Unfolding Of The Indian Aviation Industry-presentation

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…….

Market Size

Demographics

India has a population of 1.1 billion with an estimated middle class of 300 million.

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

Economic Growth

Average GDP growth of 6% p.a. sustained since 1991 and accelerating thereon. The first quarter of FY06/07 registered 9% growth, and the last Budget has established a target of 10%.

Trade & Investment

India has an increasingly open economy, with strong growth in international trade, healthy foreign exchange reserves and 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 nonscheduled 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.

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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).