INTRODUCTION India is one of the fastest growing aviation markets in the world.

The Airport Authority of India (AAI) manages a total of 127 airports in the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves. There are over 450 airports and 1091 registered aircrafts in the country. The genesis of civil aviation in India goes back to December 1912 when the first domestic air route between Karachi and Delhi became operational. In the early fifties, all airlines operating in the country were merged into either Indian Airlines or Air India. and, by virtue of the Air Corporations Act 1953, this monopoly continued for the next forty years.
The Directorate General of Civil Aviation(DGCA) controlled every aspect of aviation, including granting flying licenses, pilots, certifying aircrafts for flight and issuing all rules and procedures governing Indian airports and airspace. Finally, the Airports Authority of India (AAI) was assigned the responsibility of managing all national and international airports and administering every aspect of air transport operation through the Air Traffic Control. In 1990s, aviation industry in India saw some important changes. The Air Corporations Act was abolished to end the monopoly of the public sector and private airlines were reintroduced. With the liberalization of the Indian aviation sector, the industry has witnessed a transformation with the entry of the privately owned full service airlines and low cost carriers. In 2006, the private carriers accounted for around 75% share of the domestic aviation market. The sector has also seen a significant increase in the number of domestic air travel passengers. Some of the factors that have resulted in higher demand for air transport in India include the growing middle class and their purchasing power, low airfares offered by low cost carriers like Air Deccan, the growth of the tourism industry in India, increasing outbound travel from India, etc. Increasing liberalization and deregulation has led to an increase in the number of private players. The aviation industry comprises of three types of players:

Full cost carriers Low cost carriers (LCC) Other start-up airlines It is a phase of rapid growth in the industry with estimated growth of domestic passenger segment at 50% per annum.. This has led to intense price competition due to which full service carriers like Jet Airways, Indian Airlines and Air Sahara are giving discounts of up to 60-70% for certain routes to match the new entrants' ticket prices. The customer has thus gained enormously as a result of liberalization of the sector.

Aviation Sector In India - Presentation Transcript 1. AVIATION SECTORJATIN TANWAR 2. Aviation Transportation Roads Railways Ports 3. Large Increased in infrastructure investments required to sustain growth 4. 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. 5. Growth Rate 24% annual growth 6. Growth Domestic airlines flew 3.67 million passengers in August 2009an 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. 7. 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. 8. 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 9. Domestic Airlines
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Air India GoAir Airlines

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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) ) Formerly known as Indian Airlines GoIsplan to merge Air India and Indian into one giant airline consisting of 130-140 aircraft Regular airline offering normal economy and business class seats. 300 flights, 43 Indian destinations Does not own its brand. Brand owned by Jetair Enterprises Ltd. a separate company substantially owned by NareshGoyal Began on 3 Dec 1993with two Boeing 737-200 aircrafts as Sahara Airlines Initially services concentrated in northern India Rebranded as Air Sahara on 2 October 2000. Its hub is Chennai International Airport.

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Mainly targeting business travellers

The airline started operations in

October 2005 11. Players Taking Indians Across India

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Low-cost airline (LCC) 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. GoAir The Peoples Airline established in June 2004 LCC promoted by The Wadia Group GoAirFreeFares Relatively small player as compared to other LCCs Initial flights in southern & western India with the first nine A320s 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 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

12. Market Share 13. 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 14. 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 15. 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 slowerat 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 air4% of the population 16. 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) 17. 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 18. 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. 19. Foreign companies can explore various modes of entry into the Indian market 20. 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.

21. At Present AAI manages 128 airports which includes: - 15 International airports - 8 Custom airports - 25 Civil Enclaves - 80 Domestic airports 22. PPP IN INDIAN AIRPORTS Need for Private Participation in Airport Infrastructure To bridge the resource gap for achieving the following objectives o

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.

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23. 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. 24. 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:
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Gwalior (M.P.) Durgapur (W.B.) Jhajjar (Haryana)

25. Major Airports 26. 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. 27. Greenfield airports Hyderabad Airport Bangalore Airport 28. Greenfield airport - Bangalore - AOD April 2008
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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%.

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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.

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The commercial flights from the existing Bangalore airport will close. 30. Greenfield Airport - Hyderabad AOD Aug. 2008
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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%. AAIs investment in the equity is capped at Rs.50 crores. Estimated cost of the Project is Rs.1761 cores .

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

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The commercial flights from the existing Hyderabad airport will close. 31. Development of Greenfield Airports Proposals received from state govts.
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Goa Gangtok Sikkim Navi Mumbai, Maharashtra Chakan, Pune, Maharashtra Kannur, Kerala Kohima Nagaland Hassan & Gulbarga Karnataka Halwara Punjab Itanagar- Arunachal Pradesh

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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, FraportAG, 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 accuralRs. 804 crs. Debt Rs. 4246 crs.) 35. 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
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Terminal Building and Airside development by AAI. City side development through PPP or Land Lease and Revenue Sharing (Airport wise in a single package)

36. Airport Development Fund Requirements Rs. 40,000 crores 37. 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. 38. 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 AerotropolisPvt 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. 39. 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. 40. Thanks