Aviation

The Indian aviation industry is one of the fastest growing aviation industries
in the world with private airlines accounting for more than 75 per cent of the
sector. With a CAGR at 18 per cent and 454 airports and airstrips in place
in India, of which 16 are designated as international airports, Union Civil
Aviation Minister Praful Patel has stated that aviation sector will witness
revival by 2011. The last quarter of 2009 has also raised some hopes of
revival in the country.

With an increase in traffic movement during December 2009 and increase

in revenues by almost US$ 21.4 million, the Airports Authority of India
seems set to accrue better margins this fiscal, as per the latest estimates
released by the Ministry of Civil Aviation. This is being primarily attributed
to increase in the share of revenue from Delhi International Airport Limited
(DIAL) and Mumbai International Airport Limited (MIAL) along with increase
in airport charges. The number of passengers carried by domestic airlines
during the month of October 2009 was 4.02 million as compared to 3.56
million in September 2009, according to the previous monthly report
released by the Ministry of Civil Aviation.

The Hyderabad International Airport has been ranked amongst the world's
top five in the annual Airport Service Quality (ASQ) passenger survey along
with airports at Seoul, Singapore, Hong Kong and Beijing. The Hyderabad
International Airport is managed by a public-private joint venture consisting
of the GMR Group, Malaysia Airports Holdings Berhad and both the State
Government of Andhra Pradesh and Airports Authority of India (AAI).

The second US-India Aviation Partnership Summit was held in USA from
December 07 –09, 2009 where the Joint Aviation Steering Committee
Working Group Meeting was also held. On the sidelines of the Summit, the
delegation also discussed trade opportunities with the Federal Aviation
Administration, transportation security administration and the US Trade and
Development Agency.

Bilateral Air Service Agreement between India and Bhutan was also
formally signed in New Delhi. Also, an agreement for the co-operation on
Search and Rescue Services has also been signed between the two
countries.
According to MM Nambiar, Civil Aviation Secretary, in addition to creating
state-of-the-art airports in Delhi and Mumbai, the Airports Authority of India
(AAI) is also spending US$ 427.5 million on developing the airports in
Kolkata and another US$ 384.7 million on Chennai airport. The AAI is also
looking at upgrading and modernising 35 non-metro airports. Both Chennai
and Calcutta airports will be completed by next year. In addition to actual
airport infrastructure, the government is also looking at building
infrastructure in the air in terms of air traffic control (ATC) and CNS
systems. Safety and surveillance is another huge area being worked upon.

The government has also merged national carriers Air India and Indian
Airlines into a single entity, the National Aviation Company Ltd (NACIL).
The civil aviation ministry has prepared a blueprint to convert Delhi airport
into an international hub for passenger airlines with effect from August
2010 to help the airport, which is being expanded by a GMR-led
consortium, utilise large amounts of additional capacity that will be ready by
July 2010. Under the plan, NACIL will set up its hub in Delhi (Delhi currently
serves as the hub for domestic operations and Mumbai for international
operations).The government is also planning to make Delhi a regional hub
to connect south-east Asia to Europe by capitalising on the capital’s
strategic mid-point location, according to ministry sources.

The government, on the advice of the Kelkar Committee, has opened up

the aerospace industry to the private sector. State governments too are
taking interest in setting up special economic zones (SEZs) for the
aerospace industry.

Investment Policy

With the draft FDI compendium being finalised in end of March 2010,
changes are expected in the aviation policy too.

Currently,Foreign equity participation in airport infrastructure is permitted

upto 74 per cent with automatic approvals and upto 100 per cent in special
permission.

 FDI upto 40 per cent is permitted in domestic air-transport services.

 Foreign investors are allowed to have representation (upto 33 per
cent in domestic airline companies).
The Road Ahead

Investment opportunities of US$ 110 billion are being envisaged up to 2020

with US$ 80 billion in new aircraft and US$ 30 billion in development of
airport infrastructure, according to the Investment Commission of India.

 Indian aerospace companies are growing too. Hindustan Aeronautics

Limited (HAL) was ranked 40th in Flight International's list of the top
100 aerospace companies last year.
 Aircraft manufacturing major, Boeing is in the process of setting up
the US$ 100 million proposed Maintenance Repair Overhaul (MRO)
facilities in Delhi. Air India is also in the process of launching Cargo
Hub in Nagpur while Deccan Aviation has already started one from
the city.
 North India's first private sector greenfield international airport,
Aerotropolis, will soon come up near the industrial hub of Ludhiana in
Punjab. Aerotropolis will be built with an allocation of almost US$
3.77 billion covering an area of 3000 acres by Messrs Bengal
Aerotropolis which has partnered Changi International Airport of
Singapore.
 Punjab will also become the first state in the country to set up a
Maintenance, Repair and Overhaul (MRO) hub at Ropar, 45 km from
Chandigarh, for the civil aviation sector at a cost of US$ 6.4 million
 The country's first SEZ dedicated to the Aerospace Hattaragi, 37 km
from Belgaum, in Karnataka was also inaugurated. The SEZ is
spread over 300 acres of land and will come up with an investment of
US$ 32.06 million in November 2009.
 An Aerospace and Precision Engineering Special Economic Zone
with a proposed investment of US$ 641.2 million has also come up at
Adibatla, Ranga Reddy district, Andhra Pradesh.