Economic reforms aviation industry


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  • The Competition Commission of India has sought detailed response from Jet and Etihad on the combined market share the two airlines expect to have on the India-Abu Dhabi and beyond routes to places like North America and Europe where other Indian carriers also fly.
  • New Delhi: Janata Party leader Subramanian Swamy on Thursday filed a petition in the Supreme Court seeking a quashing of the clearance granted to AirAsiaIndia Pvt. Ltd. In his 60-page public interest litigation (PIL),…
  • The airports handled a total of 1020.9 thousand metric tones of international cargo in 2006-07.
  • 10 years back there were just 2 airlines. Both state owned . In the last 10years the economy has opened up. India has experienced growth rate of 8% per year.
  • commenwelth games, world cup, ipl etc.
  • It is also working towards making existing non-operational airports in the country operational. It has selected 12 airports. These include the Mumbai, Chennai, Bengaluru, Kolkata, Hyderabad, Ahmedabad, Cochin, Coimbatore and the proposed Navi Mumbai and Noida airports.
  • The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector.
  • PppGovt. should be a participant not only in investment but accountability also..
  • Economic reforms aviation industry

    2. 2. SOURCES • 2nd U.S.-India Aviation Partnership Summit(2009) • Research Study of the Civil Aviation Sector in India SUBMITTED TO : The Ministry of Corporate Affairs, Govt. of India (2012) • WIKIPEDIA • AIRLINE INDUSTRY- CHANGING TIMES (NMIMS PROJ;2002) GUIDE : PROF N S SHETTY • NEWSPAPER UPDATES TILL 20 Nov 2013 – – – – – – THE ECONOMIC TIMES BUSINESS STANDARD THE INDIAN EXPRESS THE TIMES OF INDIA LIVE MINT & THE WALL STREET JOURNAL. WALL STREET JOURNAL
    3. 3. SUMMARY OF PRESENTATION • Introduction • India’s economy before 1991 • Aviation Industry before & after 1991 • Liberalisation policies/Government initiatives • Impact of Liberalisation Policy • Growth Story • SWOT Analysis • ROAD AHEAD
    4. 4. REGIONAL AIRLINES-29 JUL13 • GoI has set target of building 50 new low cost small airports by AAI across 11 states to cater for regional connectivity. • Large airlines mandated to connect smaller cities • scheduled regional airlines to induct smaller aircraft for deployment on regional routes • Relaxation on number of aircrafts • Cess and tax relaxation on regional routes • Reduce VAT on ATF and Less Airport charges. • Permission to fly international routes to regional airlines.
    5. 5. JET-ETIHAD • FIPB Cleared Jet-Etihad 2058 Cr deal on 29 Jul 13 Indicating the flexible Nature of GoI for FDI • Largest foreign investment in 2013 • Etihad Assures of Indian Control : Board Members – Independent directors to be Indian Jet-4, Etihad-2 • Concerns of SEBI and MCA addressed. – Applicability of Indian Law to shareholder dispute. – Arbitration on any other dispute can be carried out under English law. – 9% stake owned by Tailwinds will have to be directly held by Chairman Naresh Goyal. – Stake After Deal Ratification • Naresh Goyal • Etihad • Public Holding – – – 51% 24% 25%
    6. 6. AIR ASIA - JV • AirAsia India is a proposed JV start-up and is the latest venture of the AirAsia Group. AirAsia Investment Ltd has applied to the Indian Foreign Investment Promotion Board (FIPB) to seek approval for AAIL to invest 49% into a proposed Indian JV together with Tata Sons Limited and Arun Bhatia of Telestra Tradeplace Pvt Ltd. The JV plans to operate from Chennai, focused on providing domestic Tier II/Tier III city connectivity
    8. 8. 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 – 87 foreign airlines of 49 countries 07 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
    9. 9. INDIA’S ECONOMY BEFORE 1991 • Influenced by Protectionism and Public ownership. • Existence of License Raj (Red Tape). • Average growth rate of India was 3.5% p.a with per capita 1.3%p.a. • More focused on Heavy Industries and Agriculture. • Less attention towards service sector. • Downfall of USSR and Gulf War added fuel to the fire of crisis.
    10. 10. INDIA’S ECONOMY BEFORE 1991 • Major imbalance in payments of loans. • International Monetary Fund (IMF) demanded for economic reforms in return of aid. • Prime Minister Narasimha Rao and Finance Minister Manmohan Singh took initiative to bring Liberalization.
    11. 11. LICENCE RAJ
    12. 12. ECONOMIC REFORMS POST 1991 Policies • Liberalisation - Private Players • Open Sky • Direct import of ATF - Regulation • FDI – Domestic Services Sector • Airports control - Airports Authority of India (AAI) • Green Field Airport
    13. 13. IMPACT OF LIBERALISATION • The Air Corporation Act, 1953 repealed Opening up of the domestic sector Disinvestment of the two public sector airlines New privately owned domestic airlines • Open Sky Allow foreign airline of any country or ownership to land at any port on any number of occasions and with unlimited seat capacity. • Foreign Direct Investment Up To 49% Of Foreign Equity & 100% Of NRI investment is allowed Pertaining to the Domestic Air Transport Services
    14. 14. IMPACT OF LIBERALISATION • Private Carriers permitted to operate scheduled services – 75% share in domestic aviation • Entry of low cost carriers • City side development of non-metro airports • Allowing Indian carriers to compete on international routes • Reduction in Landing charges. • Fleet expansion plans of Air India
    15. 15. IMPACT OF LIBERALISATION • Restructuring of Delhi and Mumbai airport and development of Greenfield airports at Bangalore and Hyderabad undertaken. • Up gradation/ expansion/ development of airports undertaken depending upon traffic potential, requirement of airline operators and need of air passengers.
    16. 16. IMPACT OF LIBERALISATION • With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers.
    17. 17. PASSENGER FLOW 2006 - 2011
    18. 18. Service Competitive Pressure Low cost Carriers changing the game Indigo Price
    19. 19. Market Size Domestic Air Traffic quadrupled from 13 million to 52 billion in last decade International Traffic more than tripled to 38 million 87 foreign airlines fly to and from India and 5 Indian airlines fly to and from 40 countries 45 million tons of cargo through 920 airlines, using 4200 airports and deploying 27000 aircrafts Projections for traffic during the Eleventh Five Year Plan, which shows increase in passenger traffic (i.e. 18.8%) as compared to cargo (i.e. 11.4%). The figure is as follows:
    20. 20. Market Size Contd…….
    21. 21. Projection of Traffics upto 2016-17
    22. 22. Major policies taken in 11th Five Year Plan  Reduction of high Aviation Turbine Fuel(ATF) cost and review of its Tax structure  Multi Modal Connectivity by building expressways to facilitate advantage of air transportation by reducing the total travel time  foreign equity participation up to 49% and investment by non-resident Indians (NRIs) up to 100% in the domestic air transport services  Promotion of Regional Airlines by the way of liberal policy and provision of better infrastructure facilities  Development of MRO hub  Review of RDG to bring them in line with developments  Merger of AI and Indian Airlines to optimize fleet acquisition & to leverage the asset base
    23. 23. Major policies taken in 11th Five Year Plan 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74% 100% FDI under automatic route is permissible for greenfield airports 100% tax exemption for airport projects for a period of 10 years projected outlay for the Eleventh Plan for MoCA is Rs 43560 crore at 2006–07 price
    24. 24. FDI Policy • • The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings 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.
    25. 25. Foreign companies can explore various modes of entry into the Indian market
    27. 27. GROWTH OF THE INDUSTRY • The growth of airlines traffic in Aviation Industry in India is almost four times above international average. • Domestic airlines passengers traffic in increasing at the rate of 25%. • India ranks fourth after US, China and Japan in terms of domestic passengers volume. 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.
    28. 28. GROWTH OF THE INDUSTRY • Further, there has been an increase in tourist charter flights to India with around 686 flights bringing 150,000 tourists. • It is predicted that international passengers will grow upto 50 million by 2015 • Aviation is now affordable with check fares and discount schemes. • Various Operators with different business model. • Regional connectivity – Tier II & Tier III cities
    29. 29. Contribution to GDP Present Contribution < 1%. Poised to grow at 5% contribution to GDP by 2030
    30. 30. OPPORTUNITIES Airport development and modernisation • The government is promoting private participation for the development of greenfield airports and modernisation of existing airports. Airport connectivity • The Ministry of Civil Aviation is focussing on improving connectivity to major airports. City-side development • The government is focussing on the city-side development of airports, including real estate and commercial development. The city-side development of 24 non-major airports is being taken up.
    31. 31. SWOT ANALYSIS
    32. 32. 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.
    33. 33. THANK YOU