CIVIL AVIATION INDUSTRY

Akanksha 2010MB31Anuradha 2010MB73

Swati Srivastava 2010MB65

OUTLINE

• Introduction• Growth• Reasons for Growth• Opportunities• Government Policies• Government Initiatives• Road Ahead

INTRODUCTION• The Indian aviation industry is one of the fastest growing industries

in the world.• Civil aviation in India began in December 1912 with the opening of

the first domestic air route between Karachi and Delhi. • Three years later, the first Indian airline, Tata Sons Ltd., started a

regular airmail service between Karachi and Madras without any assistance from the government.

• In present scenario, India ranks 9th in the global civil aviation market.

• The government’s 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 per cent share of the domestic aviation market.

Source: Transport corporation of India ltd. , Ministry of Civil Aviation & DGCA accessed on 1 st November 2010

contd..

• In 2007–08, the international airports, together, handled about 80 per cent of aircraft movement, 88 per cent of passenger traffic and 97 per cent of freight traffic.

• In 2008–09, there were 99 non-scheduled airline operators with a combined fleet of 241 aircraft.

• The responsibility of developing, financing, operating and maintaining all government airports in the country rests with the AAI, which was established in 1994 under the Airports Authority Act.

• The remaining airports, which are not managed by AAI, are governed by the Aircraft Act, 1934.

Source: business.gov.in, Ministry of Civil Aviation 2007-08 annual report accessed on 2nd November 2010

contd..

• 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.

• In January-September 2010, Indian domestic airlines handled an estimated 373.20 lakhs passengers, a growth of 18.5% from the corresponding period of year 2009.

Source: ministry of civil aviation 2007-08 annual report accessed on 2nd November 2010

AIRPORTSPresently, India has 136 airports, of which 94 are owned by the Airports Authority of India (AAI). Of 136 airports in India, 82 are operational. The airports can be categorised as:

AIRPORTS NUMBERS

International airports, including joint venture airports

17

Domestic airports 79

Customs airports 8

Civil enclaves 24

Others 8

Source: www.ibef.org accessed on 2nd November 2010

LIST OF DOMESTIC AIRLINES

AIRLINES COMMENCED OPERATIONS

Air India October 1932

Air India Express April 2005

Kingfisher August 2003

GoAir June 2004

IndiGoAirlines August 2006

Jet Airways May 1993

Jet Lite April 2007

Kingfisher Airlines May 2005

MDR Airlines March 2007

Paramount Airways October 2005

SpiceJet May 2005

Source: Ministry of Civil Aviation accessed on 30 th October 2010

Market ShareJet Airways and Jet Lite (previously Air Sahara)

27.7%

Kingfisher Airlines and Kingfisher Red (previously Air Deccan)

20.7%

Air India (previously Indian Airlines)

18.6%

IndiGo 13.6%

SpiceJet 12.4%

GoAir 5.4%

Paramount Airways 1.5% Jet Airways Kingfisher Airlines Air India IndiGo SpiceJet GoAir Paramount Airways

Source: http://dgca.nic.in/reports/MARKET.pdf accessed on 9 th November 2010

REGULATORY AUTHORITIES•Ministry of Civil Aviation

It is responsible for the formulation of policy for development and regulation of Civil Aviation. Its functions also extend to overseeing airport facilities and carriage of passengers and goods by air.• Other Attached/Autonomous OrganizationsDirectorate General of Civil Aviation (DGCA) : It promotes safe and efficient Air Transportation through regulation and proactive safety system.

Bureau of Civil Aviation Security (BCAS) : It is the regulatory authority for civil aviation security in India

Airport Authority of India (AAI) : It accelerates the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports

Source: www.ilfsindia.com accessed on 30th October 2010

GROWTH OF THE INDUSTRY

Source: Ministry of Civil Aviation annual report accessed on 30 th October 2010

• The growth of airlines traffic in Aviation Industry in India is almost four times above international average.

• Domestic airlines flew 3.67 million passengers in August 2009—an increase of 25 per cent.

• 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.

REASONS FOR GROWTH

• Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because of speed with which aeroplanes can fly, travel by air is becoming increasingly popular.

• Rising disposable income, together with the introduction of low-cost airlines, is making air travel affordable for a large section of the population. This is creating a demand for the development of airports across the country.

• India offers a cost-competitive workforce for the development of airport infrastructure.

• Increased Inward and outward tourism.• Increased business trade due to the rapidly growing economy and

free trade agreements with neighbouring countries.

Source: www.ibef.org accessed on 30th October 2010

OPPORTUNITIES

Airport development and modernisation•The government is promoting private participation for the development of greenfield airports and modernisation of existing airports. It is also working towards making existing non-operational airports in the country operational.

Airport connectivity

•The Ministry of Civil Aviation is focussing on improving connectivity to major airports. It has selected 12 airports. These include the Mumbai, Chennai, Bengaluru, Kolkata, Hyderabad, Ahmedabad, Cochin, Coimbatore and the proposed Navi Mumbai and Noida airports.

Source: Ministry of Civil Aviation 2008-09 annual report accessed on 30 th October 2010

contd..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 by the AAI under the PPP mode. These non-major airports include Ahmedabad, Amritsar, Guwahati, Jaipur, Udaipur, Thiruvananthapuram, Lucknow, Madurai, Mangalore, Aurangabad, Khajuraho, Rajkot, Vadodara, Bhopal, Indore, Raipur, Visakhapatnam, Tiruchirapally, Bhubaneswar, Varanasi, Agatti, Dehradun, Ranchi and Dimapur. Moreover, the government has decided to lease out land for the city-side development of 10 airports, including Ahmedabad, Kolkata, Jaipur, Lucknow, Amritsar, Indore, Visakhapatnam, Hyderabad, Guwahati and Bhubaneswar, in the first phase.

Source: Ministry of Civil Aviation 2008-09 annual report accessed on 30 th October 2010

contd..

Regional connectivity• The government is promoting the expansion of air connectivity

between Tier II and Tier III cities and has introduced a separate category of Scheduled Air Transport (Regional) Services. This is a significant opportunity for the development of airports in small cities.

MRO facilities• The substantial increase in international air traffic and the growth in

the fleet size of domestic airlines has given India the opportunity to provide Maintenance & Repair Operations (MRO) services to these airlines.

Source: Ministry of Civil Aviation 2008-09 annual report accessed on 30th October 2010

GOVERNMENT POLICIESThe government has implemented the following policies to support growth in the aviation sector:• The Ministry of Civil Aviation (MOCA) has raised the FDI limit in cargo

airlines from 49 to 74 per cent. • With the rise in fuel prices, the government has exempted the 5 per cent

customs duty levied on jet fuel, to help airlines reduce their operational costs. Some states, including Andhra Pradesh, Rajasthan and Maharashtra (excluding Mumbai and Pune), have reduced their sales tax on aviation turbine fuel (ATF).

• The government has also adopted an Open Sky policy, which attempts to increase the traffic rights (under bilateral agreements) provided by foreign countries such as the UAE, Mexico, Thailand and Germany.

Source: www.ibef.org accessed on 30th October 2010

contd..

Growth in the aviation sector is driving the need to develop and modernise the infrastructure at Indian airports. The following policy measures are taken for this purpose:• The government has allowed 100 per cent tax exemption on airport

projects for a 10-year period.• It allows airport developers to charge passengers a development fee. • The government has set up the Airport Economic Regulatory

Authority (AERA) on May 12, 2009. It approves tariffs for aeronautical services and also for monitoring the performance of airports.

• Airport operators, including the AAI and private developers, receive airport development fees from airlines, which contribute to their revenue stream.

Source: www.ibef.org accessed on 30th October 2010

GOVERNMENT INITIATIVES• AAI Act, 1994 was amended by Indian Parliament recently to facilitate

private sector participation in development of Greenfield airports. Government will have no role in the management of such private sector airports except for security and Air Traffic Control.

• Government of India formulated a new national policy on airport infrastructure in 1997 to provide a broad framework for development of airport infrastructure with public and private sector participation.

• The policy permits development of Greenfield Airports where an existing airport is unable to meet the projected requirements of traffic. It can be allowed both as replacement for an existing airport or for simultaneous operations.

• The two operational Greenfield airport are at Hyderabad & Bangalore.

Source: www.ibef.org accessed on 30th October 2010

In addition, discussions are on for development of Greenfield airports at these locations in the country.

GoaGangtok – SikkimNavi Mumbai, MaharashtraChakan, Pune, MaharashtraKannur, KeralaKohima – NagalandHassan & Gulbarga – KarnatakaHalwara – PunjabItanagar- Arunachal Pradesh

contd..

ROAD AHEAD•The Vision 2020 statement announced by the Ministry of Civil Aviation, envisages creating infrastructure to handle 280 million passengers by 2020.•Passenger traffic is projected to grow at a CAGR of over 15% in the next 5years.•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.

Source: www.ibef.org accessed on 2nd November 2010