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Aviation

Last Updated: September 2011




Market Size
ndia's domestic aviation market expansion has been the strongest in the world - tripling in the past five
years, according to the nternational Air Transport Association's (ATA) report.
ndia is currently the ninth largest aviation market in the world, according to a RNCOS report "ndian
Aerospace ndustry Analysis. The Government's open sky policy has attracted many foreign players to
enter the market and the industry is growing in terms of both players and the number of aircrafts. Given
the strong market fundamentals, it is expected that the civil aviation market will register a compound
annual growth rate (CAGR) of more than 16 per cent during 2010-2013.
ndia's domestic air traffic grew at a rate, which is the second highest after Brazil, according to global
figures for June 2011, compiled by ATA. The country's domestic traffic grew by 14 per cent in the same
period as against Brazil's 15.1 per cent.
ndian airlines reported a continuous growth trend and a strong domestic passenger growth rate of 22.3
per cent in July 2011. Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year
2010 closed at 90 million passengers both domestic and international. ndia is the fastest growing aviation
market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market
after US and China.
n July 2011, airlines in ndia handled 5 million domestic passengers, according to data released by the
Directorate General Civil Aviation (DGCA) on September 12, 2011, marking the 11th consecutive month
of double-digit growth. ndia's domestic market has witnessed passenger growth for 26 consecutive
months now. n July 2011, ndia's airlines handled 1.3 million international passengers, an increase of 8.5
per cent y-o-y, according to DGCA.
Passengers carried by domestic airlines during Jan-Aug 2011 were 39.63 million as against 33.41 million
during the corresponding period of previous year thereby registering a growth of 18.6 per cent, according
to data released by DGCA.
ndia is expected to cross the 450 million mark of domestic passengers by 2020. During the last two
decades from a fleet of only about 100, the scheduled operators now have reached 435 aircrafts
connecting the nation and the world.
Private carriers are anticipated to post a combined profit of US$ 350US$ 400 million for the fiscal years
2011-12, as reported by Centre for Asia Pacific Aviation (CAPA) ndia, in its 2011-12 - Aviation ndustry
outlook. Domestic capacity is also projected to grow by 12-14 per cent for the assessment period.
Aviation - Market PIayers
O During July 2011, Vijay Mallya-promoted Kingfisher was the largest domestic standalone carrier
with around 1.1 million passengers, based on CAPA calculations. Jet Airways/JetLite had a
combined passenger level of 1.2 million passengers, or around 26 per cent of the market
O ndiGo started its international air services from September 1, 2011 after completing the
mandatory five years of wholly domestic operations. The low cost carrier (LCC), the largest in the
domestic ndian market, marks the start of its foray into international markets with direct services
to Dubai, followed by Singapore and Bangkok in the first phase connecting all key global
business hubs
O Dubai's first low cost airline, flydubai, will start flights to the city of Ahmedabad in Gujarat from
August 27, 2011. Ahmedabad is the world's third fastest growing city in the world and it will
become the third ndian city on flydubai's rapidly expanding network. The airline will offer seats
from Ahmedabad to Dubai beginning at Rs 7,500 (US$ 156.25) inclusive of taxes and seven
kilograms of hand baggage. The flights will operate once in a week on Saturdays only
O Hyderabad-based GVK Power & nfrastructure would be paying Rs 114 (US$ 2.37) for each
equity share to Siemens Project Ventures to buy the latter's 14 per cent stake in Bengaluru
nternational Airport Ltd (BAL)
Aerospace on a High
O The ndian commercial aerospace market is estimated to absorb about 1,100 commercial jets
worth US$ 130 billion over the next 20 years, making it one of the most lucrative markets for the
global aviation majors, according to a new Deloitte Touche Tohmatsu report. Mentioning the
recent orders placed by ndiGo (180 Airbus A-320 aircrafts) and GoAir (72 A-320neo aircrafts),
the report declared ndia as the fastest growing commercial aviation market in the world
O An investment proposal worth Rs 11,700 crore (US$ 2.44 billion) from European Aerospace and
Defence Systems (EADS) is among the many aerospace projects received and approved by the
State Government for its aerospace special economic zone (SEZ) in Bengaluru. They plan to
develop a 250 acre SEZ at Devanahalli, north of the city, at an investment of around Rs 14,500
crore (US$ 3.02 billion), according to Ms Manjula Geetha, Deputy Secretary, nfrastructure
Development Department. "There is a huge growth in Karnataka, which is the preferred
investment destination in this sector for components and MRO projects, she added
O Low-cost carrier, ndiGo, has signed a US$ 16 billion dollar deal with Airbus to acquire 180 single-
aisle aircraft. The firming-up of the order for 150 A320neo and 30 A320 planes follows the
memorandum of understanding (MoU) the carrier had signed with the European aircraft
manufacturer in January 2011
O SpiceJet has acquired a new fleet of Q400 aircraft from Bombardier and it will use these aircrafts
in its new regional service, scheduled to start on September 21, 2011. Under the deal, SpiceJet
also has the option of ordering 15 more Q400 NextGen aircraft
Last Updated: September 2011


Aviation - Recent DeveIopments
O ippsAERO, the aircraft manufacturing division of Mahindra Aerospace, has signed an
agreement with RoIIs Royce to partner on engine technoIogy for a new aircraft
O %he overnment of Maharashtra has prepared a comprehensive project, costing
approximateIy Rs 86,647 crore (US$ 18.05 biIIion), for efficient connectivity between the
proposed Navi Mumbai InternationaI Airport and Mumbai. As much as 44 per cent of the
proposed investment is expected to come from the private sector. %he airport's first phase
is scheduIed for Iaunch by 2015
O MR Infrastructure's airport arm MR Airport HoIdings has raised Rs 584.60 crore (US$
121.79 miIIion) via issue of compuIsoriIy convertibIe preference shares
O Air India wiII take deIivery of its first Boeing 787 DreamIiner aircraft by the end of 2011,
according to Dr Dinesh Keskar, President, Boeing India. Further, Boeing predicts that India
wiII require 1,320 new aircrafts vaIued at US$ 150 biIIion over the next 20 years
O Air India Express wiII operate direct fIights from Muscat to three new destinations in
KeraIa, as weII as increase the number of fIights from the uIf to the country from October
31, 2011
O Mahindra Aerospace Pvt Ltd (MAPL) wouId soon start deveIoping its Rs 285 crore (US$
59.37 miIIion) greenfieId faciIity at Narsapur (near KoIar), about 40 km from BengaIuru. %he
pIant, to be buiIt on 20 acres, wouId start production in 12-18 months, initiaIIy for
components and sub-assembIies. EventuaIIy, the aircraft wouId be assembIed in India and
aIso in the US. %he current programmes wouId invoIve an investment of around Rs 500
crore (US$ 104.16 miIIion), incIuding the Narsapur faciIity
Aviation - overnment Initiatives
Air traffic controI (A%) operations wiII start functioning as a new entity from ApriI 2012. At
present, the air navigation service comes under the Airports Authority of India (AAI), the state-
owned airport operator.
India has aIso signed the biIateraI Aviation Safety Agreement (BASA) with the USA.
%he overnment has taken various steps towards structuraI poIicy reforms and is coming out
with new poIicies which are IiberaI and wiII encourage pubIic-private partnerships (PPP):
O overnment aIIows 100 per cent foreign direct investment (FDI) via the automatic route for
the green fieId airports. AIso, foreign investment up to 74 per cent is permissibIe through
direct approvaIs whiIe speciaI permissions are required for 100 per cent investment
O Private investors are aIIowed to set up generaI airports and captive airstrips whiIe
maintaining a distance of 150 km from the existing ones. ompIete tax exemption is aIso
granted for 10 years
O About 49 per cent FDI is aIIowed for investment in domestic scheduIed passenger airIines
and investment up to 100 per cent by non-resident Indians (NRI) via the automatic route.
FDI up to 74 per cent is aIIowed for non-scheduIed and cargo airIines.
AAI has entered into Operation Management and DeveIopment Agreements (OMDA) with M/s.
DeIhi InternationaI Airport Ltd (DIAL) for Indira andhi InternationaI (II) Airport, DeIhi with an
objective to deveIop it into a worId cIass airport. Phase-1 of the deveIopment of II airport has
been compIeted with the construction of the new Integrated %erminaI 3 (%3). It caters to additionaI
34 miIIion passengers per annum (mppa) and can operate as a hub. It is up to the airIine to take
these opportunities to operate reguIar scheduIed services from these airports and use it as a
regionaI hub. %his information was given by Mr VayaIar Ravi, the Minister of iviI Aviation to the
Lok Sabha.
AAI announced that it wiII seek the overnment's cIearance for its proposaI to issue Rs 5,000
crore (US$ 1.04 biIIion) worth of infrastructure bonds to further deveIop 15 airports in the country.
%he firm further added that according to the estimates of the Ministry of iviI Aviation, the totaI
investment required in the aviation sector is about Rs 65,000 crore (US$ 13.54 biIIion) and that the
bond issuance route is considered to be the most optimaI. %he AAI in recent past has been on the
modernisation drive of setting up around 35 non-metro airports and two major airports in KoIkata
and hennai. %he company manages a string of 125 airports in the country.
Aviation - Road Ahead
Passenger traffic growth in the Indian domestic market is expected to continue through October
2011, with domestic airIines being expected to operate aImost 30 per cent more fIights as
compared with October 2010 IeveIs, marking the Iargest year-on-year increase in fIights. %he
winter scheduIe wiII reportedIy see 14,750 weekIy domestic services as airIines expand their
domestic networks and scheduIes, especiaIIy in the southern part of the country.
"%he tier-II and tier-III market is a vast untapped market for domestic airIines," according to a
SpiceJet officiaI. %he Iow-cost carrier recentIy announced its regionaI service with Hyderabad as
hub. overnment incentives couId motivate more airIines to enter into regionaI routes. %he AAI
has aIready mooted various proposaIs to increase connectivity across the smaIIer towns.
%he AAI has recentIy been on a modernisation drive to set up around 35 non-metro airports and
two major airports in KoIkata and hennai. %he company manages a string of 125 airports in the
country.
%he Indian aviation sector is a major economic driver for prosperity, deveIopment and
empIoyment. Massive investments in airport infrastructure have Ied to worId cIass airports which
have become the symboI of India's growth story.
India is poised to emerge as the third Iargest aviation market in the worId by the end of this
decade, according to iviI Aviation Secretary Dr Nasim Zaidi. %he sector with a growth of 18 per
cent in domestic market is expected to generate approximateIy 2.6 miIIion jobs in the next one
decade, added Zaidi.
%he Vision 2020 announced by the Ministry of iviI Aviation conceives of buiIding infrastructure
to support 280 miIIion customers.
Exchange Rate Used: 1 US$ = 48.00 INR (as on September 20, 2011)
References: Directorate eneraI of iviI Aviation (DA), Press ReIeases, Media Reports, OutIook
report by entre for Asia Pacific Aviation, Ministry of iviI Aviation.

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