Air India Brief Introduction

AIR INDIA
Brief Introduction
Indias aviation sector is enjoying a steady growth. Passenger output rose to 144 million in
FY 2011 from 73 million in FY 2006, as per a joint study by FICCIKPMG (2012). This
positive growth path can be attributed to the 11th Five-Year Plan (20072012). This period
witnessed the completion of four international airport projects through the publicprivate
partnership (PPP) mode; it was also during this period that five Indian carriers began to
function on international routes.
Air transport in India today supports 56.6 million jobs and produces over US$ 2.2 trillion of
the global gross domestic product (GDP). Air passenger traffic is also increasing at a healthy
rate, a development driven by modern facilities and infrastructure.
The Centre had set aside an investment of US$ 12.1 billion in the airports sector during the
12th Five-Year Plan period, of which US$ 9.3 billion is projected to come from Indias
private sector for construction of new and low-cost airports and development of existing
ones.
Market Size
India would be the third largest aviation market by 2020, as per Mr Ajit Singh, Minister for
Civil Aviation, Government of India.
Passenger throughput increased to 159 million and cargo to 2.19 million metric tonnes
(MMT) in FY 2013, a compound annual growth rate (CAGR) of 13 per cent and 10 per cent
respectively over the period FY 20032013, as per data from the Airports Authority of India
(AAI).
The Indian civil aviation industry is among the top 10 globally with a size of around US$ 16
billion, as per a KPMG report.
Investments
The foreign direct investment (FDI) inflows in air transport (including air freight) during
April 2000 to March 2014 stood at US$ 495.24 million, as per data released by Department
of Industrial Policy and Promotion (DIPP).
The following are some of the major investments and developments in the Indian aviation
sector:
Tata-Singapore Airlines plans to launch its services in India from September 2014,
with 87 weekly flights in its first year of operations, as stated in the airlines
application for an air operators permit to the Directorate General of Civil Aviation
(DGCA). These flights will link Delhi with Ahmedabad, Bangalore, Chandigarh, Goa,
Hyderabad, Jammu, Mumbai, Patna, and Srinagar.
Bengaluru-based GMR Infrastructure has won a contract to upgrade Mactan-Cebu
international airport in the Philippines. GMR Infra and its partner, Philippine firm
Megawide Construction will make an upfront concession payment of US$ 325 million
and invest US$ 375 million over the next five years to build a new terminal and
upgrade the current one.
The DGCA granted an air operators permit (AOP) to AirAsia on May 7, 2014,
opening the path for the airline company to launch low-cost services in India. AirAsia
India will launch services with three Airbus A320 aircraft, from its Chennai hub.
Trichy in Tamil Nadu has, over the past few years, become the fastest growing
international airport in India. International passenger traffic in the town increased 382
per cent to 773,423 between 200607 and 201213. This year, it is expected to
become the 10th biggest international airport in the country.
Low-cost airline SpiceJet is changing its network strategy in order to be more cost
effective and have better yields. The airline signed a US$ 4.4-billion deal in March
2014, for 42 fuel-efficient Boeing 737 Max planes which would be delivered from
2018 onwards.
Government Initiatives
Indias Ministry of Civil Aviation revised the bilateral air traffic entitlements with Dubai in
February 2014, permitting them a 20 per cent increase in seats to India. We have allocated
Dubai 11,000 seats in three phases till the summer schedule of 2015. Dubai has agreed to
grant change-of-gauge facility for Indian carriers at the existing airport, as per a senior
official of the Ministry.
The Ministry has also signed a Memorandum of Understanding (MoU) with AAI for FY
201415, which lists targets to be achieved by AAI on some key performance areas during
the fiscal. The main features of the MoU include parameters such as risk management,
implementation of Enterprise Resource Planning (ERP) tools and development of disaster
management plan.
Delhi Airport will soon become a zero-diversionary airport. The Committee set up by the
DGCA to look into the matter, has presented its report with 27 recommendations. There were
57, 89 and 143 diversions in 2011, 2012 and 2013, respectively. Chances of diversions of
flights at Delhi Airport are expected to come down drastically after the recommendations
have been implemented.
Road Ahead
The aviation industrys potential in India is massive. The market already caters to about 150
million passengers passing through its many airports, with the potential to grow further. By
2020, traffic at airports in India is anticipated to reach 450 million. The aviation industry
presently supports about 0.5 per cent of the Indias GDP.
A KPMG report notes that the industry will continue to grow in India on the back of the
performance of regional airports. Currently, there are about 450 used/un-used/abandoned
airports and airstrips spread across India. Many Indian states, particularly in Eastern India,
have begun taking steps to promote air connectivity. Still, more needs to be done. Today,
many Tier II and Tier III cities are unconnected. The proposed Essential Air Services Fund
(EASF) by the Ministry of Civil Aviation needs to be established as quickly as possible. All
this will have a multiplier effect with regards to higher growth of tourism, employment and
local economic activities in the country.
Exchange Rate Used: INR 1 = US$ US$ 0.0166 as on June 26, 2014
References: Media Reports, Press Releases, Press Information Bureau, Directorate General
of Civil Aviation (DGCA), KPMG Report, FICCIKPMG Report

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