AVIATION SECTOR

Aviation

Roads Transportation Railways

Ports
Large Increased in infrastructure investments required to sustain growth
 AVITION SECTOR IN INDIA

Sector structure/Market size

• The Indian aviation industry is one of the fastest growing aviation
industries in the world. 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.
• India is the 9th largest aviation market in the world. According to the
Ministry of Civil Aviation, around 29.8 million passengers traveled
to/from India during 2008, an increase of 30 per cent on previous year.
It is predicted that international passengers will grow upto 50 million
by 2015. Further, due to enhanced opportunities and international
connectivity, 69 foreign airlines from 49 countries are flying into India.
 Growth Rate

24% annual growth

 Growth
• Domestic airlines flew 3.67 million passengers in August 2009—an increase of 25 per cent.
• The Centre for Asia Pacific Aviation (CAPA) forecasted that domestic traffic will increase
by 25 per cent to 30 per cent till 2010 and international traffic growth by 15 per cent,
taking the total market to more than 100 million passengers by 2010.

• The government plans to invest US$ 9 billion to modernise existing airports by 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
 Domestic Airlines

 Air India
 GoAir Airlines
 IndiGo Airlines
 Jagson Airline
 Jet Airways
 Jet Airways Konnect
 Kingfisher Airline
 Paramount Airways
 SpiceJet Airlines
 JetLite (Air Sahara)
 Kingfisher Red (Air Deccan)
 MDLR Airlines
 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 one  300 flights, 43 Indian destinations
giant airline consisting of 130-140 aircraft  Does not own its brand. Brand
owned by Jetair Enterprises Ltd. a
separate company substantially
owned by Naresh Goyal

 Began on 3 Dec 1993with two

Its hub is Chennai International Boeing 737-200 aircrafts as Sahara
Airlines
Airport.  Initially services concentrated in
Mainly targeting business northern India
travellers  Rebranded as Air Sahara on 2
October 2000.
The airline started operations in
October 2005
 Players
Taking Indians Across India

 Low-cost airline (LCC)  GoAir – The People’s Airline

 Began in May 2005
 Entered with Rs. 99 fares for first 99 days
 “Offering low everyday spicy fares”
 Aim: Compete with Indian Railways AC
sgment
 fleet of 6 Boeing 737-800 with 189 seats.
 established in June 2004
 LCC promoted by The Wadia Group
 GoAir FreeFares
 Relatively small player as compared to
other LCCs
 Initial flights in southern & western India
with the first nine A320s

 India's first low-cost carrier

 It was started by Captain G. R. Gopinath
 Started air operations in 2003
 It was known popularly as the common
man's airline
 Connects 55 cities within India
 Services started in May 05
 Initially operates only on domestic routes
but now in overseas also.
 Owned by United Beverages Group under
the leadership of Vijay Mallya
 Market Share
Jet Airways and Jet Lite (previously 27.7%
Air Sahara)
Kingfisher Airlines and Kingfisher
Red (previously Air Deccan) 20.7%
Air India (previously Indian
18.6%
Airlines)
IndiGo 13.6%
SpiceJet 12.4%
GoAir 5.4%
Paramount Airways 1.5%

Jet Airways Kingfisher Airlines Air India IndiGo Sp

GoAir Paramount Airways
How aviation industry is effecting india's economy?

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.
• The main factors which effect the Indian Economy are:-
1. Increased no. of domestic airlines
2. Low cost airlines
3. India's 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
 Global v/s
Indian Scenario
• At the macro-economic level Asia Pacific growth is
impressive. India and China are growing between 8
and 10% each year.
• International passenger traffic grew 7.6% where as Asian airlines were
slower—at 6.3%
• Asian freight traffic grew by 4.2% in comparison to global growth of 3.2%
• Globally airlines lost US$6 billion in 2005 and in Asia it is a mixed picture.
Some carriers are among the most profitable. Others however are
struggling but still the best performance in the world
• India has moved from 2 state-run airlines to a vibrant industry with more
than 10 players. Indian carriers stole the show in Paris with US$12 billion
of orders
• Huge potential still to be tapped in Indian markets. Only 40 million people
travel by air—4% of the population
 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 Infrastructure

By 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 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.
Foreign companies can explore various modes of entry into the Indian market
 PPP IN AIRPORT INFRASTRUCTURE

Background

 Indian airports were managed by Civil Aviation

Department, Government of India, till the creation of
International Airports Authority of India (IAAI) in 1972
and National Airports Authority (NAA) in 1986.

 In 1995 Airports Authority of India (AAI) was

established by merging both IAAI and NAA by an Act
of Parliament – The Airports Authority of India Act in
1994 – for better and efficient management of all
airports in India by a single Authority.
 At Present -

AAI manages 128 airports which includes:

- 15 International airports
- 8 Custom airports
- 25 Civil Enclaves
- 80 Domestic airports
 PPP IN INDIAN AIRPORTS
Need for Private Participation in Airport Infrastructure
To bridge the resource gap for achieving the
following 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)
Major Airports
 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.
Greenfield airports

Hyderabad Airport

Bangalore Airport
Greenfield airport - Bangalore - AOD April 2008
 Greenfield airport at Devanahalli is on a Build Own Operate and Transfer
(BOOT) basis for 30 years at a revised cost of Rs. 1930 crores (earlier Rs. 1280
crores).
Equity: Karnataka State Industrial Investment Development Corporation
(KSIIDC) 26% and Siemens Germany, Unique Zurich Switzerland and - L&T
India Limited 74%.

 Equity – Rs. 315 crores , State Support – Rs. 350 crores, Debt – Rs.1265
crores
 Concessions extended by the Govt. of Karnataka to BIAL

− Rs. 350 crs. Interest free support repayable after 10 years in 20 half yearly
installments
− Land lease Agreement – Lease of land of 4000 acres at concessional rent
of Rs. 1 till commencement of operations. Thereafter @3% p.a. for a
period of 6 years and 6% p.a. subsequently with an annual increase of 3%.
− Property Tax exempted for a period of 5 years.
− Stamp Duty payable on land lease exempted.
− Local Fee payable to Bangalore Int. Airport Planning Authority (BIAPA)
as betterment fee exempted.
− Entry Tax for goods for construction purposes exempted
− Infrastructure like water, power etc. to be provided at site.

The commercial flights from the existing Bangalore airport will close.
 Greenfield Airport - Hyderabad – AOD Aug. 2008
 Greenfield airport at Shamshabad near Hyderabad is being implemented on a
Build Own Operate and Transfer (BOOT) basis with Public-Private
Participation.
 Govt. of Andhra Pradesh and AAI together hold 26% equity and the strategic
joint venture partners, GMR Infrastructure Ltd. with Malaysian Airport Holding
Berhard (MAHB), hold the balance 74%. AAI’s investment in the equity is
capped at Rs.50 crores.
Estimated cost of the Project is Rs.1761 cores .

• Concessions extended by the Govt. of Andhra Pradesh to HIAL

− Rs. 315 crs. Interest free loan refundable in 5 equal installments
commencing from 16th year.
− Land Lease – Approx 5490 acres of land co-terminus with State
Support Agreement.
− State Grant Rs. 107 crores.
− Stamp Duty / Registration Fee waived off on transfer of land as well
as all project agreements.
− Sales Tax waived off on all construction material.
The commercial flights from the existing Hyderabad airport will close.
Development of Greenfield Airports –
Proposals received from state govts.

Goa
Gangtok – Sikkim
Navi Mumbai, Maharashtra
Chakan, Pune, Maharashtra
Kannur, Kerala
Kohima – Nagaland
Hassan & Gulbarga – Karnataka
Halwara – Punjab
Itanagar- Arunachal Pradesh
SL. NAME OF THE STATES WHICH AREA OF LAND PURPOSE
NO. AIRPORT / STATE HAVE
WHERE DEMAND PROVIDED
HAS BEEN MADE LAND
1 Raipur / Chhatisgarh Chhatisgarh 300 Acres Land free of cost for extension of Runway
Land yet to be handed over by State Govt.
2. Bhopal/M.P. Madhya Pradesh 366 Acres Land for extension of Runway. Land yet to be handed
over by State Govt.
3. Ahmedabad/Gujarat Gujarat 67.89 Acres Development of Airport. Land yet to be handed over by
State Govt.
4 Aurangabad/ Maharashtra 13.9 Acres Installation of CAT I approach light. Land yet to be
Maharashtra handed over by State Govt.
6. Bhavnagar / Gujarat Gujarat 29 Acres Extension of Runway. Land yet to be handed over by
State Govt.
7. Rajkot/Gujarat Negotiation with 14.7 Hectares For extension of runway. Development of Airport.
Western Railway Western Railway yet to hand over land to AAI.
8. Surat/Gujarat Gujarat 36 Hectares (85 acres) Development of Airport. Land yet to be handed over by
State Govt.
9 Udaipur/Rajasthan Rajasthan 42.53 Acres * Land For extension of runway, widening of runway strip and
admeasuring approx. construction of isolation bay.
2 acres is yet to be
handed over by State
Govt.
10. Trivandrum / Kerala - do - 2.5 Acres For Runway End Safety Area, land yet to be handed over
11. - do - - do - 120 Acres To be given free of cost by State Govt. for development
purposes. 27.57 Acres handed over.
12. Chennai / Tamil Nadu Tamil Nadu 1440 Acres To be given free of cost by State Govt. for development
purposes (for construction of parallel runway).
13. Indore / madhya Madhya Pradesh 150 Acres To be given free of cost by State Govt. for development
Pradesh purposes. ( extension of runway)
SL. NAME OF THE STATES AREA OF LAND PURPOSE
NO. AIRPORT / STATE WHICH
WHERE DEMAND HAVE
HAS BEEN MADE PROVIDED
LAND

14. Bhunter / H.P. Himachal 5.91 Acres For construction of new terminal building
Pradesh 60 Acres etc. Land will be acquired for extension of  
runway after diversion of river Beas.
15. Hubli / Karnataka Karnataka 390 Acres To be given free of cost by State Govt. for
 
development purposes.
16. Belgaum/Karnataka Karnataka 370 Acres To be given free of cost by State Govt. for
 
development purposes.
17. Tirupati /Andhra Andhra 405 Acres To be given free of cost by State Govt. for
Pradesh Pradesh development purposes. Request is being  
placed.
18. Jammu/ Jammu & J&K
 
Kashmir
 Mumbai and Delhi Airports
• Salient Features of JVCs
 Objectives
 World Class Development and Expansion
 World Class Airport Management

•Equity participation
Delhi 74 % Pvt. Consortium (GMR Group, Fraport AG, MAPL, IDF)
26 % AAI
Mumbai 74% Pvt. Consortium ( GVK, ACSA,BSD)
26% AAI
•Initial Capital
Mumbai Rs. 200 crores Delhi Rs. 200 crores.

•Estimated Capital Investment for first 7 years

Delhi Rs. 3286 crs. (Funded as equity Rs. 551 crs, internal accrual
Rs. 70 crs. Debt Rs. 2665 crs.)
Mumbai Rs.5676 crs. (Funded as equity Rs. 626 crs. Internal
accural Rs. 804 crs. Debt Rs. 4246 crs.)
 DEVELOPMENT OF NON – METRO AIRPORTS

Development of 35 Non-Metro Airports have been taken up in a

phased manner :
These airports are Ahmedabad, Amritsar, Agatti, Aurangabad, Agartala, Agra,
Baroda, Bhopal, Bhubaneshwar, Chandigarh, Coimbatore,
Dehradun, Dimapur, Guwahati, Jaipur, Jammu, Khajuraho,
Nagpur, Patna, Portblair, Pune, Rajkot, Ranchi,Raipur, Goa,
Imphal, Indore, Lucknow, Madurai, Mangalore, Trichy,
Trivandrum, Udaipur, Visakhapatnam and Varanasi,

Development Approach for first ten non-metro airports

• Terminal Building and Airside development by AAI.
• City side development through PPP or Land Lease and
Revenue Sharing (Airport wise in a single package)
 Airport Development Fund Requirements –
Rs. 40,000 crores
Particulars Airport Indicative
Cost
Rs. In crores

Restructuring/ Delh & Mumbai 15,000

Modernization for world Chennai & Kolkatta 5,000
class airports
Green Field Airports Bangalore, Hyderabad, Goa, Pune, 10,000
Navi Mumbai, Nagpur (Hub) and
Greater Noida
Upgradation 25 selected airports 7,000
Modernization/ 55 airports 3,000
Improvement
Total investment by 2010 40,000
 Air Services

India has bilateral Air Services Agreements with 103 countries.

Recently, new Air Services, Agreements have been signed with
Mexico and Chile. During the period, 1st July, 2007 to 30th
June, 2008 bilateral talks were held with 21 countries.
Additional capacity entitlements and new points of call were
agreed with Uzbekistan, Malaysia, IBSA, Maldives, Hong
Kong, Saudi Arabia, Oman, Bangladesh, Pakistan, Ethiopia,
China, Thailand, Belgium and Germany with a view to
optimally utilizing our bilateral entitlements. Indian scheduled
carriers with at least five years continuous operations in the
domestic sector and fleet size of 20 aircraft have also been
permitted to operate to many overseas destinations.
 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.
• Changi 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 Boeing's 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.
Thanks