19 December 2007,,,Since Indian aviation regulations prohibited domestic airlines from flying on international routes until they had operated in the domestic market for five years, it was decided to instead merge Kingfisher Airlines into Deccan Aviation, following which Deccan Aviation would be renamed Kingfisher Airlines.
Per capita income increasing & entertainment spending
The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector.
Industry Overview• India is World’s 9th largest market• Comprises of Domestic Airline, Air Cargo and Airports• Scheduled services available from to/fro 82 airports• Bilateral with 104 countries• Domestic air passenger - Worlds 4th• Enhanced connectivity – 72 foreign airlines of 49 countries• 14 scheduled airlines operating exclusively in passenger sector• Presently it contributes 0.5 % of GDP and it is expected that by 2030 it will contribute 5 % of GDP
Large Increased in infrastructure investments required to sustain growth
AVIATION SECTOR IN INDIA Sector structure/Market size• The Indian aviation industry is one of the fastest growing aviation industries in the world.• The governments open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and number of aircrafts. Today, private airlines account for around 75 % share of the domestic aviation market.• India is the 9th largest aviation market in the world. According to the Ministry of Civil Aviation, around 29.8 million passengers travelled to/from India during 2008, an increase of 30 per cent on previous year.• It is predicted that international passengers will grow up to 50 million by 2015. Further, due to enhanced opportunities & international connectivity, 69 foreign airlines from 49 countries are flying into India.
Contribution to GDPPresent Contribution < 1%.Poised to grow at 5% contribution to GDP by 2030
• Growth Domestic airlines flew 3.67 million passengers in August 2009—an increase of 25 per cent.• Domestic traffic has increased by 25 per cent to 30 per cent and international traffic growth by 15 per cent, taking the total market to more than 100 million passengers by 2010.• The government has planed to invest US$ 9 billion to modernise existing airports in 2010. The government is also planning to develop around 300 unused airstrips.• India ranks fourth after US, China and Japan in terms of domestic passengers volume. The number of domestic flights grew by 69 per cent from 2005 to 2008. 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.• The industry witnessed an annual growth of 12.8 per cent during the last 5 years in the international cargo handled at all Indian airports. The airports handled a total of 1020.9 thousand metric tones of international cargo in 2006-07.• Further, there has been an increase in tourist charter flights to India in 2008 with around 686 flights bringing 150,000 tourists. Also, there has been an increase in non-scheduled operator permits – 99 in 2008 as against 66 in 2007.
Low cost services• Major full-service carriers have converted around half their capacity into low-cost services, which has resulted in bringing down the average fares of airlines as a whole by about 30 per cent and thereby increasing demand from the domestic passenger market.• Kingfisher Airlines and Jet Airways have converted around half their capacity into low-cost services. While, government carrier Air India plans to launch a low-cost model in the domestic skies. It already has a low- cost airline called Air India Express which operates on international routes.• Jet Airways has also increased the number of low-cost seats in the system by around 50 per cent.• Low cost carriers (LCCs) such as Indigo and SpiceJet have increased the total number of seats by 40 per cent and 53 per cent, respectively, in the past year.• SpiceJet is also working on a plan to start international operations next year, making it the third private Indian carrier after Jet Airways and Kingfisher to fly overseas.
Some Facts• In the present scenario around 12 domestic airlines and above 60 international airlines are operating in India• The growth of airlines traffic in Aviation Industry in India is almost four times above international average• Aviation Industry in India have placed the biggest order for aircrafts globally• Aviation Industry in India holds around 69% of the total share of the airlines traffic in the region of South Asia
Players Taking Indians To Places State owned domestic airlines ((earlier Tata Airline) ) “Regular” airline offering normal Formerly known as Indian Airlines economy and business class seats. GoI’s plan to merge Air India and Indian into 300 flights, 43 Indian destinations one giant airline consisting of 130-140 Does not own its brand. Brand aircraft owned by Jetair Enterprises Ltd. a separate company substantially owned by Naresh Goyal Its hub is Chennai International Began on 3 Dec 1993with two Boeing 737-200 aircrafts as Sahara Airport. Airlines Mainly targeting business Initially services concentrated in travellers northern India The airline started operations in Rebranded as Air Sahara on 2 October 2000. October 2005
Players Taking Indians Across India Low-cost airline (LCC) GoAir – The People’s Airline Began in May 2005 established in June 2004 Entered with Rs. 99 fares for first 99 days LCC promoted by The Wadia Group “Offering low everyday spicy fares” GoAir FreeFares Relatively small player as compared Aim: Compete with Indian Railways AC sgment to other LCCs fleet of 6 Boeing 737-800 with 189 seats. Initial flights in southern & western India with the first nine A320s Indias first low-cost carrier It was started by Captain G. R. Gopinath Started air operations in 2003 It was known popularly as the common mans airline Connects 55 cities within India
How aviation industry is effecting Indias economy? 10 years back there were just 2 airlines. Both state owned . In thelast 10years the economy has opened up. India has experiencedgrowth rate of 8% per year.• The main factors which effect the Indian Economy are:- 1. Increased no. of domestic airlines 2. Low cost airlines 3. Indias improving economy• the other factors are:- 1. Increased in no. of business travellers to different countries 2.Incresed no. of incoming tourist and business enterprises
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 neighbouring countries• Favourable Government policies and tax reforms
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)
Upgrading Airport InfrastructureBy 2020, Indian airports are estimated to handle:• 100 million passengers• Including 60 million domestic passengers• Cargo in the range of 3.4 million tonnes per annum
FDI Policy The Reserve Bank of India (RBI) announced that foreign institutional investors might haveshareholdings more than the limited 49% in the domestic sector.• Airports – Foreign equity up to 100% is allowed by the means of automatic approvals pertaining to establishment of Greenfield airports – Foreign equity up to 74% is allowed by the means of automatic approvals pertaining to the existing airports – Foreign equity up to 100% is allowed by the means of special permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports – 100 per cent tax exemption for airport projects for a period of 10 years.• Air Transport Services – Up to 49% of foreign equity is allowed by the means of automatic approvals pertaining to the domestic air transport services – Up to 100% of NRI investment is allowed by the means of automatic approvals pertaining to the domestic air transport services – 74 per cent FDI is permissible in cargo and non-scheduled airlines.
At Present -AAI manages 128 airports which includes: - 15 International airports - 8 Custom airports ● - 25 Civil Enclaves ● - 80 Domestic airports
PPP IN INDIAN AIRPORTSNeed for Private Participation in Airport InfrastructureTo bridge the resource gap for achieving thefollowing objectives - To build world-class airports with modern technology and efficient management practices. To make the airport user friendly and achieve higher level of customer satisfaction. To lay special emphasis on the development of infrastructure for remote and inaccessible areas. To provide airport capacity ahead of demand. To encourage greater efficiency in Airport Operations.
Airport Development Process has taken off in the country -• The process of development of airports through PPP in the country began with CIAL.• Two new Green field airports were thereafter approved for Bangalore and Hyderabad.• On 3rd May 2006 the Airports At Mumbai and Delhi were handed over to Joint Venture Companies.• Of 35 non metro airports being taken up for modernization PPP has been approved for the city side development of 10 airports.• Proposals for a number of green field airports have been received from various State Govts.
First Indian Airport in Private Sector• First Indian Airport in Private Sector is under construction at Cochin. It is being constructed by the company named “Cochin International Airport Ltd.” Proposed Private owned airports: Gwalior (M.P.) Durgapur (W.B.) Jhajjar (Haryana)
Problem & Solution• Increased traffic and cargo growth has led to congestion/ saturation at different airports in India , e.g. Mumbai, Delhi, Bangalore, Hyderabad, Kolkata, Chennai etc.• Hence, country requires – New Airports – Expansion of capacity at existing airports – Induction of Technology for efficient handling of Passenger and cargo. – Better Management Practices• For all this additional funds to the tune of Rs. 40,000 crores + Rs. 454 crores for airports in North East are required (details shown in next slide). – The annual requirement of funds in the future is expected to be much more than the AAI can generate.
Major Investments Over the past year, various companies have shown an interest in the Indian aviation industry. Investment in airport infrastructure was over US$ 5 billion in 2008 and will go up US$ 9 billion by 2013, of which close to US$ 6.8 billion is expected to come through public private partnerships (PPP) model, according to a study by research firm Frost & Sullivan. Tata Advanced System Limited (TAS), a unit of the Tata Group, will set up a US$ 113.63 million helicopter manufacturing unit at the Aerospace Special Economic Zone (SEZ) in Adhibatla village near the Hyderabad international airport. Further, the company has formed a joint venture with US-based Sikorsky Aircraft to make aerospace components in India. US aircraft maker, Boeing Co, will deliver 100 planes worth US$ 17 billion over the next four to five years to India.
Major InvestmentsChangi Airports International is ready to enter into joint ventures with more Indian companies in developing airports. The company, which has picked up a 26 per cent stake for US$ 20 million in Bengal Aerotropolis Pvt Ltd (BAPL) is looking at other opportunities.State-owned aerospace firm Hindustan Aeronautics Limited (HAL) has signed an agreement with Boeing to supply flaperons for the Boeings 777 series commercial jetliners. It is understood that HAL will supply 600 units of flaperons to Boeing which will be delivered in phases by 2019.European passenger plane maker Airbus SAS will move 20 per cent of its engineering and design activities to low-cost countries, a majority of it to India, by 2012.
Road Ahead• The Indian aviation sector is likely to see clear skies ahead in the years to come.• Passenger traffic is projected to grow at a CAGR of over 15 per cent in the next 5 years.• The Vision 2020 statement announced by the Ministry of Civil Aviation, envisages creating infrastructure to handle 280 million passengers by 2020.• Investment opportunities of US$ 110 billion envisaged up to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure.• Associated areas such as maintenance, repair and overhaul (MRO) and training offer high investment potential. A report by Ernst & Young says the MRO category in the aviation sector can absorb up to US$ 120 billion worth of investments by 2020.• Aerospace major Boeing forecasts that the Indian market will require 1,000 commercial jets in the next 20 years, which will represent over 3 per cent of Boeing Commercial Airplanes’ forecasted market worldwide. This makes India a US$ 100 billion market in 20 years.