airline industry in india final - group 3 1

8/8/2019 Airline Industry in India Final - Group 3 1

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INDIAN AVIATION INDUSTRY

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CONTENTS

HistoryRegulatory AuthoritiesPotential For GrowthPolitical EnvironmentEconomical EnvironmentSocio-Culture EnvironmentTechnological EnvironmentEnvironmental FactorsLegal Environment

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H ISTORY

1911 First commercial flight Airmails from Allahabad to Naini1932 The Aviation Department of Tata Sons Ltd. Established1938 Tata Airlines (successor to aviation division of Tata Sons)1946 Tata Air Lines converted into a public Company and

renamed as Air India Limited1948 Air India International incorporated1953 Nationalization of Aircraft Industry

Air India (serving the international sectors)

Indian Airlines (serving domestic sectors)1986 Private Sector Players permitted as Air taxi operators (Playersincluding Jet, Air Sahara, NEPC, East West,Modiluft,etcstarted service)

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P OTENTIAL FOR GROWTH

The Indian Civil Aviation market grew at a compound annual growth rate(CAGR) of 18% , and was worth US$ 5 .6 billion .The Centre for Asia Pacific Aviation (CAPA) has forecast that domestictraffic will increase by 25% -30% till 2010 and international traffic growthby 15% , taking the total market to more than 100 million passengers by2010 . India's civil aviation passenger growth, presently at 20% , is one of the highest in the world.By 2020 , 400 million Indian passengers are likely

to be airborne.By 2020 ,Indian airports are expected to handle more than 100 millionpassengers including 60 million domestic passengers and around 3 .4million tonnes of cargo per annum.Moreover,significant measures to propel growth in the civil aviation sectorare on the anvil. The government plans to invest US$ 9 billion tomodernise existing airports by 2010 . The government is also planning todevelop around 300 unused airstripIndia has jumped to 9 th position in world's aviation market from 12 th in2006 . The scheduled domestic air services are now available from 82airports as against 75 in 2006

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P OLITICAL ENVIORMENT

Modernization of AirportsModernization of existing metro airportsModernization of existing 35 non metro airportsPhase-I ( 10 airports): Ahmedabad, Amritsar, Guwahati, Jaipur, Udaipur,Trivandrum, Lucknow, Goa, Madurai and Mangalore.Phase-II ( 15 airports): Agati, Aurangabad, Khajuraho, Rajkot, Vadodara,Bhopal, Indore, Nagpur, Vishakapatnam, Trichy, Bhubaneswar, Coimbatore,Patna, Port Blair, Varanasi.Phase-III (10 airports): Agra, Chandigarh, Dimapur, Jammu, Pune, Agartala,Dehradun, Imphal, Ranchi and Raipur. Additional airports will be taken upfor development on need basisAbolishment of TaxesForeign Travel Tax (FTT) Rs500 and 15% inland air travel tax (IATT) chargedon Basic airfare has been abolished by the government wef from January9 ,2004 to reduce fares.

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Open Sky P olicyIndia had this agreement with 40 countries and lately it signed the policywith UK, USA and European Union. According to this policy, Thesignatories are allowed to fly over the skies of India. Under thisarrangement, airlines from EU member nations will be allowed to operate

flights to India from any of the 25 EU nations regardless of the carrier'scountry of origin.Effect: Tourist arrivals in India are expected to grow exponentially,especially due to the open sky policy between India and the SAARCcountries and the increase in bilateral entitlements with Europeancountries, and the US.Landing Charges abolishedLanding charges for aircraft with less than 80 seats were abolished andlanding charges for larger aircraft have been reduced by 15% with effectfrom February 11 ,2004 .

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Reduction on Excise DutyFrom January 9 ,2004 , the excise duty on ATF was reduced from 16 to 8 percent The average domestic price of ATF is 99 per cent higher than prices inforeign countries and affects domestic airlines drastically as ATF accounts

for 30 to 40 per cent of operating costsEffect : It would lead to low fares thus giving a boost to air travelThe government has reduced the average age of aircraft being importedinto India for commercial airline operations by five years.Effect: It would lead to increase in imports of aircraft thus can discourage

more operators coming in and improve services

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ECONOMICAL ENVIRNOMENT

Aviation P olicyP olicies supporting the infrastructure

100% FDI under automatic route is permissible for Greenfield airports.For existing airports, FDI up to 74% is permitted through automaticapprovals and up to 100% through special permission (from FIPB).Private developers allowed setting up of captive airstrips and generalairports 150 km away from an existing airport.100 % tax exemption for airport projects for a period of 10 years.49 %FDI is permissible in domestic airlines under the automatic route, butnot by foreign airline companies. 100% equity ownership by Non-ResidentIndians (NRIs) is permitted.74% FDI is permissible in cargo and non-scheduled airlines.

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Role of Aviation Industry in India GDP-Growth Factors

The growth in the Indian economy has increased the Gross DomesticProduct above 8% and this high growth rate will be sustained for a goodnumber of years

Air traffic has grown enormously and expected to have a growth whichwould be above 25% in the travel segmentIn the present scenario around 12 domestic airlines and above 60 international airlines are operating in IndiaThe growth of airlines traffic in Aviation Industry in India is almost four

times above international average




Improved economy has affected the aviation industry in the followingways:Consumers have capacity to afford air travel. In 2004 13 million ticketswere sold i.e. 1% of India travelling by air compared with current scenario

50 million tickets are sold i.e. 2 .5% of India traveling by air.Consumers have money to spend on tourism, religious tourism andbusiness trips etcCompetition amongst the Air lines has resulted in sharp decline in air faresThe importance of time spent on travelling has been understood by the

consumers.

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Adverse Affects:1 . The demand for air staff and pilots has suddenly gone up, as a result, the

airlines are compromising with the staff.

2 . The infrastructure is not as developed as the aviation industry. There isshortage of good airports, runways, etc. This leads to inconvenience.

3 . The introduction of untrained or poorly educated staff has caused aproblem. The services have gone down in a few airlines.

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SOCIO-CULTURAL ENVIRONMENT

Change in Lifestyle ± Younger Population ( 70% below 35 years) ± Growth in Software / Manufacturing Industry ± Air Travel no longer a Luxury

Growth from Tier II Cities ± Government plans to modernize 35 non-metro airports ± IT/ Manufacturing companies plan to set up base ± According to CRISIL Traffic at non-metro airport to exceed metro

airports by 2010 :-

Non-Metro Airports = 74 Million PassengersMetro Airports = 19 Million Passengers ± This calls for investment of around Rs. 6000 crores

Tourism as a Growth Sector ± High Rate of Growth in Tourism Industry

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TECH NOLOGICAL ENVIRONMENT

Introduction Of Airbus A380Introduction of Double Deck Airbus A 380 New Design Superjumbo,

Airbus A380 is the world s first twin-deck, twin-aisle airliner. ± Outfitted for special passenger uses such as sleeper cabins, business

centers etc. ± Fuel efficient Uses 20% less Fuel ± Fly quieter, cheaper and more Environmental FriendlyILS-Instrument Landing SystemILS Instrument Landing System ± Facilitates a highly accurate means of navigation to the runway under

low visibility conditions

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ENVIRONMENTAL FACTORS

The increase in the global warmingThe sudden and unexpected behavior of the atmosphere dependency onweatherShortage of the infrastructural facilitiesTourism saturationSound PollutionEmissions from AircraftWastes originating from the Terminal Oil spills & waste discharge

The rapid growth of the Indian Airline Industry would be against the long-term ecological interests of the country and the world

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LEGAL ENVIRONMENT

The ministry of Civil Aviation is responsible for the formulation andimplementation of national policies and programs in civil aviation sector

Civil Aviation Sector is monitored and regulated by two separateorganizations under the Ministry of Civil Aviation Director General of

Civil Aviation and Bureau of Civil Aviation Security

Ministry has following PSU / Bodies under administrative control:

± Air India Limited ± Indian Airlines Limited ± Airports Authorities of India ± Pawan Hans Helicopters Limited ± Indira Gandhi Rashtriya Uran Akademy

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LEGAL ENVIRONMENT

DGCA is a statutory authority responsible for laying down, implementationand monitoring of standards regarding :

± Airworthiness of Aircraft ± Safety and Operations of Aircraft ± Flight Crew Standards & Training ± Air Transport Operations

Licensing of Flight Crew, Aircraft Engineers and Civil Aerodrames.Certification of Air OperatorsInvestigation of incidents and minor accidents and implementation of Safety measures

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Formulation of Aviation LegislatureUndertake Research and Development activities in the field of Civil

AviationBureau of Civil Aviation Security is designated Regulatory and MonitoringAuthority of India.BCAS is responsible for maintaining prescribed standards of AviationSecurity at all civil airports in the country

LEGAL ENVIRONMENT

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airline industry in india final - group 3 1

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