-handling facilities in the airports. simplification of procedures and reduction in waiting time. three areas require immediate attention from the government—upgradation of technology.2 High Waiting Time and Congestion in Airports In India. ATC delays cost the sector immensely. which is further increasing.58 days (182 hours 32 minutes). while the average dwell time of imports is 24 hours.

10. During 2006-07. which add to the total costs. Not surprisingly. ATF cost per kilometre in Delhi is Indian Logistics Industry Insight . The Government of India had initially imposed 10. lack of improved inventory system and absence of improved access to the cargo terminals. outdated handling equipment. the incumbent airlines with existing slots and parking capacity hold an edge over new entrants. the sales tax is as high as 30%. the infrastructural constraints at major airports are likely to worsen and hinder the robust growth of the sector. it is US$455 and in Dubai.4 Taxation The sales tax on ATF varies from state to state. in Mumbai it is US$780. switching to multiple-airport concept and the expansion of existing facilities—could relieve the pressure on major airports. (Comparative airport charges are given in table 10.2% service tax (which has gone up to 12% in April 2006) on landing.1) These will have a negative impact on the country’s air transport 81 © Cygnus Business Consulting & Research 2007 .Electronic Data Interchange. while in Singapore. it is US$497. In some states. as against global average of 20-25%. The cargo-handling terminals are unable to cope with a surge in volumes. The significance of this issue is underscored by the fact that the fuel bill typically accounts for around 35% of the operational costs. augmentation of existing capacity.3 High Fuel Cost High fuel prices in India is one of the major challenges for the aviation industry. It is eating away the profits of the airline service providers. With a number of new players set to enter the Indian aviation sector in the near future. resulting in huge losses for the sector. A multi-pronged approach—involving activation of dormant airports. The ATF in India is around 70% higher than the global figure. it is estimated that aviation industry losses were around US$500m. In India. airport and air navigation charges.Aviation US$755. making ATF account for 35-40% of operating cost. 10. the ATF prices continue to be much higher than global rates.

The security tasks are neither prioritised nor assigned to a specific agency.Aviation Post 9/11 terrorist attacks.749 5.127 NA 2.600 6.726 NA NA 15.723 NA 798 13. resulting in confusion.429 10.458 NA NA 5.865 NA 375 11.568 13.250 10.935 Difference Difference *RNFC.003 4.968 4. Indian airports.Route Navigation Facility Charges *TNLC.sector. Now a variety of central and state agencies such as the state police.273 5.726 15.342 NA 10.458 21.199 NA 230 10. For RNFC calculations. Country India Singapore Thailand Malaysia UAE (Dubai) UAE (Abu Dhabi) Oman Bangladesh Sri Lanka Nepal Qatar Bahrain USA (Miami) Australia (Melbourne) Table 10.318 78% 10. which is a challenge for most Indian airports. a stage length of 151 nautical miles (Mumbai-Aurangabad) has been used Source: IATA Airport & Air Navigational Charges Manual – March 2006 Average 23.346 6.238 NA 16. the introduction of value-added tax on a nationwide basis from April 1.Terminal Navigation Landing Charges All charges calculated for domestic flights.064 NA 4.164 14.164 NA NA 12.521 17. for a B737-800 with MTOW of 71tonnes.433 16. besides facing the usual security problems and challenges.240 11.664 6.305 NA 4. However.5 Aviation Security Indian Logistics Industry Insight .823 17. are also confronted with unique problems.906 NA 2. the aviation security has assumed importance worldwide. An issue that is common to all Indian airports is the involvement of multiple agencies and lack of clear demarcation of roles.108 5.306 13.932 Total 23.568 17. 82 © Cygnus Business Consulting & Research 2007 .249 14.1 Comparative Airport Charges Landing TNLC* RNFC* Charges 11996 5. Central Industrial Security Force and AAI in addition to airlines themselves are involved in airport security.812 14. 2005 has removed some of these tax anomalies. Now aviation security has to conform to international norms.582 NA 230 9.

Moreover, offences relating to aviation are tried under the Indian Penal Code, the Indian statutory act for criminal offences, which lacks special provisions to address issues unique to aviation. The Naresh Chandra Committee—appointed by the Indian government to prepare a road map for the civil aviation sector in July 2003—in its report submitted in two parts in 2003 and 2004, recommended that the Bureau of Civil Aviation Security and the security forces, providing aviation-related security, should be granted special powers.

10.6 Lack of Human Power
India’s civil aviation sector has been experiencing acute shortage of human resources, especially in case of pilots, which is mainly due to unprecedented growth in air traffic (both passenger and cargo), and in view of the emergence of large number of air carriers including LCC in the last couple of years. According to Sub-Group on Human Resource Development for the Civil Aviation Sector, India would need 5,400 pilots by the end of the 11th Five Year Plan. Thereafter, there would be requirement of at least 150 pilots per year as replacements for retirements and normal attrition. Shortage of aircraft maintenance engineers/technicians (AME) in India is another important bottleneck for air carriers. Though AME institutes produce around 5,000 students every year, they provide only basic Ab Initio training for issuance of basic
Indian Logistics Industry Insight - Aviation

licence. However, to meet the DGCA requirements, the trainees need to undergo an additional minimum one-year experience on heavy airplanes and get a type-rated licence. No other carriers except public carriers in India have developed an institutionalised system of training for aviation engineers. With MRO facilities being set up by M/s Boeing and M/s Airbus as a part of the package negotiated in connection with order of Air India and Indian Airlines for purchase of aircraft, the requirement of personnel for aviation engineers and technicians could only rise further. Air Traffic Control is a critical component of the civil aviation infrastructure. The surge in air traffic has exponentially increased the aircraft landing and take-offs at India’s airports and also the over-flights across the Indian skies. According to estimates, India would need around 1,150 controllers and an additional 1,000 new personnel by 2015 to keep up with the increasing number of flights and the new airports.
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11. Government Initiatives, Schemes & Regulations
11.1 Introduction
The Government of India, in a historic development, had enacted Air Transportation Act 1953 in order to boost the India’s aviation sector and hence overall economy by allowing the private players to enter in the domestic market besides the two state-owned airline service providers (Air India and Indian Airlines). Airports play a crucial role in shaping a country’s identity and act as a window to the world. Therefore, the Government of India has emphasized the significance of airport infrastructure in order to meeting the growing demand for better air transportation facilities and also to complement the increasing economic activity. The quality of airport infrastructure, which is a vital component of the overall transportation network, contributes directly to a country's international competitiveness and the flow of foreign investment. The Government of India has been taking many positive steps in the post-liberalisation period to give a boost to the country’s vital infrastructure sector. The steps include allowing private sector participation in the infrastructure sector, which was in need of urgent augmentation. Over the past few years, India has also tried to attract Foreign Direct Investment (FDI) in the infrastructure sector especially in roads, seaports and
Indian Logistics Industry Insight - Aviation

airports. The country has reached a situation wherein 100% FDI is now allowed in most of the infrastructure sectors. Significantly, in the aviation sector, 100% FDI is permissible for existing airports; FIPB approval is required for FDI beyond 74% and for Greenfield airports, 100% FDI under automatic route is permissible. Open Sky Policy of the Government and rapid air traffic growth have resulted in the entry of several new privately-owned airlines and increased frequency/flights for international airlines. There is 100% tax exemption for airport projects for a period of ten years.

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11.2 Requirements for Becoming Air Cargo Operator
An Air Cargo Operator's (ACO) Permit can be granted to: 1. Citizen of India; or 2. A Non-Resident Indian (NRI); or 3. A company, registered under the Companies Act, 1956, having its principal place of business within India and with or without foreign equity participation (excluding NRI equity) limited to 49%; or 4. The Central Government or state government or an Undertaking owned or controlled by either of the said Governments. • Air Cargo Operations shall be carriers of cargo, mail. Passengers are not permissible in cargo operations. • It can be scheduled or non-scheduled operations. • Operations would be to destinations within India. For operations outside India, specific permission of the DGCA would be necessary demonstrating capability for conducting such operations. • Before applying of Air Cargo Operators' Permit, an applicant should be in possession of an aircraft with Certificate of Airworthiness in Normal Goods category.
Indian Logistics Industry Insight - Aviation

• Applicants should either have their own maintenance and repair facilities approved by the DGCA or should furnish proof of availability of such facilities and flight crew members and aircraft maintenance engineers, duly licensed by DGCA. • An applicant should conduct operations from approved operational and maintenance bases and should abide by the prescribed operational requirements. • An applicant should get the security programme approved by Bureau of Civil Aviation Security before grant of ACO permit. • The NOC for operating air transport services is valid for one year. Extension of validity of NOC is granted up to a period of six months on merits of each case. These period related restrictions apply in respect of dry lease and outright purchase of aircraft as well. However, when the aircraft, proposed to be
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to a citizen of India. ii. • 2. • Air Cargo Operators' Permit is not transferable. 11. Its Chairman and at least two-thirds of its Directors are citizens of India. extension of NOC is allowed for the actual lead time of delivery. Foreign airlines are. or to a company or a body corporate provided that. Foreign Financial Institutions and other entities that seek to hold equity in the domestic air transport sector shall not have foreign airlines as their shareholders.3 Guidelines for Foreign Equity Participation in the Domestic Air Transport Sector The Domestic Air Transport Policy. if any. provides for foreign equity participation up to 49% and investment by NRIs up to 100% in the domestic air transport services. even if it exceeds the total period of one and half year. 4. 3. and Its substantial ownership and effective control is vested in Indian nationals. • Air Cargo Operators' Permit is renewable every year.Aviation It is registered and has its principal place of business within India. is a new one with a definite delivery schedule. and composition of the Board of Directors and senior management of the said foreign investing institution/entity.imported. An applicant shall be required to furnish full and detailed information with regard to the shareholding of any airline in the foreign investing institution/entity. 1. approved by the government. not permitted to pick up equity directly or indirectly. Permission to operate scheduled services will be granted either: i. • • Indian Logistics Industry Insight . An applicant who seeks permission to operate air transport services in the domestic sector shall be required to give a declaration that no foreign airline is in financial or commercial tie up with him/her or has the management/ownership interest in him/her. however. 86 © Cygnus Business Consulting & Research 2007 .

be permitted. 9. Management contract with a foreign airline shall also not be permitted to a domestic air transport sector operator. A domestic air transport sector operator will also be permitted to get maintenance. overhaul. code sharing. A domestic air transport operator shall not enter into an agreement with a foreign airline. hire purchase or other loan arrangements. 12. however. This shall. interlining will. A domestic air transport operator may enter into financial arrangements with a bank and/or other financial institutions for the purpose of lease finance. be 87 © Cygnus Business Consulting & Research 2007 . 7. However. Marketing arrangements such as ground handling. may have representation on the Board of Directors of the Company. A domestic air transport sector operator may be permitted to employ foreign pilots/engineers till s/he is able to train his own manpower. repair works done and training of pilots/engineers conducted either at the facilities available with other airlines or those certified by the Director General of Civil Aviation on such terms as may be prescribed. 6. such representation shall not exceed 1/3rd of the total. however. wet leasing of an aircraft may be allowed from any source subject to the fulfilment of the guidelines issued by the Government/DGCA. but such a tie up shall not be permitted with a foreign airline. Any Foreign Financial Institution/entity. which seeks to hold equity in the domestic air transport sector. general sales agency. which seeks to make investment in the domestic air transport sector. Domestic sector air transport operators shall not have agreements such as shareholders agreements etc. Indian Logistics Industry Insight . which may give such foreign airline the right to interfere in the management of the domestic operator. containing provisions/arrangements empowering such foreign airlines or others on their behalf to have effective control in the management of the domestic airline.5. 8. While the foreign investing institution/entity. with a foreign airline. 11. 13. A leasing company leasing aircraft to an operator in the domestic air transport sector shall also not be a part of an airline.Aviation 10. shall not be a subsidiary of a foreign airline.

15. • Indian Logistics Industry Insight . An applicant who seeks permission for domestic air transport operations will be required to give a declaration that s/he fulfils all the requirements mentioned in the above guidelines and in case of any change. shall be liable for suspension/cancellation of his/her operating permit.Aviation Greenfield international airports at Bangalore and Hyderabad have been approved and are currently under construction. In addition. These measures are expected to bring a total investment of Rs400 billion for modernisation of the airport infrastructure. These are likely to be commissioned by middle of 2008. a Model Concession Agreement is also being developed for standardising and simplifying the PPP transactions for airports. • On the analogy of the highways sector.4 PPP in Airport Infrastructure Initiatives • The Committee on Infrastructure has initiated several policy measures that would ensure time-bound creation of world-class airports in India. who furnishes wrong information in respect of any of the above-prescribed guidelines at any stage. 11. s/he shall notify the competent authority within one month of such change. to ensure balanced airport development around the country. Modernisation and expansion of the Delhi and Mumbai airports through PPPs has been awarded. The policy of open skies has already provided a powerful spurt in traffic growth that has exceeded 20% per annum during the past two years. Other major airports such as Chennai and Kolkata are also proposed to be taken up for modernisation through the PPP route. the applicant will be required to furnish such a declaration every year. 14.permitted with the express approval of the competent authority and for such period and terms as may be prescribed by the said authority. 88 © Cygnus Business Consulting & Research 2007 . Similarly. A domestic air transport operator. a comprehensive plan for the development of other 35 non-metro airports is also under preparation through PPP route.

Table 11.00 400.5 Aviation Growth through Air Cargo The over utilisation in India’s air cargo traffic has come in the way of exploiting full potential of air cargo traffic. Navi Mumbai.00 100. Enhanced technology. Nagpur (Hub) & Greater Noida Upgradation 25 selected airports Modernisation / Improvement 55 airports Total Investment by 2010 Indicative Cost (Rs bn) 150.According to Committee on Infrastructure. Handling capabilities for new generation aircraft. infrastructure relating to cargo handling such as satellite freight cities with multi-modal transport. Pune.Aviation In order to develop India as a Regional Air Cargo hub.. cargo terminals. is required to be set up on top priority basis. Moreover. handling equipment and information systems 89 © Cygnus Business Consulting & Research 2007 .00 50. mechanised transportation of cargo. the airport development programme is given below. Hyderabad. the following steps are recommended: • • • • • • • ‘Gateway’ status at all international airports Cargo Village concept at all major airports Forwarders Bonded Terminals at every gateway airport Multi-modal connectivity. automatic storage and retrieval systems.00 30. It is high time to augment the existing airport infrastructure in order to speed up the handling of air cargo and reduce the dwell time. effectively serving the hinterland Enhancing air capacity and connections to international destinations. cargo clearance is also needed on 24-hour basis.1 Airport Development Programme in India Particulars Airport Restructuring / Modernisation Delhi & Mumbai for world-class airports Chennai & Kolkata Greenfield Airports Bangalore. In addition. Such facilities will also be provided at non-metro airports as well. cold storage. computerisation and automation.00 Source: Airport development programme presented to the Committee on Infrastructure (CoI) 11. Goa.00 70. etc. Indian Logistics Industry Insight .

Medical and Licence validity: All the airlines are supposed to computerise the records pertaining to flight crew duty time limitation. Open cargo ground handling contracts to avoid monopoly. Training. and Ratification of the Montreal Protocol. processed foods. 11. bullion.Aviation Director General of Civil Aviation has directed to all the Scheduled and NonScheduled operators to monitor performance of the crew by analysing DFDR data for exceedence. and Shippers • • • • • • E-Freight – the IATA program needs to be integrated in Indian Air Cargo initiatives Compatibility with international laws and conventions. • Computerised monitoring of FDTL. The deficiencies pointed out in the safety audit reports are immediately brought to the notice of the management of the operators for taking necessary remedial actions. 1999 Customs linked initiatives like simplifying commodity coding. • Establishment of Unidirectional Air Traffic routes in place of bi-directional routes for enhancement of safety of operations 90 © Cygnus Business Consulting & Research 2007 . currency etc. Specialised cold chain infrastructure and services for perishables. medical and licence validity. automating export/import license application and approval. their training. • Dedicated and trained safety audit teams of DGCA officers carry out the safety audit and surveillance inspection of the Indian operators and maintenance organisations in the country. thereby integrating all the players – Customs. Specialised facilities for valuable cargo.6 Initiatives for Safety Ministry of Civil Aviation has taken several initiatives for 11th Plan for safety of flights: • Indian Logistics Industry Insight . Regulatory Agencies.• Encouraging use of EDI in air cargo. GHAs. qualification. Airlines. including diamonds and jewellery. pharmaceuticals. Service Provider. AAI.

wherever they may be.1 Guidelines for the movement of hazardous goods by air transport The guidelines related to transport of hazardous goods by air have been laid down by the Ministry of Civil Aviation under the Aircraft (Carriage of Dangerous Goods) Rules. Carriage of dangerous goods by air Indian Logistics Industry Insight .7. which are required to be aboard the aircraft in accordance with the pertinent airworthiness requirements and operating regulations or that are authorised by the State of the operator to meet special requirements. within and over India. from. 2. 2003. except in accordance with and subject to the terms and conditions of a permission in writing granted by the Central Government (or by an officer authorised in this behalf by the Central Government). no person shall carry or cause or permit to be carried in any aircraft to. To aircraft registered in India or aircraft operated by an operator who has his principal place of business or permanent place of residence in India. 91 © Cygnus Business Consulting & Research 2007 .Aviation • Save as otherwise provided in these rules. from. shippers of dangerous goods or their agents. 11.• • Installation of Airborne Collision Avoidance System Installation of Ground Proximity Warning System in order to provide automatically a timely and distinctive warning to the flight crew when the aircraft is in potentially hazardous proximity to the earth's surface.7 Regulations 11. Articles and substances. To all aircrafts for the time being in or over India. and To persons operating air transport services to. within or over India or deliver or cause to be delivered for loading on such aircraft any dangerous goods. • The following classes of dangerous goods may be carried in aircraft subject to following provisions: 1. The salient points include: 1. 3.

marking. 7. horticultural. wheelchairs or other battery-powered mobility aids. safety matches and liquefied gas lighters carried aboard a passenger aircraft by the operator for use or sale on the aircraft during the flight or series of flights. safety matches or a lighter and nonradioactive medicinal or toilet articles like medicines containing alcohols. perfumes and colognes etc. 6. Such goods as required to provide during flight. alcoholic beverages. 8. storage. transportation or any other process connected directly or indirectly with carriage of such dangerous goods. unloading. aid in connection with search and rescue operations.g. forestry or pollution control activities. radio isotopic cardiac pacemakers or other devices. Aerosols. • Where the carriage of dangerous goods is permitted it shall be the duty of the shipper. but excluding non-refillable gas lighters and those lighters liable to leak when exposed to reduced pressure. Such goods as required for the propulsion of the means of transport or the operation of its specialised equipment during transport (e. during flight.’ Note: “Technical Instructions” refer to Technical Instructions for the Safe Transport of Dangerous Goods by Air” issued by the International Civil Aviation Organisation. Such goods as required for dropping in connection with agricultural. to take all precautions to avoid danger to aircraft or to persons therein or to any other person or property and in particular to ensure: 92 © Cygnus Business Consulting & Research 2007 . in small quantities as permissible to be carried Indian Logistics Industry Insight . 5. of the operator and of every person concerned with packing. acceptance. labelling. hair sprays. 4. 3. refrigeration units) or those that are required in accordance with the operating regulations (e. fire extinguishers). colognes.2. loading. medical aid to a person or veterinary aid or a humane killer for an animal. Such goods as required to provide. Dry ice intended for use in food and beverage service on board the aircraft. perfumes. Articles and substances such as small gaseous oxygen or air cylinders required for medical use.Aviation by passengers and crew in accordance with the ‘Technical Instructions. handling.g.

to be taken in the matter. Indian Logistics Industry Insight . That the dangerous goods are so packed.Aviation 93 © Cygnus Business Consulting & Research 2007 . protected and secured as to avoid the possibility of their being a source of danger. Custody of unauthorised dangerous goods Where any officer authorised by the Central Government for this purpose. 3. That the nature of the dangerous goods is plainly and conspicuously marked on the outside of the package containing them. 4. contravened. That the dangerous goods are carried so as not be accessible to the passengers on the aircraft. has reason to believe that the provisions of this rule are. That all other provisions of the Technical Instructions and the terms and conditions of the permission granted by the Central Government are strictly complied with. s/he may cause the dangerous goods in question to be placed under his/her custody pending detailed examination of the nature of the goods or pending a decision regarding the action. or are about to be.1. 2. if any.

Air cargo accounts for 2% of international trade by volume and around 40% by value.6 208 Figure 12.6 billion FTKs.1 Global Air Cargo Market Global air freight industry has witnessed a growth rate of 5. This major driver of international trade growth will help stimulate the 94 © Cygnus Business Consulting & Research 2007 .1 Global Air Cargo Market (FTKs bn) Company. Outlook 12. Boeing and 220 210 200 190 180 170 160 150 2006 2007E 2008E 2009E 175. Europe and North America. the components of total strongly positively correlated with the world gross domestic product (GDP). after exceeding 2% annual average growth over the last couple of years.Aviation 2009 from the present 175. driven by resurgent global According air traffic economic to are the activities.6 185. Industry consulting firm Air Cargo Management Group projected that world air cargo volume would reach 208 billion Freight Tonne Kilometres (FTKs) by Indian Logistics Industry Insight .1% in 2006. The air freight demand is concentrated geographically since it is based on the economic activity.1). Global air cargo traffic has gone up at CAGR of 5. This is because the Intra-Europe and North American markets have matured.Estimated Source: MGI Global Air Freight Flow Model (See Figure 12. In 2004.12.53% during 2001-06 E.6 196. According to International Monetary Fund. the global GDP growth is expected to average at 3% per annum through 2023. Due to slower growth in Intra-Europe and North America. more than 96% of world FTKs moved within the three pillars of the world economy—Asia Pacific. Asia and Intra-Asia are emerging as the prime engines for growth in the air cargo sector.

Estimated Source: Airport Authority of India 95 © Cygnus Business Consulting & Research 2007 584. government regulations and national industrial initiatives. the momentum would boost the sector in the Asian region.61 643. Other factors that contribute to the airborne freight growth rate include the continuous process of globalisation.05 1289. respectively. which results from trade growth. relative currency strength. around 80% of these good will cross borders. This will be driven by high growth rates of these economies and the increasing proportion of their GDP. • • Economic activity: Economic activity.6 2007-08E 2008-09E 2009-10E 2010-11E 2011-12E International Domestic E. Indian air cargo market (in terms of volume) is expected to grow at CAGR of 11.31 708.5 1622. by 2020.2% and domestic air cargo would be 10. Globalisation: At present.39 . of which the CAGR of international air cargo is expected to be 12.2 Indian Air Cargo Outlook Indian Logistics Industry Insight . remains the primary growth driver for air cargo industry’s growth. According to McKinsey estimates. The growth momentum will continue for the next two decades.33 1822.69 860.1% and 8. According to AAI. This development will have a greater impact on the global air cargo sector.5% per annum. • Growth of Asian Economies: Asian markets are growing. which is measured in terms of world GDP. Since there is a positive correlation between GDP growth and growth of air cargo.2 Indian Air Cargo Market (FTKs bn) 1151.26 1445. with the growing trend of globalisation and market liberalisation.global air freight growth rate. about 20% of all manufactured goods cross borders. 12.Aviation Indian aviation industry is emerging as one of the fastest growing markets in the world both in terms of passenger as well as cargo traffic. the domestic Chinese and intra-Asian markets are expanding at average annual rates of 10.5% from 2007-08 to 2011-12.78 780.15% 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Figure 12.

inventory concern and E-commerce development. Indian Logistics Industry Insight . India’s air cargo market is looking for a big leap forward over the next five years. Since India is emerging as one of the favourable destinations for manufacturing outsourcing. In view of the forecasted (9%) GDP growth during 11th Five Year Plan. it is expected to get a major fillip due to the burgeoning overseas trade. it provides greater opportunity to the air cargo industry to airlift the high-value items.during the same period (See Figure 12. customer service orientation.2). although the base for air cargo movement in the country is low. At present.Aviation 96 © Cygnus Business Consulting & Research 2007 .

Annexure I: List of Abbreviations 3PL 4PL Third Party Logistics Fourth Party Logistics AAI ACO ADS AME AMSS APIS ASBS ASEAN ASKMs ASR ATM AWB Airport Authority of India Air Cargo Operators Automatic Dependence System Aircraft Maintenance Engineers Automatic Message Switching System Advance Passenger Information System Automatic Self Briefing System Association of South East Asian Nations Available Seat Kilometres Airport Surveillance Radar Air Traffic Management Airway Bill BDAL CAGR CNS CPDLC Indian Logistics Industry Insight .Aviation CSO Blue Dart Aviation Ltd Compounded Annual Growth Rate Communication. Navigation and Surveillance Control Pilot Data Link Communication Central Statistical Organisation DGCA DVOR EDI FDI Director General of Civil Aviation Doppler Very High Frequency Omni-Directional Range Electronic Data Interchange Foreign Direct Investment FDPS FDTL FIPB FTK GDP HAL Flight Data Processing System Flight Time Limitation Foreign Investment Promotion Board Freight Tonne Kilometres Gross Domestic Product Hindustan Aeronautics Ltd ICAO 97 International Civil Aviation Organisation © Cygnus Business Consulting & Research 2007 .

Aviation 98 © Cygnus Business Consulting & Research 2007 .IGI IIP JACC KRC Indira Gandhi International Index of Industrial Production Joint Air Cargo Complex Konkan Railway Corporation Low Cost Carriers Management Information Systems Memorandum of Understanding Maintenance. Repair and Overhaul Monopulse Secondary Surveillance Radar No Objection Certificate Non Resident Indian North-South-East-West Public Private Partnership LCC MIS MoU MRO MSSR NOC NRI NSEW PPP SAARC SATS ULD WTO South Asian Association for Regional Cooperation Singapore Airport Terminal Services Unit Load Devices World Trade Organisation Indian Logistics Industry Insight .

www. The Hindu Business Line 26. Chattrapati Shivaji International Airport 11.mapsofindia. International Air Transport Association 20.dgft. Indiastat. Air Deccan 3.in 29.moneypore.in 32. Chennai Airport 12.mospi.gov. BSE India 9.com 99 © Cygnus Business Consulting & Research 2007 .Annexure II: Bibliography 1. The Economic Times 25.com 30.pppinindia. www. Bangalore International Airport Ltd 7. Director General of Civil Aviation 14. Air India 4. Indian Airlines 17. www.nic. Airport Authority of India 6.com 31.infrastructure.com 18. India 23. Ministry of Commerce and Industry.Aviation 21.in 28.nic. www. Planning Commission of India 24. Business Standard 10. Delhi International Airport Pvt Ltd 13. Ministry of Civil Aviation 22. www. Indira Gandhi International Airport (IGI 19.delhi. Jet Airways Indian Logistics Industry Insight . ICAO 16. Air Sahara 5. www. Bluedart 8. World Bank 27. Edelweiss Research 15. Air Cargo World 2.

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