UNFOLDING OF THE INDIAN AVIATION

INDUSTRY
A peep into its early history…………

 In 2003 the whole world celebrated the centenary of

powered flight. But we Indians have to wait till 2010 to
observe the centenary of flight in India.

 After the flight of the Wright Flyer, it took just seven

years, for the first aircraft to get airborne at Allahabad in UP.

 There was hectic activity to bring planes to India and

show them off in December 1910.
 From then to now……….
1953: NATIONALISATION OF AIRCRAFT
INDUSTRY
Assets of 9 existing companies transferred
to two entities in the aviation sector
controlled by the Government in
 Indian Airlines, primarily serving domestic
sectors
 Air India, primarily serving the
international sectors
IMPLICATIONS
 Aviation became a preferred mode of
transport for elite class
 Restricted Growth of Aviation Industry
 High Cost structure
 Underdevelopment of infrastructure
1986: Private Sector Players permitted as
Air taxi operators. Jet, Air Sahara,
NEPC, East West, Modiluft, etc started
service.
1994: Private Carriers permitted to operate
scheduled services. Six operators granted
license, however only Jet and Air Sahara
able to service.
2003: Entry of low cost carriers. Air
Deccan, Spice Jet, Go Air, Indigo.
IMPLICATIONS
 Aviation is now affordable with check
fares and discount schemes.
 Various Operators with different business
model.
 Huge growth foreseen in Aviation
Macro Fundamentals that will drive
Aviation Growth…….

India has a population of 1.1 billion with an estimated middle

Market Size class of 300 million.

50% of the population is <25 years old. Therefore, the size of the
Demographics economically active segment will continue to grow for a number of
decades (unlike the developed countries and even China).

Average GDP growth of 6% p.a. sustained since 1991 and

Economic accelerating thereon. The first quarter of FY06/07 registered 9%
Growth growth, and the last Budget has established a target of 10%.

India has an increasingly open economy, with strong growth in

Trade & international trade, healthy foreign exchange reserves and
Investment increasing foreign direct investment.
Rise of the middle class…..

A socio-economic revolution is underway as the consumer profile

becomes increasingly middle class……
Change in travel preferences will continue to drive
growth……

CAPA Indian Domestic Market Forecast:

Business vs Leisure/VFR
 New government initiatives to develop India’s
potential as the world’s fastest growing
aviation market……
Changing regulation policies

The government is planning to raise the foreign direct investment (FDI) limit to 74% for non-
scheduled airline operations, helicopter services and regional airlines using small aircraft. The
current FDI ceiling for airline services is 49%.

Increased privatization of airports

In 1997 the Government of India published a policy document to open up existing airports to
domestic and foreign private investors in order to meet the significant costs involved in
developing India’s airports to keep pace with the growth in air traffic. In Sep 2003, Govt leased
out Delhi and Mumbai airports to the private sector as part of its extensive modernisation and
growth plan for the sector.
 CONTINUED………

Growing Infrastructure developments

Mumbai Airport - Planned investment of USD1.6 billion by 2020, of which USD1.3 bn

will take place by 2014

Delhi Airport - Planned investment of USD764 million by 2014 and USD1.7 billion by
2020

Kolkata Airport - Modernisation will be led by the Airports Authority of India. Total
project cost is estimated at US$360 million.

Hyderabad & Bengaluru Airports - Total investment of USD 1.1 billion dollars. Both
airports have commenced commercial operations in April 2008.
 CONTINUED………

Growing Infrastructure developments

35 Non-Metro Airports - Development of 35 non-metro airports will proceed at an

estimated cost of USD1.2 billion. City side development will require a further
USD350 million, with the modernisation process to be completed by 2009.

North East Region - Development of following airports :

• Pakyong Airport, Gangtok, Sikkim
• Cheithu Airport, Kohima, Nagaland
• Itanagar

Other Greenfield Airports –

• Mopa, Goa
• Navi Mumbai. Planning Commission discussing 3rd Mumbai Airport.
• Chakan/Rajguru, Pune, Maharashtra; Halwara, Punjab
• Kannur, Kerala.
• Hassan & Gulbaraga, Karnataka.
 EXPECTATIONS OF THE INDUSTRY FROM
GOVERNMENT…

The Indian aviation sector’s double-digit growth has been the fastest in the world. But
the airlines have not made much out of the profitless growth, with most players
stepped deep in red.

The industry’s wish list includes :

Lowering taxes on aviation turbine fuel (ATF) which is 35% of the operating cost of
airlines. As per international standards, it is 10-15% of the operating cost.

Reduction in landing charges – In India low cost carriers (LCC) pay the same as full
service airlines. As per international standards, it is lower for LCCs.

Extending exemption of withdrawal tax on lease rentals of aircraft

Relaxing fringe benefit tax (FBT)

Removing service taxes on first and business-class travellers.

.

The growth opportunity in Indian Aviation…..

“Centre for Asia Pacific Aviation projects domestic traffic in India will grow
25-30% p.a., and international by 15% p.a. until 2010”

 India’s airports handled

million domestic passenge
In 2006/07, posting growth
almost 40% year-on-year,
over 25 million internation
passengers, up approx 15%

 Growth is underpinned b
economic expansion, incre
capacity and price stimula
resulting from increased
competition.
CURRENT SCENARIO…….

The relentless rise in global crude prices is threatening to take

the sting out of aviation industry’s tail.

Jet fuel prices have gone up by 50 per cent since January. 08. STEEL PRICES

Losses of industry is in the range of Rs.4000 crore and it is expected to double by

the end of next year

The operating cost for airlines across the country during the past six months has
gone up from 30 percent to a whopping 47 percent now

Airlines across the country are finding it difficult to pay the increased fuel bill and in
some cases the wages, industry experts say.
COMPARISION WITH RAILWAYS

HELI AMBULANCE Heli-ambulance services are gaining ground with the first step being
taken by Deccan Aviation and Apollo Reports listing statistics said that the Apollo group has made 400 emergency air-lifts in
the past two-and-a-half years and each trip can cost the patient Rs 1-2 lakh depending on the distance to the hospital, or
around Rs 75,000 an hour.

AVIATION FOR TOURISM INDUSTRY

TECHNOLOGY
 OUTLOOK INDIA 2020……

 The growth of India’s aviation sector has the potential to absorb up to

US$120 billion of investment by 2020.

 However, we must close the gap between the demand for aviation
services and the ability of our aviation system to meet that demand.

 India must prepare a blueprint for the expansion of system capacity

whilst maintaining safety, security and the environment.

 India must develop a roadmap for infrastructure development beyond

2010.
OUTLOOK INDIA 2020……

 Air Traffic - CAPA research projects that domestic passenger traffic will
reach 150-180 million by 2020, with international traffic in excess of 50
million.
 Scheduled Aircraft - The total aircraft fleet is likely to reach 1000,
including replacement of the current fleet of 312 aircraft, with an
estimated value of US$80bn +
 General Aviation - Market for 500 Plus aircraft in the Non-Scheduled
Category by 2020 and 300 aircraft in the private category use.
Estimated Investment of Usd 4 billion.

 Airports – US d 30 billion plus investment requirement by

2020(Included 9 billion already committed).