1. ECONOMIC REFORM
AVIATION SECTOR - INDIA

2. SOURCES
• 2nd U.S.-India Aviation Partnership Summit(2009)
• Research Study of the Civil Aviation Sector in India
SUBMITTED TO : The Ministry of Corporate Affairs, Govt. of
India (2012)
• WIKIPEDIA
• AIRLINE INDUSTRY- CHANGING TIMES (NMIMS PROJ;2002)
GUIDE : PROF N S SHETTY
• NEWSPAPER UPDATES TILL 20 Nov 2013
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THE ECONOMIC TIMES
BUSINESS STANDARD
THE INDIAN EXPRESS
THE TIMES OF INDIA
LIVE MINT & THE WALL STREET JOURNAL.
WALL STREET JOURNAL

3. SUMMARY OF PRESENTATION
• Introduction
• India’s economy before 1991
• Aviation Industry before & after 1991
• Liberalisation policies/Government initiatives
• Impact of Liberalisation Policy
• Growth Story
• SWOT Analysis
• ROAD AHEAD

4. REGIONAL AIRLINES-29 JUL13
• GoI has set target of building 50 new low cost small
airports by AAI across 11 states to cater for regional
connectivity.
• Large airlines mandated to connect smaller cities
• scheduled regional airlines to induct smaller
aircraft for deployment on regional routes
• Relaxation on number of aircrafts
• Cess and tax relaxation on regional routes
• Reduce VAT on ATF and Less Airport charges.
• Permission to fly international routes to regional
airlines.

5. JET-ETIHAD
• FIPB Cleared Jet-Etihad 2058 Cr deal on 29 Jul 13
Indicating the flexible Nature of GoI for FDI
• Largest foreign investment in 2013
• Etihad Assures of Indian Control : Board
Members – Independent directors to be Indian
Jet-4, Etihad-2
• Concerns of SEBI and MCA addressed.
– Applicability of Indian Law to shareholder dispute.
– Arbitration on any other dispute can be carried out
under English law.
– 9% stake owned by Tailwinds will have to be directly
held by Chairman Naresh Goyal.
– Stake After Deal Ratification
• Naresh Goyal
• Etihad
• Public Holding
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51%
24%
25%

6. AIR ASIA - JV
• AirAsia India is a proposed JV start-up and is
the latest venture of the AirAsia Group.
AirAsia Investment Ltd has applied to the
Indian Foreign Investment Promotion Board
(FIPB) to seek approval for AAIL to invest 49%
into a proposed Indian JV together with Tata
Sons Limited and Arun Bhatia of Telestra
Tradeplace Pvt Ltd. The JV plans to operate
from Chennai, focused on providing domestic
Tier II/Tier III city connectivity

7. AIRPORTS & AIRCRAFTS- INDIA
AIRPORTS & AIRSTRIPS
ORG
TOTAL
OPERATIONAL
AAI
97
65
DEFENCE 138
90*
STATE GOV 161
67
JV
06
06
PVT
61
53
* CIVIL ENCLAVE
25
AIRCRAFTS
AIRLINE
NOS OF A/C
AIR INDIA
131
JET
111
INDIGO
62
SPICEJET
48
GO AIR
13
BLUE DART
08
DECCAN CARGO
02
AIR MANTRA
02
QUICKJET
01

8. INDUSTRY OVERVIEW
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India is World’s 9th largest market
Comprises of Domestic Airline, Air Cargo and Airports
Scheduled services available from to/fro 82 airports
Bilateral with 104 countries
Domestic air passenger - Worlds 4th
Enhanced connectivity – 87 foreign airlines of 49 countries
07 scheduled airlines operating exclusively in passenger
sector
• Presently it contributes 0.5 % of GDP and it is expected that
by 2030 it will contribute 5 % of GDP

9. INDIA’S ECONOMY BEFORE 1991
• Influenced by Protectionism and Public ownership.
• Existence of License Raj (Red Tape).
• Average growth rate of India was 3.5% p.a with per capita
1.3%p.a.
• More focused on Heavy Industries and Agriculture.
• Less attention towards service sector.
• Downfall of USSR and Gulf War added fuel to the fire of crisis.

10. INDIA’S ECONOMY BEFORE 1991
• Major imbalance in payments of loans.
• International Monetary Fund (IMF) demanded for economic
reforms in return of aid.
• Prime Minister Narasimha Rao and Finance Minister Manmohan
Singh took initiative to bring Liberalization.

11. LICENCE RAJ

13. ECONOMIC REFORMS POST 1991
Policies
• Liberalisation - Private Players
• Open Sky
• Direct import of ATF - Regulation
• FDI – Domestic Services Sector
• Airports control - Airports Authority of India (AAI)
• Green Field Airport

14. IMPACT OF LIBERALISATION
• The Air Corporation Act, 1953 repealed
Opening up of the domestic sector
Disinvestment of the two public sector airlines
New privately owned domestic airlines
• Open Sky
Allow foreign airline of any country or ownership to land at
any port on any number of occasions and with unlimited seat
capacity.
• Foreign Direct Investment
Up To 49% Of Foreign Equity & 100% Of NRI investment is
allowed Pertaining to the Domestic Air Transport Services

15. IMPACT OF LIBERALISATION
• Private Carriers permitted to operate scheduled services – 75%
share in domestic aviation
• Entry of low cost carriers
• City side development of non-metro airports
• Allowing Indian carriers to compete on international routes
• Reduction in Landing charges.
•
Fleet expansion plans of Air India

16. IMPACT OF LIBERALISATION
•
Restructuring of Delhi and Mumbai airport and development
of Greenfield airports at Bangalore and Hyderabad
undertaken.
• Up gradation/ expansion/ development of airports
undertaken depending upon traffic potential, requirement of
airline operators and need of air passengers.

17. IMPACT OF LIBERALISATION
• With the liberalization of the Indian aviation sector, aviation
industry in India has undergone a rapid transformation. From
being primarily a government-owned industry, the Indian
aviation industry is now dominated by privately owned full
service airlines and low cost carriers.

18. PASSENGER FLOW
2006 - 2011

20. Service
Competitive Pressure
Low cost Carriers
changing the game
Indigo
Price

21. Market Size
Domestic Air Traffic quadrupled from 13 million to
52 billion in last decade
International Traffic more than tripled to 38 million
87 foreign airlines fly to and from India and 5 Indian
airlines fly to and from 40 countries
45 million tons of cargo through 920 airlines, using
4200 airports and deploying 27000 aircrafts
Projections for traffic during the Eleventh Five Year
Plan, which shows increase in passenger traffic (i.e.
18.8%) as compared to cargo (i.e. 11.4%). The figure
is as follows:

22. Market Size Contd…….

23. Projection of Traffics upto 2016-17

24. Major policies taken in 11th Five Year Plan
 Reduction of high Aviation Turbine Fuel(ATF) cost and
review of its Tax structure
 Multi Modal Connectivity by building expressways to
facilitate advantage of air transportation by reducing the
total travel time
 foreign equity participation up to 49% and investment by
non-resident Indians (NRIs) up to 100% in the domestic air
transport services
 Promotion of Regional Airlines by the way of liberal policy
and provision of better infrastructure facilities
 Development of MRO hub
 Review of RDG to bring them in line with developments
 Merger of AI and Indian Airlines to optimize fleet
acquisition & to leverage the asset base

25. Major policies taken in 11th Five Year Plan
100% FDI is permissible for existing airports;
FIPB approval required for FDI beyond 74%
100% FDI under automatic route is
permissible for greenfield airports
100% tax exemption for airport projects for a
period of 10 years
projected outlay for the Eleventh Plan for
MoCA is Rs 43560 crore at 2006–07 price

26. FDI Policy
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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.

27. Foreign companies can explore various
modes of entry into the Indian market

28. AVIATION SECTOR

29. GROWTH OF THE INDUSTRY
• The growth of airlines traffic in Aviation Industry in India is almost
four times above international average.
• Domestic airlines passengers traffic in increasing at the rate of 25%.
• India ranks fourth after US, China and Japan in terms of domestic
passengers volume.
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.

30. GROWTH OF THE INDUSTRY
• Further, there has been an increase in tourist charter flights to India
with around 686 flights bringing 150,000 tourists.
• It is predicted that international passengers will grow upto 50
million by 2015
• Aviation is now affordable with check fares and discount schemes.
• Various Operators with different business model.
• Regional connectivity – Tier II & Tier III cities

31. Contribution to GDP
Present Contribution < 1%.
Poised to grow at 5% contribution to GDP by 2030

32. OPPORTUNITIES
Airport development and modernisation
• The government is promoting private participation for the
development of greenfield airports and modernisation of existing
airports.
Airport connectivity
• The Ministry of Civil Aviation is focussing on improving connectivity
to major airports.
City-side development
• The government is focussing on the city-side development of airports,
including real estate and commercial development. The city-side
development of 24 non-major airports is being taken up.

33. SWOT ANALYSIS

34. 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.

35. THANK YOU