India's Aviation Sector Growth with Open Skies Policy and Emerging Regional Airlines
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This document provides an overview of the aviation sector in India. It discusses the impact of liberalization policies in the 1990s in opening the sector to private players. Key developments include the growth of low-cost carriers, new joint ventures between foreign and domestic airlines like Jet-Etihad and Tata-AirAsia, and plans to improve regional connectivity through new regional airports and regional airlines. The aviation industry is projected to continue strong growth in the coming years driven by rising passenger and cargo traffic.
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India's Aviation Sector Growth with Open Skies Policy and Emerging Regional Airlines
- 1. AVIATION SECTOR : OPEN SKY &PREP BY: EMERGING AIRLINES SUBMITTED TO: PROF MADHULIKA SINHA
- 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 • NEWSPAPER UPDATES TILL 20 Nov 2013 – THE ECONOMIC TIMES – BUSINESS STANDARD – THE INDIAN EXPRESS – THE TIMES OF INDIA – LIVE MINT & THE WALL STREET JOURNAL.
- 3. PREVIEW • Introduction • Open sky policy • JV & Regional Airlines • Growth Story • Road Ahead
- 4. 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 Largest Enhanced connectivity – 87 foreign airlines of 49 countries 07 scheduled & 01 regional airline 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
- 5. AIRPORTS & AIRCRAFTS- INDIA AIRPORTS & AIRSTRIPS ORG TOTAL OPERATIONAL AAI 97 65 DEFENCE 138 90* STATE GOV 161 67 JV 06 06 PVT 61 53 * CIVIL ENCLAVE 25 AIRCRAFTS AIRLINE NOS OF A/C AIR INDIA 131 JET 111 INDIGO 62 SPICEJET 48 GO AIR 13 BLUE DART 08 DECCAN CARGO 02 AIR MANTRA 02 QUICKJET 01
- 7. DEFUNCT AIRLINES • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Airline Commenced operations Air India Cargo 1954 Air Deccan 2004 2007 Merged with Kingfisher Airlines and rebranded as Kingfisher Red Air Mantra 2012 Air Sahara 1991 2006 Merged with Jet Airways and rebranded as JetLite Air Services of India 1936 Airways (India) Limited 1945 Ambica Airlines 1947 Archana Airways 1991 Aryan Cargo Express 2005 Bhaarat Airways 1995 Crescent Air Cargo 2000 Damania Airways 1993 Renamed Skyline NEPC after takover by the owners of NEPC Airlines Darbhanga Aviations 1950 East-West Airlines 1992 Elbee Airlines 1994 1998 Gujarat Airways 1995 Himalayans Air Transport & Survey Limited 1934 Himalayan Aviation 1948 Indian 1953 2011 Merged with Air India Indian National Airways 1925 Indian Overseas Airlines 1947 Indian State Air Service (ISAS) 1929 Indian Transcontinental Airlines 1933 Indus Airways 2006 Irwaddy Flotilla & Airways 1934 Jamair 1946 1977 Jetlite 2007 2012 Merged with JetKonnect Jupiter Airways 1948 Kalinga Airlines 1946 Kingfisher Airlines 2005 Kingfisher Red 2007 MDLR Airlines 2007 ModiLuft 1994 1996 NEPC Airlines 1993 1997 Orient Airways 1946 Paramount Airways 2005 Pushpaka Airlines 1979 Tata Airlines 1932 1946 Vayudoot 1981 1997 VIF Airways 1993 1996 Vijay Airlines 1981 1997 Ceased operations 2012 Headquarters Mumbai Bangalore 2013 Delhi 1953 1955 1949 1999 2010 1999 2006 1997 1962 1995 2001 1935 1953 1945 1950 1931 1948 2007 1939 1949 1953 2012 2011 2009 1953 2010 1983 Mumbai Mumbai[8] Kolkata Bombay New Delhi New Delhi Mumbai Chennai Mumbai[9] Kolkata Mumbai Mumbai Ahmedabad Kolkata Kolkata New Delhi Delhi[8] Mumbai Kolkata Kolkata[8] New Delhi Chennai Kolkata Mumbai Mumbai Kolkata Mumbai Mumbai New Delhi Mumbai Chennai Kolkata Chennai Mumbai Mumbai[8] New Delhi Hyderabad Chennai
- 8. 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
- 9. 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.
- 10. PASSENGER FLOW 2006 - 2011
- 12. 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%).
- 13. JV & REGIONAL AIRLINES
- 14. JET-ETIHAD : JV
- 15. JET-ETIHAD : JV • “Abu Dhabi-based Etihad has a unique airline-cumairport strategy that is likely to change the way Jet operates. It promises to be an interesting partnership” • Jet Airways Chairman Naresh Goyal and James Hogan of Etihad Airways signed a code sharing agreement in 2008 • Wet lease signed in Mar 2013
- 17. JET-ETIHAD : JV
- 19. JET-ETIHAD : JV • FIPB Cleared Jet-Etihad 2058 Cr deal end Jul 13 Indicating the flexible Nature of GoI for FDI • Largest foreign investment in 2013 • CCI clears JV – Nov 2013 • Etihad Assures of Indian Control : • Board Members – Independent directors to be Indian – Jet-4 – Etihad-2
- 20. JET-ETIHAD : JV • 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%
- 21. ETIHAD :STRATEGY • Well-crafted airline-cum-airport strategy where Abu Dhabi becomes a crucial hub in this part of the world • Etihad’s expansive web of bilateral agreements with many airlines is built on the reality that airline hubs bring economic prosperity. • Not only shaping the future of Etihad, but even the future of the Emirate of Abu Dhabi
- 22. HOW ETIHAD WILL DIGEST JET • • • • • • Integration of operations & marketing activities Ground handling atcommonly used airports Careful nurturing of loyal customers Renegotiations & cost cutting. 26 Indian cities access to Etihad International route change for Jet – Most European routes likely to be dropped – Focus : Connecting Etihads hub ( Abu Dhabi) – Pax feeds to Etihad, more a regional role
- 23. HOW ETIHAD WILL DIGEST JET • Etihad has purchased Jet's landing slots at Heathrow • Will buy the airline's frequent flier programme Jet Privilege • Will provide/arrange for loans under soft and discounted rates – Required by Jet airways to retire its high cost debt
- 25. AVIATION: TATA
- 26. TATA - AIR ASIA : JV • Tata group (30%) JV with Air Asia(49%) & Telestra Tradespace(21%). • Airline Scheduled to start operations soon. • Rupees 80 Crore initial investment. • Regulatory Authourity permissions being sought ( DGCA & BCAS). • Operate from Chennai : Connectivity to tier II & tier III cities. • Launch will mark return of Tata’s to aviation sector.
- 27. TATA- SIA : JV • • • • • Tata SIA Airlines Ltd- Full service airline FIPB cleared FDI proposal (12 Nov 13) Operational by Jun-Jul 2014 Initial investment $ 100 million Control of airline in Indian hands – 04 directors : Tata’s – 02 directors : SIA
- 29. REGIONAL AIRLINES • 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.
- 30. REGIONAL AIRLINES • Air Costa- Two Ambraer Jets • Lingamaneni business group From Vijaywada • First generation Entrepreneur Mr Bhaskar Rao • Seven Years After Paramount Air: Operated with Seven Ambraer Jets • Future Plans – 02 E-190 Jets Being added in Nov – !0 E-190 Jets by 2014 – Fleet of 25 by 2018.
- 31. Tata- SIA Etihad ec vr e S i Competitive Pressure Low cost Carriers changing the game Tata- Air Asia Air Costa Indigo Price
- 32. 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 is 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.
- 33. GROWTH OF THE INDUSTRY • 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
- 34. 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.
- 35. CONCLUSION
- 37. THANK YOU
Editor's Notes
- Quote by cuckoo paul Wetleaseof aircraft with 60 crew members.
- Reality is that Naresh Goyal’s business model was broken and would not have been able to last very long (see: Jet Airways: Heading South). Old Jet soldier Saroj Datta, who has been part of the airline since its inception, minces no words on the situation. “Raising funds was proving to be extremely difficult, and survival would have been tough if not impossible,” he says. Datta had been part of Jet’s senior management for 18 years and has been reading the writing on the wall for years now.
- Jet Airways lost its lead position in the Indian market over the past five years after low-cost carriers (LCCs) hit their stride. Goyal was unable to adapt to this shift in market preference for LCCs, but not for want of trying. In fact, he tried too hard and fell flat. From acquiring Air Sahara to fend off Vijay Mallya and Kingfisher, to lobbying fiercely against foreign airline investment, to trying to make his own low-cost airline Jet Konnect click, he tried everything in the book and outside it. Nothing worked. Jet’s debt mounted to $2.1 billion and needed rescuing by a white knight.
- Will Etihad save Jet? Addisson Schonland, president of Innovation Analysis Group, an aviation-focussed market research company based in the US, says: “We have seen airlines tied into the Etihad network; [they] all show big improvements once they come under the umbrella. So I would expect to see the same at Jet.” According to Schonland, the challenge will be how the people at Jet deal with this change. Change is coming, he warns, no doubt about it. Schonland says the folks at Jet will have to realise that their focus is not on Indian competition, but global competition. Etihad and its partners compete against global alliances. Jet will have to “up its game” and that would mean a change of pace for its people. Every alliance is only as good as its weakest partner, and Jet wouldn’t want to be the weak link, he says.
- 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. The Union cabinet had already cleared the deal last month on October 4, the CCI approval now means that the deal, the first since the government announced a liberalised policy allowing foreign airlines to invest in domestic carriers, can be fully operational within, as little as, the next fortnight. Keeping public sentiment on the fear of the two airlines monopolising the India Abu Dhabi routes, the CCI has cautioned "This approval should not be construed as immunity in any manner from subsequent proceedings before the Commission for violations of other provisions of the Act. It is incumbent upon the parties to ensure that this ex-ante approval does not lead to ex-post violation of the provision of the Act,” This deal could not have come a moment too soon for Jet Airways, which is literally running on fumes. The airline which is reeling under a debt of almost $2 billion, desperately needs cash to retire high cost debt.
- Strategic investment under FDI policy of the Government of India will deliver wide-ranging revenue growth and cost synergy opportunities for both airlines Alliance will bring significant passenger benefits with expanded codesharing, creating a combined network of 140 destinations Alliance will bring significant benefits to the Indian economy, both in terms of growth, job creation, trade and tourism Jet Airways passengers from 23 cities in India to gain direct access to an expanded global network Jet Airways to enhance its services from its primary hubs of Delhi and Mumbai, and introduce new flights from Hyderabad and Bangalore The strategic alliance between the two airlines will bring additional traffic, frequencies and revenues to metro airports, as well as other airports of AAI New India-Abu Dhabi routes and Jet Airways to establish a Gulf gateway for flights to the US, Europe, Africa and the Middle East The strategic investment enables Etihad Airways to tap into India’s fast-growing 42 million strong travel market Both airlines' passengers will benefit from fully integrated frequent flyer programs with reciprocal ‘earn-and-burn’ Alliance will result in both consumer benefits and/or all round efficiencies This strategic investment with a US$600 million commitment from Etihad Airways will help further strengthening of Jet Airways financial position.
- In some ways, Hogan and his backers in Abu Dhabi are like the Lakshmi Mittals of the airline industry. Just as the steel billionaire fashioned an empire by buying up key, mostly-distressed, steel projects and turning them around to form a larger empire, a big part of Etihad’s ‘multilateral’ strategy is to identify loss-making airlines with access to key source markets. For example, the deal with Air Berlin provided access to the German domestic market—one of the largest in Europe—in the face of bilateral restrictions. Like Dubai and Qatar, Abu Dhabi too has little to boast about in terms of a home market. The latest deal with Air Serbia allows access to the Balkans The second feature of all of Etihad’s tie-ups is the careful nurturing of loyal customers. Hogan has developed a collection of frequent flier programmes (FFPs) from airlines that it has a stake in and plans to weld them into his own. In India, an early step was to pick up half of Jet’s FFP Jet Privilege flyers for $150 million. The ability to earn and burn miles is critical to the creamy layer of airline customers. Etihad also owns 70 percent in Air Berlin’s FFP Topbonus.
- Control By Air Asia ?????
- The airports handled a total of 1020.9 thousand metric tones of international cargo in 2006-07.
- Ppp Govt. should be a participant not only in investment but accountability also.. CAGR: Compound annaul growth rate.