Aviation Industry

The Aviation Industry in India
 The Airport Authority of India (AAI) manages a total of 127 airports in

the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves.  As of today, India has 1 government airline and 7 private airlines – Paramount, Air Deccan, Jet (includes Jet Lite (formerly Sahara), Jet Airways and Jet Konnect), Spice Jet, Go Air, Indigo and Kingfisher (includes Kingfisher and Kingfisher Red (previously Air Deccan)  1991, was the year when the Indian Government came up with the Open Skies Policy.

A Brief Overview
 India is poised to be among the top five aviation nations in the world in

the next 10 years. Currently, India is the 9th largest civil aviation market.  Recent estimates suggest that domestic air traffic will touch 160-180 million passengers a year, in the next 10 years and the international traffic will exceed 80 million passengers a year.  The Indian Aviation Industry is exploring opportunities to improve connectivity and is also looking at enhancing the number of Indian carriers to various countries.  One of the key achievements of India in the last decade has been to setup an independent regulator for economic regulation of airports.

1911. Later.  First domestic air-route  between Karachi and Delhi in December 1912. Opened by Indian Air Services in collaboration with the UK based Imperial Airways as an extension of London-Karachi flight. He flew airmails from Allahabad to Naini. .History of Aviation in India  The first commercial flight  on February 18.  First domestic air-lines  Tata Air Lines (initially Tata Air Services) in 1932 between Karachi & Madras via Ahemdabad & Bombay. covering a distance of about 10 km. Delhi and Colombo were also serviced. by a French pilot Monseigneur Piguet.

Indian Airlines (for domestic service) and Air India (for international service) were born. First International Flight  June 8th. Entry of Low Cost Carriers  Budget airlines entered the Indian aviation industry in 2003 led by Capt.Gopinath’s Deccan Airways. Consequently. 1948 from Bombay to London via Cairo & Geneva Nationalization of Aviation Industry  Air Corporations Act .R. . Open Sky Policy  Private Carriers were granted licenses for domestic routes in 1994. only Jet Airways & Air Sahara were able to provide service. passed on August 25th. Of the 6 licenses granted. G. Air India International  Set up as a joint-venture     company in 1948 with the Government of India acquiring 49 per cent stake in Tata Air Lines. 1953 nationalized the air transportation industry.

A similar trend is observed in the cargo sector.200 airports and deploys 27.  The rapidly expanding aviation sector handles 2.  Passengers carried by domestic airlines during Jan-Nov 2011 were 55. using 4. domestic air traffic has quadrupled from 13 million to 52 million and international traffic more than tripled to 38 million. . moves 45 million tonnes of cargo through 920 airlines.000 aircraft.81 million during the corresponding period of previous year thereby registering a growth of 17.  Today. 87 foreign airlines fly to and from India and five Indian carriers fly to and from 40 countries.5 billion passengers across the world in a year.Current Scenario – Market Size  In the last decade.03 million as against 46.6 per cent. according to data released by Directorate General Civil Aviation .

.  CAPA India expects domestic traffic growth of 17-18 per cent.Current Scenario – Market Size  The air transport in India has attracted FDI worth US$ 423. are expected to increase towards the upper end of a 10-12 per cent range over the next 12 months.  Private carriers are anticipated to post a combined profit of US$ 350– US$ 400 million for the financial year ending March 31. possibly as high as 20 per cent. which grew by about 10 per cent last year. International passenger numbers. India.31 million from April 2000 to September 2011. according to the data provided by Department of Industrial Policy and Promotion. 2012. as per a report titled '2011-12 Aviation Industry Outlook' by Centre for Asia Pacific Aviation.

Challenges  Initializing privatization in the airport activities  Modernization of the airlines fleet to handle the pressure     of competition in the aviation industry Rapid expansion plans for the major airports for the increased flow of air traffic Development for the growing Regional Airports Waving of Tax Exemption on leasing from government Costs pressures (ATF Prices & Staff Cost) .

Issues with Indian Aviation Industry  Shortage of Pilots  Delayed Salaries  Increased prices of Air turbine fuel  Declining Yields and services  High Input costs  Increasing debts  Gaps in Infrastructure .

The government is also planning to develop around 300 unused airstrips.  India ranks fourth after US. The number of domestic flights grew by 69 per cent from 2005 to 2010. China and Japan in terms of domestic passengers volume.  The Centre for Asia Pacific Aviation (CAPA) forecasted that domestic traffic will increase by 25 per cent to 30 per cent till 2012 and international traffic growth by 15 per cent.Growth  Domestic airlines flew 3. taking the total market to more than 100 million passengers by 2012.8 per cent during the last 5 .  The industry witnessed an annual growth of 12.  The government plans to invest US$ 9 billion to modernise existing airports by 2012.67 million passengers in 2010—an increase of 25 per cent. The domestic aviation sector is expected to grow at a rate of 9-10 per cent to reach a level of 150-180 million passengers by 2020.

Key Players .

Market Share .

Known Factors Influencing Growth Rate  Increased Inward and outward tourism  Increased competition has driven down prices and margins  Additional purchasing power due to rapidly rising real incomes amongst the middle class  Increased business trade due to the rapidly growing economy and free trade agreements with neighboring countries  Favorable Government policies and tax reforms .

AIRPORTS .

4 million tonnes per annum .Upgrading Airport Infrastructure By 2020. Indian airports are estimated to handle:  100 million passengers  Including 60 million domestic passengers  Cargo in the range of 3.

In 1995 Airports Authority of India (AAI) was established by merging both IAAI and NAA by an Act of Parliament – The Airports Authority of India Act in 1994 – for better and efficient management of all airports in India by a single Authority. till the creation of International Airports Authority of India (IAAI) in 1972 and National Airports Authority (NAA) in 1986.Public Private Partnership IN Airports Background  Indian airports were managed by Civil Aviation Department. Government of India.  .

80 Domestic airports .25 Civil Enclaves .8 Custom airports .At Present AAI manages 128 airports which includes: .15 International airports .

. To provide airport capacity ahead of demand. To lay special emphasis on the development of infrastructure for remote and inaccessible areas.PPP IN INDIAN AIRPORTS Need for Private Participation in Airport Infrastructure To bridge the resource gap for achieving the following objectives      To build world-class airports with modern technology and efficient management practices. To encourage greater efficiency in Airport Operations. To make the airport user friendly and achieve higher level of customer satisfaction.

 Proposals for a number of green field airports have been received from various State Govts. .  On 3rd May 2006 the Airports At Mumbai and Delhi were handed over to Joint Venture Companies. Two new Green field airports were thereafter approved Airport Development Process has taken off in the country - for Bangalore and Hyderabad.  Of 35 non metro airports being taken up for modernization PPP has been approved for the city side development of 10 airports.

Major Airports .

454 crores for airports in North East are required  The annual requirement of funds in the future is expected to be much more than the AAI can generate. Delhi. Kolkata. Hyderabad.g.  Better Management Practices  For all this additional funds to the tune of Rs. country requires  New Airports  Expansion of capacity at existing airports  Induction of Technology for efficient handling of Passenger and cargo. . Mumbai. Chennai etc.  Hence.Problem & Solution  Increased traffic and cargo growth has led to congestion/ saturation at different airports in India . e.000 crores + Rs. 40. Bangalore.

Greenfield airports Hyderabad Airport Bangalore Airport .

Should govt liberalise foreign investment in aviation sector?  Indian aviation is in crisis.  Relying solely on domestic capital to fund the massive potential of India's carriers carries two risks. . underfunding and isolation from global expertise.  Modernising policies on foreign investment in Indian carriers could bring some relief to India's airline industry.

 Indian aviation has deep-rooted problems that need comprehensive solutions. carrying the cost burden of an extra 25% on an average on fuel is simply not sustainable in a ferociously competitive global industry. .  For India's airlines.  Jet fuel pricing is probably the most urgent.

at 20- 30% strangle the lifeblood from airlines  Replace the posted-pricing system used by public sector oil companies with transparent pricing indexed to the price of crude oil  Break the monopoly pricing power of the incumbent fuel suppliers and fuel infrastructure owners by ensuring "true" open access to new entrants. .Three actions are urgently needed:  Reduce or eliminate state fuel taxes which.

security and giving airlines the commercial freedom to operate as true businesses. .  The government's role is clear.  They should not be over-burdening the industry with excessive or unnecessary taxes. How the government regulates and taxes aviation needs a major refocus.  Governments should not be micromanagers setting prices and service standards. Regulation must focus on safety.

US limits the amount of foreign ownership in its domestic airlines to a maximum of 25%. saying that an increase would not benefit Canadian carriers. India is planning to impose a 49% ownership limit in the airline industry. . China and a host of other nations across Asia and Europe.  Canada too has stayed with a 25% foreign ownership limit in Canadian airlines.  . Most other countries have similar protective provisions limiting ownership of their airlines.have imposed a 49% ownership limit in the airline industry.International practice  Developed and the developing countries . The Canadian Transport Ministry has rejected calls for any increase. This is true for Singapore.

All round liberalization in foreign investment rules also allows domestic companies to diversify and explore investment opportunities in other markets... and are adding capacity. adding routes. lowers prices and accords choice to consumers. where both the legacy and the newly entered low-cost carriers alike are engaged in fierce competition. adding features & products and dropping prices. . and congestion in the skies. The aggressive route expansion plans of the Indian carriers have already resulted in excess supply over a deficient infrastructure – leading to congestion on the ground. The airline industry in India is passing through its most competitive phase to date.While FDI benefits industry sectors. A further FDI allowance in airlines in India would only impact adversely.  FDI brings in competition. the financial health and future of India’s own home grown carriers. and also the civil aviation sector.

Airline industry is an exception to free FDI. It is important that India should seek reciprocal opening of Airline industry in other countries. In an environment where restrictive foreign ownership in the Airline industry is the norm. While Open skies is a desirable long-term outcome. globally  Foreign investment in airlines should however not be a one-way street where a country offers access and makes foreign ownership allowance. and also using bilateral air service rights to their advantage.. the health of the Indian carriers be also kept firmly in sight. it cannot be achieved by a single nation alone. this protects the foreign carriers from both targeting Indian carriers for acquisition. before allowing open access of its market to foreign carriers.. India also currently does not allow direct or indirect equity participation by foreign airlines in Indian carriers. Airlines are an important part of the national economy and it is important that in making allowances and concessions to international players. without reciprocity from others.. .

This would help not only in manning critical functions within the country. The government could provide special incentives allowing global majors and Indian industry to invest in avionics and equipment. .  There is a need for building the avionics and aviation equipment capabilities of Indian industry. ground handling. is greater. There could be special incentives and FDI allowances for education and training in the Aviation sector.Aviation is more than just Airlines  The key challenge for India's civil aviation sector is not 'more airlines'. Maintenance Repair & Overhaul (MROs) and other non core-airline functions of the aviation sector.  Foreign participation in India's civil aviation sector could be leveraged in areas where both the need and the opportunity. aviation provides India an opportunity to build capacities and capabilities in Aviation. but also for creating employment opportunities for Indian personnel in global aviation markets.  Given the acknowledged competence and expertise of skilled Indian manpower. but more infrastructure. and to invest not only in pilot & ATC training but also growing the pool of technical & maintenance expertise in Aviation. The government could consider opening up foreign investment in non-scheduled operations. charter flights.

 The Ministry of Civil Aviation in India will alone handle about 280 million passengers by the year 2020.JOURNEY TO THE FUTURE !!!  Less than 2% of India’s 1. .  CAGR growth rate of more than 15% in the forth coming years.  About US$ 110 billion new investments in the Indian aviation sector with not less than US$ 80 billion exclusively targeted for the purchase of new aircraft and US$ 30 billion for developing the infrastructure at the airports.2 billion population travels by air. which points to massive potential for growth.

THREATS IN THE WAY !!! .

WHAT ACTUALLY IS NEEDED ?  Step 1 : Hold firm .  Step 3 : Restructure costs and rationalize. . merge or capitulate. take market share.  Step 4 : Survive.  Step 2 : Curb capacity growth and raise yield.

Employment Opportunities                  Commercial pilot Air cargo pilot Co-pilot Cabin crew Cabin safety instructor Air traffic controller In-flight base managers In-flight managers Cabin services instructor Training instructor Cabin crew Maintenance controllers Aircraft maintenance engineering Cargo officers Quality control manager Guest service agent Ground staff .

without compromising on safety & security  Reduction in ATF prices and taxation on ATF and lease rentals  .INITIATIVES TO BE TAKEN… Control Costs  Improve quality of service  Develop a large pool of skilled / technical manpower  Attract more professionals to manage the aviation industry  Develop infrastructure to match growth plans  Liberalize rules & regulations governing civil aviation.

With the favorable economic environment and the massive infrastructure projects in the region. the outlook of aviation industry is bright and we believe more investments will be channeled to this industry in the region benefiting all related sectors of the economy.CONCLUSION  Aviation industry is a strategic and essential element for any economy to flourish. .

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