Challenges for aviation industry in india Challenges for aviation industry in india - Presentation Transcript Aviation Industry (World

Wide) 2,000 airlines, 23,000 aircrafts serve some 3,750 airports through a route network of several million kilomet ers 32 million jobs India Aviation Industry (Intro.) Fastest growing aviation industry Dec, 1912 first domestic route AAI manages all airport Over 450 airports and 1091 aircrafts Cont d DGCA controlled every aspect Including granting flying licenses, pilots, certifying aircrafts for flight. Indian Airline Sector K A and J A converted around half their capacity into low-cost services. Also govt. carrier Air India Launch LCS Has a Low cost Airline Air India Express Cont d First low cost airline Air Deccan in 2003 objective to increase their reach to a largely untapped middle class segment . Passenger traffic 96 million in 2007, compared 6 billion passenger by railwa y. Current Scenario precipitated the boom for domestic and international passenger carriers. domestic passenger and cargo traffic recorded a growth rate of 44.6% and 8.7 %. Intl. passenger and cargo traffic recorded growth rates of 15.8% and 13.8% Cont d Top 5 airports of country handle 70% pass. All airports handle 90.44 million pass. 2006 Growth of Aviation Industry is mostly due Low fares and schedules domestic services Challenges Aviation industry facing major challenges like environmental clearances, acq uisition of land and obstructive rules in developing its infrastructure. experts had asked the government and the environment agencies to give cleara nces Cont d Land acquisition is one of the major challenges Asian Institute of Transport Development Director (Aviation) - T R Kesherwan i Airlines can expand themselves but airports can increase their capacity by expanding themselves Cont d airport at Navi Mumbai has run into trouble over environmental clearances Long term need to master plan for development of infrastructure CAPA India CEO KapilKaul stressed on the need for air safety and communicati on Cont d urgent need of providing training to manpower industry is facing shortage of trained technical staffs and this should not be ignored. Cont d provide training to staffs to full fill goal Indian aviation industry expected to grow two to three fold by 2020 3,000 Crore would be needed for the development of airports

Rs 8,000 crore would be required for airlines Cont d number of passengers is likely to increase to 400-450 million by 2020 but pr esent 110 m. number of scheduled aircraft is estimated to go up to 1,000-1,500 from 600 a t present Some Challenges which faced by aviation industry in India Regional connectivity Biggest challenges lack of airports High input costs ATF prices in India continue far higher than Global rates US $ 755 in Delhi US $ 455 in Singapore US $ 497 in Dubai Cont d Withholding tax on interest repayments on foreign currency loans for aircraf t acquisition. Increasing manpower costs due to shortage of technical personnel. Declining yields LCCs and other entrants together now command a market share of around 46% Increasing growth prospects have attracted & new Players Gaps in infrastructure Airport and air traffic control (ATC) infrastructure is inadequate to suppo rt growth. While a start has been made to upgrade the infrastructure, the result s will be visible only after 2 - 3 years. Trunk routes A matter of concern that the trunk routes, are not fully exploited. One of the reasons for inability to realize the full potential of the trunk routes is the lack of genuine competition. The entry of new players would ensure that air fares are brought to realisti c levels This in turn would stimulate demand and lead to growth. Excess Capacity Several new aircrafts were bought within a short span of time Aircrafts ordered during good times are being delivered during recession. According to industry experts, around 17% of the current fleet are scheduled for delivery during the next 3 years. Cont d the industry grew above 40%, almost half of the growth was primarily stimula ted due to low fares. Maintaining such low levels of fares will be difficult due to excess capacit y, especially during the ongoing global slowdown. Hugh Debt Burden Healthy profits and increasing passenger traffic saw airlines raising signif icant amount of capital from Financial Institutions and Banks The top three airlines are now carrying a cumulative debt burden of approxim ately $8 billion. Cont d Incidentally, this is almost equivalent to the losses of $8.5 billion posted by all global carriers. Restructuring this huge amount of leverage will be a challenge as resorting to equity capital will also be equally difficult during economic slowdown Poor Infrastructure Infrastructure continues to be a major constraint for Indian Airline Industr y has been aggravated further due to excess capacity created during good times . Cont d steps are being taken on this front to upgrade major airports in Mumbai, Del

hi and Hyderabad, security concerns still remain to be addressed. Attracting investments from private sector will go a long way to develop and maintain the infrastructure Air craft Noise Emissions The perception of people -its intensity, its frequency and the length of tim e they are exposed to it. Aircraft noise, including night noise, is associated with sleep disturbance, long term adverse health effects and learning difficulties. Shortage of Airport Facilities There are lot of problem at airports in India. There is no capacity to land two flight at same time. Conclusion Indian Airline Industry was one of the fastest growing Airline Industry acro ss the world during the last decade. However, skyrocketing fuel prices, economic slowdown, slashed corporate trav el budgets over the last 3 years has forced all Indian Airlines to rethink their business model. Cont d Excess capacity build-up and poor infrastructure continue to plague the indu stry which is also experiencing a decline in passenger traffic at the same time.

2. India is one of the fastest growing aviation markets in the world. With the libe ralization of the Indian aviation sector, the industry had witnessed a transform ation with the entry of the privately owned full service airlines and low cost c arriers. As of May 2006, private carriers accounted for around 75% share of the domestic aviation market. The sector has also seen a significant increase in num ber 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 i ts purchasing power, low airfares offered by low cost carriers, the growth of th e tourism industry in India, increasing outbound travel from India, and the over all economic growth of India. In addition to these factors, the emphasis on modernization of non-metro airport s, fleet expansion by airlines, service expansion by state owned carriers, devel opment of the maintenance, repair and overhaul (MRO) industry in India, opening up of new international routes by the Indian government, establishment of new ai rports and renovation and restructuring of the existing airports have added to t he growth of the industry. However, in mid-2006, many airline operators announced large losses. Analysts op ined that a combination of factors such as high aviation turbine fuel (ATF) pric es, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition among the players were responsible for the losses in this sector. The problem was also compounded by new players entering the industr y even before the existing players could stabilize their operations. It was esti mated that the industry as a whole could face losses of over Rs. 22 billion in 2 006-07. Some experts expect the industry to consolidate in the near future. The government also was keen to restrict the losses in this sector by closer scrutin y of the business plans of new entrants, conducting quarterly financial audits, etc.