Challenges for aviation industry in india


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Challenges for aviation industry in india

  1. 1. Presentation On“Challenges for Aviation Industry”<br />Parminder Singh Grover<br />
  2. 2. Aviation Industry (World Wide)<br />2,000 airlines, 23,000 aircrafts<br />serve some 3,750 airports through a route network of several million kilometers<br /> 32 million jobs <br />
  3. 3. India Aviation Industry (Intro.)<br />Fastest growing aviation industry<br />Dec, 1912 first domestic route <br />AAI manages all airport <br />Over 450 airports and 1091 aircrafts<br />
  4. 4. Cont’d<br />DGCA controlled every aspect <br />Including granting flying licenses, pilots, certifying aircrafts for flight.<br />
  5. 5. Indian Airline Sector<br />K A and J A converted around half their capacity into low-cost services.<br />Also govt. carrier Air India Launch LCS<br />Has a Low cost Airline Air India Express<br />
  6. 6. Cont’d<br />First low cost airline Air Deccan in 2003<br />objective to increase their reach to a largely untapped middle class segment. <br />Passenger traffic 96 million in 2007, compared 6 billion passenger by railway.<br />
  7. 7. Current Scenario <br />precipitated the boom for domestic and international passenger carriers.<br />domestic passenger and cargo traffic recorded a growth rate of 44.6% and 8.7%.<br />Intl. passenger and cargo traffic recorded growth rates of 15.8% and 13.8%<br />
  8. 8. Cont’d<br />Top 5 airports of country handle 70% pass.<br />All airports handle 90.44 million pass. 2006<br />Growth of Aviation Industry is mostly due <br />Low fares and schedules domestic services<br />
  9. 9. Challenges<br />Aviation industry facing major challenges like environmental clearances, acquisition of land and “obstructive” rules in developing its infrastructure.<br />experts had asked the government and the environment agencies to give clearances <br />
  10. 10. Cont’d<br />Land acquisition is one of the major challenges <br />Asian Institute of Transport Development Director (Aviation) - T R Kesherwani<br /><ul><li>Airlines can expand themselves
  11. 11. but airports can increase their capacity by expanding themselves </li></li></ul><li>Cont’d<br />airport at Navi Mumbai has run into trouble over environmental clearances <br />Long term need to master plan for development of infrastructure<br />CAPA India CEO KapilKaul stressed on the need for air safety and communication <br />
  12. 12. Cont’d<br />urgent need of providing training to manpower<br />industry is facing shortage of trained technical staffs and this should not be ignored.<br />
  13. 13. Cont’d<br />provide training to staffs to full fill goal<br />Indian aviation industry expected to grow two to three fold by 2020<br />3,000 Crore would be needed for the development of airports<br />Rs 8,000 crore would be required for airlines <br />
  14. 14. Cont’d<br />number of passengers is likely to increase to 400-450 million by 2020 but present 110 m.<br />number of scheduled aircraft is estimated to go up to 1,000-1,500 from 600 at present<br />
  15. 15. Some Challenges which faced by aviation industry in India<br />
  16. 16. Regional connectivity<br />Biggest challenges<br />lack of airports<br />
  17. 17. High input costs<br />ATF prices in India continue far higher than Global rates<br /><ul><li>US $ 755 in Delhi
  18. 18. US $ 455 in Singapore
  19. 19. US $ 497 in Dubai </li></li></ul><li>Cont’d<br />Withholding tax on interest repayments on foreign currency loans for aircraft acquisition.<br />Increasing manpower costs due to shortage of technical personnel.<br />
  20. 20. Declining yields<br />LCCs and other entrants together now command a market share of around 46%<br />Increasing growth prospects have attracted & new Players<br />
  21. 21. Gaps in infrastructure<br /> Airport and air traffic control (ATC) infrastructure is inadequate to support growth. While a start has been made to upgrade the infrastructure, the results will be visible only after 2 - 3 years.  <br />
  22. 22. Trunk routes<br />A matter of concern that the trunk routes, are not fully exploited.<br /> One of the reasons for inability to realize the full potential of the trunk routes is the lack of genuine competition. <br />The entry of new players would ensure that air fares are brought to realistic levels<br />This in turn would stimulate demand and lead to growth.<br />
  23. 23. Excess Capacity<br />Several new aircrafts were bought within a short span of time <br />Aircrafts ordered during good times are being delivered during recession.<br /> According to industry experts, around 17% of the current fleet are scheduled for delivery during the next 3 years.<br />
  24. 24. Cont’d<br />the industry grew above 40%, almost half of the growth was primarily stimulated due to low fares.<br /> Maintaining such low levels of fares will be difficult due to excess capacity, especially during the ongoing global slowdown. <br />
  25. 25. Hugh Debt Burden<br />Healthy profits and increasing passenger traffic saw airlines raising significant amount of capital from Financial Institutions and Banks <br />The top three airlines are now carrying a cumulative debt burden of approximately $8 billion.<br />
  26. 26. Cont’d<br />Incidentally, this is almost equivalent to the losses of $8.5 billion posted by all global carriers.<br /> Restructuring this huge amount of leverage will be a challenge as resorting to equity capital will also be equally difficult during economic slowdown <br />
  27. 27. Poor Infrastructure<br />Infrastructure continues to be a major constraint for Indian Airline Industry <br />has been aggravated further due to excess capacity created during good times.<br />
  28. 28. Cont’d<br />steps are being taken on this front to upgrade major airports in Mumbai, Delhi and Hyderabad, security concerns still remain to be addressed.<br /> Attracting investments from private sector will go a long way to develop and maintain the infrastructure<br />
  29. 29. Air craft Noise Emissions<br />The perception of people -its intensity, its frequency and the length of time they are exposed to it.<br /> Aircraft noise, including night noise, is associated with sleep disturbance,<br /> long – term adverse health effects and learning difficulties. <br />
  30. 30. Shortage of Airport Facilities<br />There are lot of problem at airports in India.<br />There is no capacity to land two flight at same time.<br />
  31. 31. Conclusion<br />Indian Airline Industry was one of the fastest growing Airline Industry across the world during the last decade.<br />However, skyrocketing fuel prices, economic slowdown, slashed corporate travel budgets over the last 3 years has forced all Indian Airlines to rethink their business model.<br />
  32. 32. Cont’d<br />Excess capacity build-up and poor infrastructure continue to plague the industry which is also experiencing a decline in passenger traffic at the same time.<br />
  33. 33. Thank You!<br />Parminder Singh Grover, Punjab<br />