CAPA-SITA Report on Innovation & Technology

7/30/2019 CAPA-SITA Report on Innovation & Technology

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CAPA-SITA Report on

Innovation & Technology

Opportunities for Transformation

in Indian Aviation

March 2012


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DisclaimerCAPACentreforAviation(CAPAIndia)andSITAhavemadeeveryefforttoensuretheaccuracyoftheinformationcontainedinthispublication.CAPA IndiaandSITAdonotacceptany legal responsibility for consequences thatmayarise fromerrors,omissionsoranyopinionsgiven.Thispublication isnotasubstituteforspecificprofessionaladviceoncommercialorothermatters.


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Contents

Foreword:Dr.NasimZaidi,Secretary,MinistryofCivilAviation............................................................3Foreword:Mr.FrancescoViolante,CEO,SITA........................................................................................4

Foreword:Mr.PeterHarbison,ExecutiveChairman,CAPACentreforAviation.................................6

ExecutiveSummary.................................................................................................................................7

OverviewofIndianAviation....................................................................................................................9

PassengerTraffic...............................................................................................................................10

Fleets.................................................................................................................................................11

CargoTraffic......................................................................................................................................12

AirportDevelopment........................................................................................................................13

ModernizationProgram................................................................................................................13

AncillaryAviationServices................................................................................................................14

GroundHandling

...........................................................................................................................

14

Maintenance,RepairandOverhaul..............................................................................................14

AirTrafficControl..........................................................................................................................15

GeneralAviation...........................................................................................................................15

TrainingandEducation.................................................................................................................15

Security.........................................................................................................................................15

CurrentChallengesinIndianAviation..................................................................................................15

ITandInnovationTrends:thegloballandscape...................................................................................18

IT&InnovationTrends:theIndianlandscape......................................................................................25

KeyFutureTechnologies...................................................................................................................26

MarketSurvey&Findings.....................................................................................................................27

PublicPrivate

Partnership

Airports

..................................................................................................

27

AAIAirports.......................................................................................................................................32

Airlines..............................................................................................................................................34

GreenTechnology.............................................................................................................................37

Outsourcing.......................................................................................................................................38

GroundHandlers...............................................................................................................................38

BorderControl..................................................................................................................................38

AirTrafficManagement....................................................................................................................39

ITandInnovationinIndianATI.............................................................................................................41

Recommendations&Roadmap............................................................................................................43

Glossary.................................................................................................................................................44


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CAPASITAReportonInnovation&Technology


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ForewordDr.NasimZaidi

Secretary

MinistryofCivilAviation

GovernmentofIndia

OverthelastfewyearsIndiahaswitnessedatransformationofitsaviationindustry.Intheyear2000

ourairportshandledaround42millionpassengers,tenyearslaterthepassengernumberincreased

to

over

140

million.

By

2020

passenger

traffic

will

more

than

triple

to

around

450

million

annual

passengers,withIndiaexpectedtobeamongstthefivelargestaviationmarketsintheworld.

Thehugegrowthofairtrafficpresentsanumberofchallenges.Inordertoaddressthesechallenges,

investmentininfrastructureandskillswillbeneeded.Perhapsevenmoreimportantly,technological

innovationwillberequiredtobringefficiencyandspeedtothesector.

Informationtechnology(IT)hasalreadydeliveredsignificantimprovementsinefficiencyandcosts

acrosstheaviationindustry,andwillcontinuetodoso.Butthisisonlythebeginning.Goingforward

webelievethattheopportunityexistsforITtodrivetransformationalchangesinwaysthatearlier

couldonlybeimagined.

SITAhasbeenanactiveparticipantintheIndianairtransportcommunityforover60years.SITA

innovatescollaborativelywiththeairtransportindustryandenablesthemtostayaheadofthe

curve.

AttheMinistryofCivilAviationweareworkingonnumerouspolicyandregulatoryinitiativesto

createanenvironmentwhichencouragescompetitiveinnovationinouraviationsector,supported

bytechnology,withtheultimateobjectiveofcreatingasafe,viableandsustainableaviation

industry.

Inlightofthissharedgoal,theinitiativebySITAandCAPAtopreparethisreportonthestateof

technology

adoption

and

innovation

in

Indian

aviation

today,

and

the

outlook

for

the

future,

is

appreciatedandwillbehelpfulfortheIndianairtransportindustry.


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Foreword

FrancescoViolante

CEO

SITA

ItisnowtwoyearyearssinceSITAandCAPAjointlyproducedtheir2010whitepaperonITinIndian

Aviation.ThatreportexploredtrendsintheIndianairtransportindustryaswellaslookingatwhere

andhowtheindustryspentitsITinvestmentdollars;analyzedmanagementtrends;andhighlighted

somekeytechnologyprojects. ThefirstWhitePaperreportedfindingsonhowtheIndianaviation

industryviewed

and

deployed

technology;

the

challenges

to

greater

implementation;

and

the

overall

strategicroleoftechnology.Sincethen,theindustryhasgrownfurtheronthebackofstrong

demandfromdomesticpassengersandtherisingoutboundtravelfromIndia. Thisgrowthhasbeen

fedbytheopeningofnewinternationalroutes;modernizingnonmetroairports;anddeveloping

newairports.

Indiaispoisedtoemergeastheworldsthirdlargestaviationmarketby2020. Thislevelofgrowthis

inevitablyaccompaniedbychallengesinareaslikeinfrastructure,security,resourcesandthe

regulatoryframework.Innovationwillplayanimportantpartinaddressingthesechallengesto

supportthegrowingdemandsofIndiasaviation.

SITAhas

been

acatalyst

for

innovation

in

the

Indian

air

transport

community

for

over

60

years.

We

havebeeninstrumentalinbringingnewtechnologytoIndia.Today,weareinvolvedinallaspectsof

airtransportinIndia:fromcheckintothecockpit;fromboardingtothebaggagecarousel;from

airlineoperationstoairportmanagement.

SITAregardsitsrelationshipwiththeIndianairtransportindustryasatruepartnershipwherewe

worktogetherforthebenefitoftheindustry.ThispartnershipisstrengthenedbySITAslonglasting

relationshipwithIndianairports,airlines,groundhandlingcompaniesaswellasgovernmental

agenciesandpolicymakers.BelowIhavehighlightedjustsomeexamplesofhowSITAworks

togetherwithitspartnerstotransformtheindustry.

SITAsPassenger

Services

System

supported

the

integration

and

modernization

plan

of

Air

India.

In

addition,SITAprovidesAirIndiawithnetworkconnectivity,desktopinfrastructureandsupportatall

domesticandinternationalstations,alongwithsolutionsforcheckin,airtoground

communications,faresmanagementandbaggagetracing.

Forairports,wesupplystateoftheartcheckinsystemsthatcanbeusedbyanyairline,suchas

CommonUseTerminalEquipment(CUTE)installedin18airportsacrossIndiaandmorerecently

CommonUseSelfService(CUSS)kiosks.Duringthenextyearwewillincreasethetallyofinstalled

checkinsystems(CUTE/CUSS)to41airportsoutof43airportsinIndia.Thepassengerexperienceat

theendofthejourneyisenhancedthroughourbaggagereconciliationsystemsatairportssuchas

Bangalore,CochinandMumbai.WealsointroducedIndia'sfirstairportmanagementsystemat

MumbaiInternational

Airport.


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Intheair,SITAsAIRCOMnetworkprovidescoverageacrossIndiathrough27VHFgroundstations

andwealsoprovideFANS(FutureAirNavigationSystem)servicestotheAirportsAuthorityofIndia.

SITAhelpsover50internationalanddomesticairlinesinIndiatocomplywithIndianGovernment

requirementsforadvancepassengerinformationthroughitsAPISservices.

ForthissecondwhitepaperTheCAPASITAReportonInnovation&Technologyweareonceagain

proudtobeworkingwithCAPAtoproducethisvaluablereportonthestateoftheindustry. It

providesanupdateontheITlandscapeinIndiasairtransportindustry,andalsohighlightssomeof

thechallengesindeployinginnovativetechnologyacrosstheindustry.TheWhitePaperincorporates

theperspectivesofthekeystakeholdersintheindustryandmakessomepredictionsforthefuture.

AstheworldsleadingspecialistinairtransportcommunicationsandITsolutions,welookforwardto

continuingtoworkwiththeIndianaviationcommunityandtheGovernmenttodriveinnovation

duringthisexcitingperiodoftransformationandchange.

FrancescoViolante

CEO,SITA


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Foreword

Peter

Harbison

ExecutiveChairman

CAPACentreforAviation

WearedelightedonceagaintopartnerwithSITAforthissecondreportontheroleoftechnologyin

Indianaviation,providingavaluablefollowuptoouroriginaljointstudyconductedin2010.

SITAistheworld'sleadingairtransportcommunicationsandinformationtechnologyspecialist.The

organisationhasbeensynonymouswithaviationtechnologysolutionsforthelast60yearsandisthe

idealpartnertosupportastudyofthisnature.

ThesearechallengingtimesforIndianaviation.Wefaceanenvironmentwhichcallsfororiginal

thinkingandsolutionstodevelopanew,viableandsustainablebusinessmodelfortheindustry.This

2012reportthereforeplacesadditionalemphasisoninnovation.

Technologytodayhasthepotentialtobecomefarmorepervasiveandtotransformtheoperations

ofairlines,airports,serviceprovidersandbordercontrol.Theaviationindustrycanleverage

technologynotonlytodeliverfunctionalityandcostefficiencies,buttodriveenhancedpassenger

experiences,newcommercialrevenuestreamsandimprovedsecurity.Inthisreportwesetoutto

understandwhetherIndiasaviationindustryispositionedtograsptheseopportunities,andto

presentaroadmapforthefuture.

ThisstudyisthelatestinCAPAscommitmenttobringingglobalknowledgetoIndianaviation,by

providinghighlevelresearchandmarketanalysisalongsideourreputedadvisoryservices.

PeterHarbison

ExecutiveChairman

CAPA CentreforAviation


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ExecutiveSummary

CAPAand

SITA

have

jointly

conducted

astudy

on

the

implementation

of

technology

and

innovation

inIndianaviation.ThestudycombinesCAPAsextensiveongoingresearchandanalysisoftheIndian

aviation sector with a customised survey programme involving primary interviews with key

stakeholdersamongstairlines,airports,andgroundhandlersalongwiththoseinvolvedinairtraffic

management,customsand immigration.ThisjointCAPASITAreporton innovationandtechnology

buildsupontheearlierstudyconductedin2010.

In2012,airporttrafficwillexceed150millionpassengers,ofwhich60percentwillbehandledat

private airports. By 2020 airport traffic is expected to reach 450 million passengers (360 million

domesticand90millioninternational)alongwith6.5milliontonnesofcargo.ThiswouldmakeIndia

thethirdlargestaviationmarketintheworldbywhichtimeIndiaisexpectedtogeneratemorethan

30million

annual

outbound

departures

and

more

than

13

million

inbound

visitors.

Over

90

million

passengersareexpectedtopassthroughDelhiairportaloneby2020.

Overthenext10years,all6metropolitancities(Bangalore,Chennai,Delhi,Hyderabad,Kolkataand

Mumbai) are expected to have provisioned for a second airport, and Mumbai will need to start

preparingforathird.SeveralnonmetrocitiessuchasAhmedabadandPunewillalsooutgrowtheir

existing infrastructureandrequirenewairports.Total investment inthesectorbetween2004and

2020 isexpectedtoreachUS$120billion,ofwhichUS$80billion isrepresentedbyaircraft,US$30

billion in airport infrastructure and US$10 billion in ancillary services such as ground handling,

maintenance,airtrafficmanagement,securityandtraining.By2020Indiaisexpectedtohaveafleet

ofmore

than

1,000

scheduled

aircraft

and

2,000

general

aviation

aircraft.

Themagnitudeofgrowthisboundtogenerateastrainontheexistinginfrastructureintheindustry.

Keeping this in mind, technology and innovative practices will be critical components to facilitate

business transformation. Although theprojectedgrowthseemsstartling, it isnotunprecedented.

Over the last decade China has actually experienced slightly faster expansion than is forecast for

Indiaover thenext tenyears.So it isachievable.But itrequiresanenablingpolicyandregulatory

environmentwhichremovesunnecessaryandobstructivedistortionstocreatea levelplaying field

and encourages investment in infrastructure. The Indian government is addressing this and has

takensometentativebutpositivestepsinthisdirection.

Industryalso

needs

to

play

its

role

as

the

viability

of

airlines

is

critical

to

the

health

of

the

entire

valuechain.Overthelast6years,IndiasairlineindustryhasaccumulatedlossesofUS$8.5billion,a

clearlyunsustainablesituationwhichmustberemedied.But itshouldnotbe forgotten that there

have been a number of positives resulting from this. Airlines have in part lost money because of

competitionand low fares,therehasconsequentlybeenasignificantconsumersurplus.Therapid

expansionintrafficstimulatedby lowfaresprecipitatedtheairportmodernizationprogrammeand

attractedwidespread investor interest. Italsobenefitedhotelsandgeneratedemployment in the

tourism industry.Unfortunately,theairline industryhas largelyshoulderedtheburdenalone. The

time has therefore come to for airlines to establish new, viable business models that generate a

reasonablereturnoncapitalandcanwithstandexternalshocksfromtheeconomy,competition,fuel

pricesand

exchange

rates.

Sustainable

airlines

are

required

to

support

asustainable

industry.


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Technologyhas thepotential toplayacentral role increating thisnew transformationalbusiness

model.Thisreportwasinitiatedinordertoassesswhetherairlineshaverecognizedthis.Information

technologyandtheuseofanalyticscouldbeasimportantforanairlineasanaircraftbecauseitcan

drive a competitive business model by reducing costs, increasing efficiencies, enhancing the

customerexperienceandgeneratingnewrevenuestreams.

InthepastITwaslargelyinternallyfocused,supportingprocessesandfunctionality.However,nowit

enablescloser integrationwith thecustomerexperience,and theability to shapeandpersonalise

the relationship with the passenger, from the time of planning and booking, through to airport

facilitation, inflight, baggage claim and service recovery. Technology, if deployed correctly, can

deliversimplicityandtransparency.

However,theprogressoftechnologyimplementationacrossIndianaviationsince2010hasnotbeen

encouraging with little that was planned then being delivered by 2012. This partly reflects the

financialdifficultiesbeing facedbythe industrybut inaddition,ourstudy foundthat IT isstillnot

consideredatoolofstrategic importance.Technology inIndianaviation is largelyconsideredtobe

anoperationalissueratherthanforminganintegralcomponentofthecompanyskeyobjectivesand

isnotdirectly linkedtoprofitand lossperformance. IT is largelynotused forrevenuegeneration,

and in the case of cost reduction the approach is quite unstructured, such that there is limited

measurementoftheefficienciesthatareachieved.

In most cases the awareness of technology, and the benefits that it can drive, is limited to the

operationalworkforceordomainhead.OurstudyfoundthatChiefTechnology/InformationOfficers

(CTOs/CIOS)intheIndianaviationsectorarehighlyskilledandqualified,buttheroleisnotyetpart

ofthemostseniordecisionmakingteamsthatchangethedirectionoforganizations.

UntilCTOs

and

CIOs

are

given

greater

recognition,

industry

leadership

will

by

and

large

fail

to

recognize the critical strategic role that customercentric technology can play in transforming

financialandoperationalperformance.

Thelowerpriorityattachedtotechnologyalsoimpactsthespeedofdecisionmakingandallocation

ofbudgetswhichslowsdownimplementation.OurobservationisthatIndianaviationtodayismore

focused on catching up with existing global practices rather than establishing new innovative

benchmarks.


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OverviewofIndianAviationIndia has seen a transformation of its aviation landscape since 2004, positioning it as one of the

fastestgrowing

and

most

exciting

markets

in

the

world

today.

In2000just42millionpassengerspassedthroughairports;agovernmentcommitteehaddeclared

Indias airports were for the most part an embarrassment; and only 2 percent of traffic was

handledatprivatizedairports. Inthedomesticarenathe lowcostairlinemodelwasunknownand

AirIndiawastheonlyIndiancarrierpermittedtooperateinternationalservices.

Fast forward to today and airport traffic has more than tripled to over 150 million in 2012, 60

percentofthisatprivatizedairports,someofwhicharewinninginternationalawards.Thelowcost

modelnowdominatesthedomesticmarketwithcloseto70percentmarketshareandsevenIndian

carriersflyoverseas.

Thescheduled

commercial

fleet

has

grown

from

119

aircraft

in

2000

to

437

today,

representing

an

investmentofUS$16billion.Meanwhile,a furtherUS$1.5billionworthofgeneralaviationaircraft

havebeenpurchased,includingmorethan100businessjets.CombinedwithUS$8.6billionofcapital

expenditure inairportmodernizationanddevelopmentandUS$1billion inancillaryactivities, the

totalinvestmentinIndianaviationsince2000isestimatedatoverUS$27billion.

Overthenext10yearsweexpectthisrapidrateofgrowthtocontinue.Passengertrafficisexpected

toreach452millionby2020,makingIndiathethirdlargestaviationmarketintheworld,alongwith

6.5 million tonnes of cargo. A fleet of over 1,000 scheduled aircraft and 2,000 general aviation

aircraftwilloperate from rapidlyexpandingworldclassairportsandallsixmetropolitancitiesare

expectedtohaveprovisionedforasecondairport(athirdinthecaseofMumbai)by2020.Over90

millionpassengers

are

expected

to

pass

through

Delhi

Airport

alone

by

2020.

The overall expansion of the industry will drive investment in air traffic management, safety and

security,groundhandling,maintenance,educationandtrainingandotherancillaryservices.Indiais

alsolookingtodevelopfurtheritsaerospacesectorwithplanstolaunchanindigenous7090seater

regionalaircraft.IfIndiasrelativelylowercoststructurecanbecombinedwithinternationalquality

standards,thereisanopportunitytocreategloballycompetitiveprovidersthatcanservicenotonly

Indiasrequirements,butalsoattractclientsworldwide.Totalincrementalinvestment inthesector

isexpectedtoreachclosetoUS$100billionoverthenextdecade.

SummaryofHistoricalandProjectedIndicatorsofIndianAviationGrowth

2000 2010 2020

DomesticPassengers 14million 52million 180million

InternationalPassengers 14million 37million 90million

ScheduledAirlineFleet 116aircraft 397aircraft 1,030aircraft

DomesticCargo 0.1milliontonnes 0.4milliontonnes 1.2milliontonnes

InternationalCargo

0.6

million

tonnes

1.5

million

tonnes

4.0

million

tonnes


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PassengerTraffic

OverthelastdecadepassengertrafficinIndiahasgrownmorethanthreefoldfrom42millionairport

passengersin2000to141millionpassengersin2010.

Domestic&InternationalPassengerTraffic2000to2010

Source:CAPA,AAI

CAPAhasdevelopedforecastsforthecomingdecadebasedonacombinationofregressionanalysis

andaqualitative

assessment

of

the

key

drivers

of

traffic.

We

project

continued

rapid

growth

with

traffic expected to increase to 450 million by 2020. Although the growth is similar to that

experiencedoverthelasttenyears,occurringasitwilloffamuchlargerbase,theabsoluteincrease

will be more than three times as much. CAPA estimates that this level of growth will require

investment of US$120 billion over the next ten years and will generate significant business

opportunitiesforairlines,airportoperators,architectsandplanners,aircraftmanufacturers,leasing

companies,exportcreditagencies,equipmentsuppliers,maintenanceorganisationsandeducation

andtrainingproviders.

CAPAForecastforIndianAirportTrafficin2020

Domestic

AirlinePax

IntlAirline

Pax

Airport

Pax*

10year

CAGR

Absolute

Growth

2000 14m 14m 42m

2010 52m 37m 141m 12.9% 99m

2020 180m 90m 450m 12.3% 309m

Source:CAPAProprietaryModel

*Number of airport passengers in the country is equivalent to twice the domestic airlines passengers (each of which

generatestwoairportmovements,adepartureplusanarrival),plusthenumberofinternationalpassengers.


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Fleets

Indiascommercialaviationsectorconsistsofthefollowingscheduledpassengerairlinesoperatinga

totalfleetsizeof437aircraftaccordingtotheDirectorateGeneralofCivilAviation(DGCA)aircraft

register

as

at

December

2011.

Since

2000,

aircraft

with

a

purchase

of

price

of

US$16

billion

have

beenimportedintothecountry:

Air India, the stateowned airline, operates full service domestic and international services. Italsohasawhollyowned lowcostsubsidiary,AirIndiaExpress,whichoperatesoninternational

shorthaul routes. Plans to launch Air India Express on domestic routes have not yet been

implemented.

JetAirwaysoperatesfullservicedomesticandinternationalservices.Thecarrierhasconfiguredapproximately70percentofitscapacityunderanofrillsbrand,JetKonnect.Inaddition,Jethasa

whollyownedlowcostsubsidiary,JetLite.Theairlineplanstomergeitstwolowcostoperations

underasinglebrandin2012.

KingfisherAirlinesoperatesfullservicedomesticandinternationalservices.SimilartoJet,ithadconfigured approximately 70 percent of capacity under a nofrills brand, Kingfisher Red.

However,inOctober2011theairlineannouncedthatitwouldbephasingoutthelowcostbrand

andmovingtoanentirelyfullserviceoperationwithaircraftconfiguredwithtwoclasses.

IndiGo,SpiceJetandGoAirare independentlowcostcarriers.Inadditiontodomesticservices,IndiGoandSpiceJetoperateshorthaul internationalservices to the Gulf,SouthandSoutheast

Asia.

IndianScheduledAirlineFleetsasatDecember2011

Source:CAPA,DGCA

The fleet is heavily skewed towards narrowbody aircraft which represent over 70 percent of the

total.Largerwidebodiesandsmallerregionalaircrafteachrepresentabout15percentofthefleet.

Withintheregionalsegmentthebalance istippingawayfromregionaljetstoturboprops.By2020

weexpectthefleetsizetohavegrownto1,030aircraft,ofwhichapproximately65percentwillbe

narrowbodies.


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CargoTraffic

AircargoinIndiaisshowingstronggrowthbutisatanearlystageinitsdevelopment.Totalaircargo

handledatallIndianairportsin2010reached2.35milliontonnes.Thisiscomparabletothevolumes

handled

at

Dubai

Airport.

And

the

five

largest

cargo

airports

in

China

(Hong

Kong,

Shanghai,

Beijing,

GuangzhouandShenzhen)collectivelyhandledcloserto10milliontonnes.

Domestic&InternationalAirCargoVolumeshandledatIndianAirports

Source:CAPA,AirportsAuthorityofIndia

Asis

often

the

case

in

India,

growth

has

occurred

despite

challenges

related

to

airport

facilities,

technologycustomsprocessingandbureaucracy.Withappropriateinfrastructure,investmentanda

conduciveregulatoryframework,theunderlyingpotentialcouldbeunleashed.

CAPAforecaststhataircargovolumescouldtripleover10yearsfrom2.35milliontonnesin2010to

6.51milliontonnesin2020.

CAPAProjectionsforGrowthofIndianAirCargoVolumesto2020

Domestic

CargoCarriage

(tonnes)

IntlCargo

Carriage

(tonnes)

AirportCargo

Volumes*

(tonnes)

10Year

CAGR

Absolute

Growth

(tonnes)

2000 144,000 557,000 846,000

2010 426,000 1,496,000 2,348,000 10.8% 1,502,000

2020 1,237,000 4,035,000 6,510,000 10.7% 4,161,000

Source:CAPAProprietaryModel,IndustrySources

*Volume of airportcargo volumes in thecountry isequivalent to twice the domesticcargocarried byairlines (aseach

tonneofcargoshandletwice,onloadingandunloading),plusthevolumeofinternationalcargo.


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AirportDevelopment

India has 130 designated airports, of which 80 currently have scheduled services. The Airports

Authorityof India(AAI),thestateownedairportoperator, isresponsiblefor125oftheseairports.

Five

airports

Delhi,

Mumbai,

Bangalore,

Hyderabad

and

Cochin

are

operated

under

public

private

partnership(PPP)models.InallbutCochin,theprivateequitystakeis74percent.

In 2010 Indias operational airports handled over 141 million passengers, including 104 million

domesticand37millioninternationalpassengers,representingyearonyeargrowthof15.9percent.

Thetop10airportshandled80percentofalltrafficacrossthecountry.

TotalPassengerNumbersHandledin2010

Airport PassengerNumbers

NewDelhi 29.9million

Mumbai 29.1million

Chennai

12.0million

Bangalore 11.6million

Kolkata 9.6million

Hyderabad 7.6million

Cochin 4.3million

Ahmedabad 4.0million

Goa 3.1million

Pune 2.8million

Source:CAPA

ModernizationProgram

In 2005 the government of India announced a US$10 billion airport modernization plan for the

periodthroughto2010.Thekeyelementsofthisplanincluded:

Upgrade and modernization of Delhi and Mumbai Airports through the PublicPrivatePartnership(PPP)model(INR230billion)

Construction of greenfield airports at Bangalore and Hyderabad through the PPP model(INR45billion)

UpgradeandmodernizationofKolkataandChennaiAirportsbytheAAI Upgradeandmodernizationof35nonmetroairportsbytheAAI.

Indiasairportupgradeandmodernizationprogrammereachedamajormilestonein2010,withthe

openingofthenewTerminalThree(T3)atDelhiInternationalAirport.Constructedatanestimated

costofUS$2.8billion,T3istheflagshipoftheIndianairportsystemandhasthepotentialtobethe

firsthubinthecountry.

Over thenext10yearstheairportsector isexpected toseea further investmentofUS$20billion

whichwillconsistof:

Upgradeofexistingairports Greenfieldairportconstruction Provisioningforsecondairportsateachofthemetros


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UpgradeofExistingAirports

Bangalore

Expandcurrentterminal Constructsecondterminal

Mumbai

IntegratedTerminalTwodueforcompletionby2012/13

Delhi

SecondphaseexpansiontocommenceChennai

Upgradeprogramdueforcompletionin2012.

Likely

to

be

followed

by

greenfield

secondairport.

Kolkata

Upgradeprogramdueforcompletionin2012.

NonMetroAirports

Upgrade andmodernizationprogramtobecompleted

AdditionalAirports

Afurther45airportshavebeenidentifiedformodernizationbytheAAI

Overall

Projectedgrowthwillnecessitateprovisioningforasecondairportateach

ofthemetrocities(andathirdinthecase

ofMumbai),pavingthewayforatotalof

13metroairports.Possibilityofasecond

airportinAhmedabadaswell.

AncillaryAviationServices

Although airlines and airports are the most visible elements of the air transport industry, the

aviation value chain consists of numerous other activities each of which plays a critical role in

supportingthe

smooth

functioning

and

growth

of

the

sector.

GroundHandling

There is an estimated US$500 million market in passenger and cargo ground handling services in

India today. In 2007, the Government announced plans to introduce a new policy to improve

security due to the many companies operating at the airport, and to provide a competitive

environment.Thepolicystatedthattherewouldbeamaximumofthreegroundhandlingcompanies

ateachofthemetroairports.Airlinesappealedarguingthatthiswouldresult in lowerserviceand

higher costs. Planned introduction of the policy has been repeatedly deferred until at least mid

2012.

Maintenance,RepairandOverhaul

CAPAestimatesthattheIndianmaintenance,repairandoverhaul(MRO)marketisvaluedatUS$900

millionandprojects that itcouldgrowtoUS$2.85billionby2020.By thatdatethe Indian fleet is

expected to exceed 1,000 commercial aircraft and 2,000 nonscheduled aircraft. Most heavy

maintenanceactivityontheIndianfleetiscurrentlyconductedoffshore.Withtheprojectedgrowth

ofthefleet,themarketwillsoonachievesufficientscaletobeabletosupportthedevelopmentof

incountryfacilities.However,keybarriers include:afiscalenvironmentwithamultiplicityoftaxes

thatraisethecostbaseofincountrythirdpartyMROs;ashortageofspecificaircraftmaintenance

skillsand

training;

and

strong

competition

from

operators

in

the

United

Arab

Emirates

and

Asia.


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AirTrafficControl

Air navigation services in India are provided by the Airports Authority of India (AAI). The AAI has

preparedanewplan forupgradingairtrafficmanagement (ATM)andcommunications,navigation

and surveillance (CNS) which includes the implementation of modern radar coverage with ADSB

(Automatic

Dependent

SurveillanceBroadcast),

multilateration,

transition

from

voice

communication and ground based navigation to digital communication and satellite based

navigation,knownasGAGAN(Indiassatellitebasedaugmentationsystem).Overthenext10years

investment of over US$1.52.0 billion will be required across the value chain in areas such as

communication, navigation, surveillance, automation, meteorology, technology, maintenance and

training.

GeneralAviation

Thegeneralaviation (GA)sector in India issignificant insizewithanestimated750activeaircraft,

compared

with

just

over

400

scheduled

aircraft.

However,

the

sector

is

highly

fragmented,

unstructured and underfunded. It faces numerous challenges including the lack of a supportive

regulatoryframeworkandtheabsenceofdedicatedinfrastructureatairports,andmaintenanceand

trainingfacilities.Nevertheless,givenIndiaseconomicgrowth,largelandmass,variedterrainandin

many cases poor surface connectivity there are multiple opportunities for GA operations for

business, tourism, industrialsupportandemergencyservices.CAPAestimates that the fleetcould

expandtoover2,000aircraftby2020.

TrainingandEducation

Askilledandcompetentworkforceisessentialforasafeandefficientindustry,buttheindustryhas

apoor

track

record

in

human

resources

planning.

Indian

aviation

needs

to

recruit

and

train

people

in

unprecedented numbers. CAPA forecasts that India will require an additional 300,000350,000

employeesintheaviationsectoroverthedecade2012to2022.Inaddition,theGulfwillrequirean

additional500,000employees,alargeproportionofwhichwillcomefromIndia.

Security

CAPAestimatesthatan investmentofUS$1.5billionto2billionwillberequired inairportsecurity

overthenextfewyears,bothtoupgradeexistingfacilitiesandtoequipnewterminalsandairports.

Indianairportswillhavetocontinuetooperateunderaheightenedlevelofsecurityinthemedium

termandcontinuous investmentwillbenecessarytoupgradeairportequipmentandprocessesto

internationalstandards.

CurrentChallengesinIndianAviationIndias aviation industry today is fundamentally unviable. A negative regulatory and policy

framework, significant structural challenges, a high cost environment and serious under

capitalisationhavecombinedtocreateasituationinwhichvirtuallyeverystakeholderintheaviation

valuechain (airlines,airports,generalaviation) is financiallyweak,withairlinesparticularly fragile.

Overthe lastsixyearsIndiasairlineshaveaccumulated lossesofapproximatelyUS$8.5billionand

Indias3 largeairlinegroupshavetotaldebtsofaroundUS$16billion.Someofthereasonsbehind

thispoorperformanceinclude:


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16


Policy & Regulatory: Indias policy and regulatory framework is not aligned with industryviability. And it adopts a fragmented approach which considers airlines, airports, ATM and

general aviation as separate, unconnected activities with no long term strategic plan for the

sector.

Structural

Issues:

These

are

some

of

CAPAs

observations

about

the

issues

which

impact

the

operationsoftheairlinesector:

o Taxation: The highly punitive fiscal regime in India is the primary problem for theaviation sector. The cost of Aviation TurbineFuel in India is almost 60 percent higher

thaninternationalbenchmarks.Inadditionaltotaxationonfuelthereareseveralother

fiscalimpostsincludingservicetaxandwithholdingtax.

o Cost of Operations: Aside from fuel, Indian aviation is facing an increasing costenvironment.WithalmostUS$10billionofinvestment inairportsoverthelast5years,

airportchargesareexpectedtoincreaseinthecomingmonths,particularlyatthemajor

metros. The need to upgrade ATM infrastructure is also expected to result in higher

charges.Meanwhile,ashortageofmanpowerandafailuretoplanforpeopleortraining

meansthatstaffcostsareincreasingaheadofinflation.

o Foreign Direct Investment: Although India permits foreign investment in the airlinesector,foreignairlinesareexcluded.There isnoclearrationaleastowhythe investor

class that would bring the most expertise and strategic synergies, is barred from

participating.However,itisexpectedthatthisanomalywillberemovedin2012.

o RouteDispersalGuidelines:Therequirementtooperatesocialobligationroutescreatesadistortion fortheairlinesandat thesametimedoesnotappeartobeachieving the

ultimate objective of delivering greater connectivity to remote and less developed

regions.

o 5 Year / 20 Aircraft Rule: There is no logic for the discriminatory regulation whichpreventsIndiancarriersfromoperatingoverseasuntiltheyhavecompletedfiveyearsof

domesticoperationsandoperateafleetofatleast20aircraft.Foreigncarriersflyinginto

Indiaarenotsubjecttothishurdle.

o International Traffic Rights: Most Indian carriers are now eligible to operateinternational services and wish to do so, but are facing delays in obtaining rights to

launchnewroutesduetoAirIndiasfirstrightofrefusal.AirIndiahaslimitedcapability

tooperatenewroutes,meanwhileblockingprivatecarriersfromdoingso.

o Alliances: The process of Indian carrier accession to membership of Star Alliance andSkyTeam has become Air Indiacentric and is holding up the integration of Indian

aviation intotheglobalsystem.Alliancemembershipcouldprovidevaluablepassenger

feedbothintermsofvolumesandyields.

o Commercial Flexibility: The restrictions on airlines being able to adjust their forwardschedulesinresponsetomarketdemandlimitstheircommercialflexibility.

o LegalFramework:Aviation issubjecttoactsofparliamentwhichdate fromthe1930swith limited relevance to todays environment. This structure imposes archaic

procedureswhichresultinhighercosts.


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17


o Safety: A shortage of airworthiness inspectors and air traffic controllers raises safetyissuesandlittleprogressappearstohavebeenmadeontheseconcerns.

Supply Side Efficiency: Low productivity of Indias strategic infrastructure assets such asrunwaysandairspacehasamajorimpactonairlineefficiency.

Congestion,holding

patterns

and

extended

turnaround

times

all

serve

to

increase

costs.

In

addition, lowefficiency of infrastructuremeans that available capacity is exhausted early,

capex needs to be invested in building new airports earlier than should otherwise be the

caseandthesecostswillultimatelybepassedontotheairlines.

Onthemanpowerfront,ashortageofskillsandtraininginfrastructureandafailuretoplan

forpeoplemeans that staffcostsare increasing and in somecases there isadanger that

aircraftmaybegroundedduetoanabsenceoftechnicalresources.

Manyoftheissuesoutlinedabovehavebeenontheagendaforseveralyearsbutlittleprogresshas

been made, contributing to the current situation. However, a crisis should never be wasted. The

currentissues

have

firmly

placed

aviation

on

the

national

agenda.

The

momentum

should

not

be

lost

and instead we consider this an ideal opportunity to implement long overdue reforms and to

developinnovativesolutionstoestablishanewsustainablebusinessmodelfortheindustry.


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ITandInnovationTrends:

thegloballandscapeIts all about the passenger. Every year SITA undertakes extensive global surveys to track major

trendsandtechnologiesacross theworldsair transport industry.Thesurveysnotonlygather the

opinions of senior executives at airlines and airports. They also address the most important

stakeholderofthemall:thepassenger.

SITAs latestAirline ITTrendsSurveywasreleased in June2011, followedbytheAirport ITTrends

SurveyaswellasthePassengerSelfServiceSurvey inOctober.All threesurveysarebuiltonsolid

methodology,andenjoyahigh levelofengagementglobally,ensuring results thatare relevant to

regions and organization types across the world. The Airline IT Trends Survey represents airlines

carrying1.25billionpassengersayear,witharound100airlines representing57percentofworld

passengertraffic. AirportITTrendsSurveyrepresentssome200airportswhichmanage43percent

ofworld

traffic,

accounting

for

2.1bn

in

bound

and

out

bound

passengers.

The

Passenger

Self

Service Survey represents 2,547 passenger interviews at six major airports across the globe. See

www.sita.aeroformore.

ITspendingandinvestmentpriorities

Nowhereareimmediateandpressingtrendsandtechnologiesmoreevidentthaninthecurrentand

planned IT spend of the air transport industry. SITAs latest survey results suggest airlines and

airportsreceivedfurtherincreasesinbudgetin2011onthebackofarecoveryforthefullfinancial

year in 2010. In light of a predicted increase in industry revenues, this indicates an increase in

absoluteterms.Taking intoaccountthis increase inrevenue, itwouldmeanarise inspend, inreal

terms,forthesecondconsecutiveyear.

ITexpensesencompass:

Capitalexpenditure(CAPEX):thatis,theannualamortizationofITequipment. Operational expenditure (OPEX): that is, operation and maintenance expenses for the

currentfiscalyearthathavenotbeencapitalized.

Thesurveyresponsesuggeststhatforthemajorityofairlines,operationalITspendin2011remained

stable,atanaverageof1.8percent(aspercentageofrevenue)whiletheaveragecapitalITspendis

atalmost1percentofrevenue.

Thelevel

of

spend

remained

almost

the

same

as

in

2010.

Together

with

the

increase

in

industry

revenues,onaglobalbasis,thismeansthatitalmostrecoveredtoprerecession levels.82percent

ofairlinestoldSITAthattheirITspendincreasedorstayedthesamein2011.Almost60percenthad

receivedanincreaseinspend.

Clearly,themoodfor2012ismoreguarded.Butwhatsclearfromthesurveysisthatmostairports

and airlines through the peaks and troughs experienced by the air transport industry remain

determinedtokeepafocusontheirfuturegoals.


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19


ExpectedChangeinITBudgets

Topinvestmentpriority:improvecustomerservice

Service has always been at the forefront of the air transport industrys IT agenda. Latest survey

resultsshownodeviationfromthat.Airlinesandairportsrankimprovedcustomerservicehighestas

adriverforITinvestments.

Whatssignificant isthatin2011customerserviceshiftedbackto itstopposition,withinvestment

recoveringfrom

the

lower

levels

recorded

for

2010.

This

highlights

the

importance

of

customer

service and its central position to the IT strategy and direction for both airports and airlines. Of

course,asthe industryrecovers,costreduction isstillahighpriority.ButSITAssurveysshowthat

forIT,costreductionisnolongernumberoneonthewatchlist.


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20


Withcustomerservicesittingastoppriority,whatdoesthismeanintermsoftechnologyadoption

andthetechnologylandscapeinthenextcoupleofyears? Afocusonpassengerinteractionreveals

someanswers.

Passengerinteractionevolutioninthenext35years

Choosing/buyingtravel

services

Airlinewebsitesstilldrivethemajorityofthedirectticketsales,butotherchannelsarestartingto

complement website. In fact, the number of channels is increasing fast. Airlines show a strongly

interested in adding new sales channels: mobiles take top position with 85 percent of airlines

planningtosellticketsthroughthecustomersmobilesby2014,while7outof10airlinesplantosell

ticketsonkiosksandonsocialmediachannels.

Thereareofcourseotheremergingsaleschannelsbesidessocialnetworkchannels,suchasGoogle

flight search pointing directly to the airline site. The impact of this on the airlines sales channel

strategyremainstobeseen.


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21


Themarchofthemobile

Mobility isamassivetrendandanarearifewithrapid innovation.Some54percentofpassengers

carrieda smartphone in 2011,up from28percent in2010and16percent in 2008. Themobile

phone

is

a

fast

growing

extension

of

self

service.

Its

importance

in

enabling

passengers

to

purchase

servicesisincreasing.

Already, passengershavegrown familiarwith selfserviceofferedonairlinewebsites.Somuch so

that79percentofpassengerswantmoreselfserviceoptionsontheirairlinewebsite,accordingto

SITAs Passenger SelfService Survey. Looking at the trends so far, passengers are likely to expect

moreandmoreselfserviceoptionsextendedtotheirmobiledevices.

Preflightinteraction

It isexpectedthatby2014overtwothirdsofpassengerswilluseselfservicecheckin.Although if

checkin isstillrequiredatthattime,thenitwillno longerbeused inthetraditionalway,withthe

majorityofpassengerscheckingin45to75minutesbeforeaflightleaves.

Kioskand

online

check

in

are

well

established

and

reaching

aplateau.

Any

further

usage

will

require the removal of other obstacles, such as the introduction of Baggage drop off points. In


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22


fact,baggageisamajorinhibitorfortheadoptionofmoreselfservice.Onethingisclear.Themobile

phoneisfastbecomingaviablechannelforpreflightinteraction,with15percentexpectingtouseit

for this reason by 2014, a rise from the 3 percent now. Smart phone penetration will boost this

further

WhatweareseeingfromSITAsITTrendsSurveysisthewillingnessandpreparednessofairlinesand

airports

to

invest

in

technology,

innovations,

processes

change

and

standards

to

remove

the

obstaclesfortheadoptionofmoreselfservice,forexample:

Airlinesandairportsplantoincreasethecapabilityofbagtagprintingby2014 Commonbagdropisthenextstep,withpenetrationstillinitsinfancy.Thecurrent4percent

willrisetoanimpressive51percentofairlinesplanningtoprovidethiscapabilityby2014to

theirpassengers.

Thentherearealsoautomaticsecurityandboardinggates.Thesearestartingtoemergeasawayofspeedinguppassengerflowatairports.

Clearly,tomakethesetrendsareality,technologymustmatureandfurtherintegrationeffortsmust

takeplace

between

airlines,

airports

and

authorities.

Newcustomerserviceoptions

Worldsmartphoneadoptionexperienceda73percentyearonyeargrowth,with107.7millionunits

shipped in Q2 2011 (source: Canalys). In SITAs Passenger SelfService Survey the percentage of

interviewedpassengerscarryingsmartphoneshadalmostdoubledoverthepreviousyear:overhalf

werecarryingasmartphone.

The iPhone ispopularacrossallagegroupsand isthepreferredsmartphoneofbothbusinessand

leisure travelers. With rising adoption of smartphones and greater functionality, passenger

expectationsare

increasing:

more

and

more,

they

want

smartphones

to

support

their

journey.

SITAs passenger survey found that passengers want to see improvements in communication: I

acceptthatifsomethingmaynotgoasplanned,butIwouldliketobeinformedintime,clearlyand

concisely.

There are implications for notifications about flight status. We will see an increase in this

functionalityprovidedtomobiledevices.Forairlines,itwillrisefrom51percenttodayto94percent

by2014;

for

airports,

the

figures

will

rise

from

48

percent

to

81

percent.


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23


Butotherchannelsarestartingtocomplementthisprocess.Socialnetworksare increasinglybeing

used to communicate with passengers (and for passengers to communicate with airlines). Not

surprisingly,airlineswillseeanincreaseinprovidingthiscapabilityfrom23percentto76percentby

2014,whileairportswillseeariseto73percentfromthecurrent36percent.

What is clear is that interaction with passengers is becoming ever more complex as new

communicationschannels

are

added.

All

of

these

channels

not

only

require

management

in

relation

topassengerdemands,buttheyalsoproduceadditionaldataaboutcustomers.Thisisvaluabledata

thatalsoneedstobemanaged,togainaconsistentpictureaboutpassengersandmaintainservice

qualityacrossallchannels.

Anotherareaofinnovation,navigationservices,issetforgreaterpopularitytoo.Inparticular,ahigh

percentageisdemandingtheseservices.SITAhasbeenactiveininnovatinginthisarea.Airportsare

ontheirwaytobuildnavigationservices.By2014,49percentplantohavethem,arisefromtodays

5percent.

Navigatingthroughtheairport:iphoneappforFrankfurt

Cloudtechnologytogainground

Tobeabletodelivernew levelsofcustomerserviceandenablesomeofthefunctionalitythatwill

enhance thepassengerjourney,airlinesandairportsmust invest intoupgradestotheirexisting IT

infrastructure.Hereagain,newtechnologiesandinnovationsaresettingthepace.

Newareassuchasautomatedboardinggates,bagdrop,passengerflowmanagement,tonamejustafew,requirenewequipmentorupgradestoexistingones.Airlinesandairportsarebothwellaware

ofthekeyroletechnologyplaysinthetransformationofcustomerservice.Bothconsiderupgrading

theirinfrastructureasbeingessentialtotheirbusinessstrategy.

Scalabilityandflexibilityofinfrastructureareimportantdriversforinfrastructureinvestmentsatthe

bestof times,but even more so in volatileeconomic times.Cloud and virtualization technologies

playasignificantroleinthis.

Investmentsincloudandvirtualizationaregatheringpace. SITAssurveysconfirmthattheindustry

isacceptingtheconceptandbenefitsofvirtualizationandcloudcomputing:asmanyas9outof10

airlines and airports have already implemented or are planning to implement Infrastructureasa

Service(IaaS)

by

2014.


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24


Sowhosdrivingtheinnovation?

Looking across the three SITA surveys, its not unreasonable to consider the question: So who

exactly is driving the trends, technologies and innovations that are so critical to the airline and

airportagenda?

Given

that

airlines

and

airports

are

both

sharply

focused

on

the

passenger

journey,

as

well

as

their

passengersperceptionsand loyalties,wedontneedto looktoo far for theanswer.And letsnot

forget,witheverincreasingcompetitionforpassengers,improvingcustomerservicehasclimbedto

topoftheITagendaintermsofinvestmentcriteria.

The bottom line is that there is really no other choice. Passengers, as SITAs passenger survey

demonstrates, are mecentric. They are technology savvy and they demand service. They are

preparedtousemoreselfservice,acceptnewchannelsandnewtechnologies.Theyarelookingfor

innovations. Ifall theplansexpressed inSITAssurveysbecome reality, the industrywillseeabig

transformationofthepassengerprocess,withthemobilebeingamajorcatalyst.

Globaltrendsandtechnologiesinairtransport.Ataglance


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IT&InnovationTrends:

theIndianlandscapeTechnology can play a strategic role in business transformation for the Indian ATI. However, the

aviation ecosystem needs to facilitate an environment which promotes the implementation of

technology and the creation of innovative IT solutions. Currently technology in Indian aviation is

faced with certain barriers towards effective and gainful implementation, either due to policy

constraints faced intheexternalenvironmentoronaccountof ITbeinganoncorestrategyatan

enterpriselevelacrossmoststakeholders.

The approach to IT and its prioritization varies between organizations at present. Stakeholders

acrossthesectorarenotalignedwithITapplicationstoreapthebenefitsoftechnology.However,IT

ability is being looked at by stakeholders to add value to the service delivery initiatives being

planned.

Airports are looking to benefit from the establishment of centralized Airport Operations Control

Centres(AOCC)andprocessautomationofpassengerservicesinairportsby2017.Airportsatmetro

citieshavechangedthewayITinfrastructureisviewedwithinthesector.However,thepaceofwide

scaleITimplementationacrossallairportshasscopeforimprovement.Airlinesexpecttechnologyto

become more B2C focussed as consumer expectation will drive the need for technology. Most

airlinesexpectaparadigmshifttomobilitysolutionsoverthenextcoupleofyears.

Warehouseoperationsofgroundhandlerspresentanopportunityto implementsolutionstowards

e

cargo

and

consignment

tracking.

Additionally

there

is

a

need

for

solutions

to

automate

operations

inorder to increaseefficiencies.Technology forgroundhandling firms iscustomized locallyand is

deployedonaneedsbasis.

StakeholdersinIndianaviationbroadlyhighlightsimilardriverstowardstechnologydeployment.

KeyDrivers2012

Key

Drivers

1.CostReduction

2.Efficiencies

3.RevenueGeneration

4.CustomerExperience

KeySnapshot2012

Hybridmodelforoutsourcingbetween6080percentnoncore

functions.

Implementationofexistingglobalbestpractices. Mobilityforpassengerprocessing,

FIMSforATMoperations,and

biometricsforscreeningarefocus

areas.

MostlynonexistentR&Dfacilities. Securityconstraintsduetopolicy,act

asbarrierstoeffectivedeployment.

SlowrateofITdeploymentsince2010.

Technologydeployedismoreoperationalthanstrategic.


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KeyFutureTechnologies

Indian aviation is likely to witness some key technologies being deployed, which are expected to

have apositive impact on businessesand operations in the future.However, this willneed to be

supportedby

favorable

policy

and

industry

initiatives.

Some

key

future

technologies

identified

in

the

industrysurveyare:

Biometricsforemployeesandpassengersisexpectedtobeinplaceoverthenext3to5years. Serverandapplicationvirtualizationarebothbeingconsideredasameanstoreducethecostsof

IT, with server virtualization being seen as the priority given the impact on reducing server

infrastructure. There is also growing interest in the asaservice approach that cloud

computingbringstotherationalizationandcostreductionofITinfrastructure.

Anintegratedradarsystemisatanearlystageofimplementationandisexpectedtobecriticalas

it

will

cover

the

blind

areas

not

covered

by

the

current

radar

systems.

Also

FIMS

(flight

information management system) will assist in communicating available flight details to air

trafficcontrolandisexpectedtobeimplementedacrossairportsisthenearfuture.

Mobilitysolutionstofacilitatepassengerprocessingforairlines(mobilecheckin,boardingpassonmobileetc)andtosupportstaffefficiency.

Onboardinternetandphoneconnectivityisenvisagedinthenext5years. Radio frequency identification (RFID) is to be implemented by 2015. Opportunity exists to go

beyondsimplybaggagereconciliationanddeployRFID forcargohandling,assetand inventory

controlandpassengertracking.

Self servicekiosksareexpectedtowitnessfullscaledeploymentby2014. Commonuse solutions will become increasingly common, and the use of a shared platform

shouldpermittheprovisionofamoreseamlessservice.

Websolutionsforfilingofflightplanthroughtheinternet.Somekeysolutionsthathavewitnessed increaseddeploymentamongstairportsandairlinessince

thestudythatwasconductedin2010include:

increasedfocusonwebsitesasamediumtoincreasesalesanddistributionforairlines; socialnetworkingapplications; implementation of Common User Terminal Equipment (CUTE) across PPP airports, with

expansionunderwayacross25nonmetroairports; ERPandbusinessintelligencesolutionsacrossthevaluechain; Baggagereconciliationsystems; Flightinformationdisplaysystems; Visualdockingsystems.


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MarketSurvey&FindingsThequalitativesurveywasconductedinJanuaryandFebruary2012,coveringtheentirevaluechain

oftheairporttransport industry includingairports,airlines,groundhandlers,theMinistryofHome

Affairs, Custom and Excise, and the Bureau of Immigration. The perspectives were sought from

Heads of IT, Chief Financial Officers (CFO), Chief Executive Officers (CEO) and senior bureaucrats

fromthesestakeholders.

KeyContributors

Airports Airlines Others

6metroairports 1nonmetroairport AirportsAuthorityof

IndiaHeadOffice

3fullservicecarriers 4lowcostcarriers 6foreignairlines 1cargoairline

AAIATM 3groundhandlers MinistryofHomeAffairs CustomsandExcise BureauofImmigration

PublicPrivate

Partnership

Airports

Introduction

PPPairports in Indiacurrently handle 60percentof the passenger traffic and are keen to deploy

numeroustechnologyinitiatives.TheseairportswillrequirearobustITinfrastructuretohandlethe

projectedgrowthlevelsinpassengerandcargotraffic.

The market survey revealed that most PPP airports have a defined strategy towards technology

implementation. PPP airport spend as a percentage of revenue is expected to remain steady at

around45percentduring201213,howevergiventhehigherbaseofrevenue,ITspendwillwitness

anincreaseinabsoluteterms.

Reflectingacontinuedpositiveoutlookforthenextyear,80percentofsurveyrespondentsexpectIT

spendtoincrease,while20percentexpectbudgetstostaythesamein2013.TheimportanceofIT

in decision making is increasing with CTOs getting representation at board levels in some cases.

However,thereisverylimitedfocusonresearchingtheimpactoftechnologyattheseairports.

DuetothechallengingenvironmentprevalentinIndianaviation,thecriticalfocusforairportsison

developing solutions to facilitate cost reductions. This was followed by improvements in business

processes and enhancement of the customer experience. Surprisingly, capturing revenue

opportunitieshavea lowpriority fortheseairports intheshort term.PPPairportsaimtobecome

moretechsavvytoalignthemselveswithglobalbestpracticesinthenext5years.


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ProgressinTechnologyatPPPAirportssince2010PPP airports witnessed investments across three broad categories over the last couple of years

covering enhancement of the passenger experience and facilitation, improving airport operations

and strengthening IT infrastructure. Technologies for passenger experience enhancement such as

selfservice kiosks, information exchange via mobile and social networking along with FIDS have

gained importance during the period. All PPP airports have CUTE deployed; while business

intelligencegained

managements

attention.

Solutions

such

as

baggage

reconciliation

(BRS),

RFID,

biometric identificationsolutionsandhandheldsfor internalcommunicationattractedattention.In

termsofITinfrastructure,airportslookedatimplementingvirtualizationandERPsolutions.

Passenger facilitation technologies saw increased rollout of selfservice functionality and its

acceptance by passengers. Kiosk checkin has been the major focus area and saw widespread

implementationatPPPairports.AtpresentPPPairportsareplanningtoextendselfservicekiosksfor

thepurposesoflostbaggageandtransfers.Moreover,mostairportsimplementedFIDSsystemsand

are also planning to automate the public announcement system to reduce noise. In the last two

years,fouroutoffivePPPairportsestablishingasocialmediapresence.Currentlysocialnetworking

isbeing

used

primarily

for

customer

relationship

handling,

though

further

plans

include

promotion

ofservicesandflightupdates.

ITspendingaspercentofrevenueinFY2012* Increaseinspendingfromlastyear*

FY2012

FY2014

FY2017

100%

60%

60%

40%

20% 20%

03% 36% 69% 1012%

KeyDriversfor ITimplementation

80%

70%

20%60%

Reducing

costs

Improving

business

processes

Revenue

opportunities

Improving

customer

experience

Prioritylevel

80%

40%

70%

65%

50%

70%

70%

80%

Virtualization

Cloud

computing

Social

networking

RFID

NFC

Biometrics

Selfscanning

onmobile

Selfservice

kiosks

PriorityLevel

*Percentageofrespondents

SampleSize 5SampleSize 5


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29


Nil Low Moderate High VeryHigh

Mobilitysolutionsarebelievedtoplayacriticalroleamongairportoperators,butdependencieson

otherstakeholders

such

as

security

institutions

are

posing

ahindrance

in

implementation

and

hence

thepriorityallocatedtomobility isdecliningwhen itshould infactbetheopposite.Indianairports

couldconsequentlybe leftbehind.TheadoptionofRFIDhasbeenslow in Indiaeven for thesole

purpose of baggage recovery, whereas other markets are already expanding deployment to re

designcheckin,cargohandling,assetmanagementandevenpassengertracking.

However, despite the various initiatives underway, we did not observe a focus on creating a

seamless customer experience, instead there are individual projects being developed in isolation.

This approach does not keep the customer at the centre, nor does it effectively support the

organizationsownstaff.Airportsneedtodevelopaplatformwhich integrateseachofthevarious

elements.

Application Status

in2010

Status

in2012

Remarks

SelfServiceFacilities

KioskCheck

in

Lostbaggagekiosk

SelfServicebagdrop Possibleimplementationby2014

Selfscanningmobile2Dboarding

passes

Highinterestamongairports,stalled

bysecurityandregulatorypolicies

TransferKiosk

FlightDisruptionkiosk Fewairportsinterested

SelfScanningofpassport/ID's Highinterestamongairports,stalled

bysecurityandregulatorypolicies

AncillaryRevenuesEnhancement UnderconsiderationbyPPPairports

Biometrics

Currentlyused

for

employee

entry

RFID Implementedforcargooperations

SocialNetworkingpresence Mostlyforcustomerrelationship

handlingandinformationsharing

Virtualization Onlyforserverandapplication

MobileApplication

CUTE

ERPimplementation

Businessintelligence

Inlinebaggagescreeningsystem

BaggageReconciliation

System

(BRS)

Handheldforinternal

communication

VisualDockingSystems

Cloudcomputing Interesttowardsprivatecloud

FIDS

AOCC


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30


Andwhereasimmigrationandsecurityagenciesarefrequentlydescribedasholdingupprogress,itis

criticalto incorporatethem intothenewsystemsasdifficultas itmaybe. In fact,sincecreatinga

customerfocusedcultureattheseagenciescouldbedifficult,technologytakesonaddedimportance

asithasthepotentialtoreducethenumberoftouchpoints.

Statusof

Self

Service

Functionalities*

KioskCheckin

Selfservicetransfer

Selfservicebagdrop

Lostbaggagereporting

Disruptionmgmt

SelfscanningofID's

Automatedgates 20%

100%

40%

40%

20%

20%

20%

20%

20%

60%

40%

40%

20%

40%

20%

20%

80%

20%

60%

underevaluation Alreadydone Byendof2012 Byendof2014 Noplans

Business intelligence has gained greater importance in improving airport operations, as is being

considered by 60 percent of the respondents. Further, keen interest has been displayed to

implement technologies like biometric identification for employee entry along with handheld

devicesforinternalcommunication.Additionally,theairportsarealsoconsideringotherapplications

ofbiometricsincludingpassengercheckinandboardingetc.butareawaitingregulatoryapprovals.

BaggageReconciliationSystems(BRS)havebeenimplementedbymostPPPairports.RFIDgenerated

alotofinterestin2010buthasseenlimitedimplementationby2012.

Statusof

Biometrics*

Employeeentry

Passengercheckin

Securirtycheckpoint

Boarding

100%

40%

40%

40%

20%

20%

20%

40%

40%

40%

Alreadyoffered 12years 35years NoPlans

IT infrastructureatairports isexpected to improveonaccountof implementingneworupgraded

ERPsolutionsandvirtualization,which introduceefficiencies.Servervirtualizationhasbeenableto

attracttheattentionofthePPPoperators,with20percentofairportshavingimplementedit,while

afurther60percentareinadvancedstagesofitsimplementationwithafocusoncostreductionand

creatingapaperlessoffice.Cloudcomputingdoesnotseemtobeapriorityareawithairportsmostly

on account of data security issues, only a private cloud for limited applications is under

consideration.



SampleSize 5

SampleSize 5


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StatusofVirtualization*

Serverandstorage

virtualization

Application

virtualization**

Desktop

virtualization

20%

40%

20%

40%

20%

60%

40%

20% 20%

20%

Underevaluation Alreadydone Byendof2012 Byendof2014 NoPlans

**ApplicationvirtualizationisimplementedatonePPPairportonalimitedscale

TechnologyOutsourcingStatusAirports

are

following

ahybrid

model

for

IT

outsourcing.

Airports

have

outsourced

around

80

percentoftheirnoncoreactivitiescitingcostandexpertiseasthemajorreasons. However,asan

exceptiontothetrend,amajorprivateairportinSouthernIndiapracticesaninsourcingmodelwith

astrategicviewtoavoiddelaysinsoftwaremodifications,anddevelopingexpertise.

ChallengesinTechnologyImplementation

PPPairportshavecitedsecurityregulationsasamajorhindranceintechnologydeployment.Thisis

followedby

ascarcity

of

skilled

manpower

in

aviation

IT

technologies

coupled

with

the

attrition

of

trainedresourcesinatightlabourmarket.Limitedtechnologicalknowledgeattheenterpriselevelis

also seen as a challenge. Limited scalability of applications coupled with a lack of commonality

betweentechnologyplatforms,alongwiththepresenceofvariousstakeholderspresentsadditional

challenges forairports. Interestingly,very fewairports cited issues suchas limitedbudgets for IT,

nonavailabilityoftechnologyorlackofmanagementorboardsupport.

TechnologyOutsourcingStatus KeyChallengesTowardsITimplementation

80%

20%

Outsourced

Insourced

90%

40%

50%

70%

90%

60%

AviationITskill

scarcity

Budgetary

limitations

Limited

scalability

Dependencies

Regulatory

approval

Lackof

commanality

PriorityLevel

*PercentageofrespondentsSampleSize 5

SampleSize 5


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AAIAirports

IntroductionIndianairport infrastructure isbeingstretchedby the rapidgrowth inairtraffic.Tocopewiththe

demand,

the

AAI

is

planning

to

increase

its

spend

on

IT.

In

the

short

term,

the

AAI

plans

to

spend

around2percentoftotalrevenueonIT,whileitislookingatincreasingitto5percentoverthenext

fiveyears.Developmentofresearchanddevelopmentcapabilitiesisnotacurrentfocusarea.

AAIPlannedSpendingonITasProportionofRevenue

AAI

is

considering

investment

in

solutions

such

as

virtualization,

self

service

kiosks,

FIDS,

ERP,

and

RFID.Additionally,AAIplansto implementBRSsolutionsatitsmajorairportswithintwoyears.Itis

alsoconsidering limited implementationofbiometricstoenhancesecurity.AAI isevaluatingserver

virtualizationalongwiththedeploymentofCUTEat13airportsinthefirstphaseand25airportsin

thesecondphaseofimplementation.AOCCisplannedtobeimplementedat10airportswithinthe

next2years.

KeyDriversfor ITimplementation KeyfutureareasofinvestmentinIT

Key

Technologies

ERP

FIDS

Selfservice

kiosk

Virtual

ization

RFID


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33


ProgressinTechnologyatAAIAirportssince2010


AAIoutsourcesmostITfunctionswhileretainingprojectmanagementandmonitoringinhouse.The

majorbottleneckforIT implementationhasbeencitedasthelengthybureaucraticproceduresand

approvalprocesses.

Application Status

in2010

Status

in2012

Remarks

SelfService

Facilities

KioskCheckin Willbeatmajorairportsbyendof

2012

Lostbaggagekiosk

SelfServicebagdrop

Selfscanningmobile2Dboarding

passes

TransferKiosk

FlightDisruptionkiosk

SelfScanningofpassport/ID's

Biometrics

Under

evaluation

to

enhance

security

ofsensitiveareas

RFID Planstoimplementforcargoin35

years

SocialNetworkingpresence Noplansinshortterm

Virtualization Servervirtualizationunderevaluation

MobileApplication

CUTE Planstoimplementat13airportsin1st

phaseandthenanother25airportsin

2ndphase

ERPimplementation Currentlyunderimplementation

Businessintelligence

Cloudcomputing Noplansinshortterm

FIDS PartofChennaiandKolkata

modernization

AOCC Currentlyunderimplementation


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Airlines

IntroductionTheairlinesectorinIndiahasbeenstrugglingfinanciallyforthelastfewyears.Thishassignificantly

limitedtheir

spending

capability

on

technology.

Spending

on

IT

was

observed

to

be

in

the

range

of

1

3percentofrevenueinFY2012.Thiscanbeconsideredasmoderatespendingwhencomparedwith

globaltrendswhichwerearound1.8percent.Consideringthecurrentfinancialscenarioofairlines,

ITspendingisnotexpectedtoincreasemuchoverthenexttwoyearsexceptinthecaseofacouple

of airlines. However, 70 percent of respondents believe that spending on IT will see a robust

increase over the next five years depending on the external factors. However, airlines do not

considerdevelopmentofresearchanddevelopmentcapabilitiesinITasaninvestmentarea.

ITSpendsofAirlinesInFY2012

KeydriversforITimplementationforairlinesareobtainingoperationalefficiencyandbringingabout

enhancementofcustomerexperiencecoupledwithcostreductions.Additionally,thiswasfollowed

byaugmentationofrevenuebeingconsideredby60percentofrespondents.

Mobility solutions are emerging as a key IT investment area for the future with 90 percent of

respondents planning some form of implementation in the next 12 years. Virtualization, cloud

computing, BI and multiple applications of social networking are being considered actively.

Furthermore,technology implementationforcargooperationswillwitnessthedeploymentofRFID

andbarcodingsolutions.Thiswillbesupportedbyapplicationsforautomatingprocesses.

KeyDriversfor ITImplementation KeyFutureAreasofInvestmentinIT

80%

90%

60%

90%

Reducingcosts

Improving

business

processes

Revenue

opportunities

Improving

customer

experience

PriorityLevel

80%

60%

40%

65%90%

80%

70%

80%

Virtualization

Cloud

computing

Social

networking

RFID

Mobility

Solutions

Revenuemgmt.

upgrade

Cargomgmt

solutions

CRMupgrade

PriorityLevel

Veryfewcarrierswithfocus

andcapability

to

spend

on

IT

A

few

carriers

migrated

from

moderateintothiscategory

duetothecurrentfinancial

scenario


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35


ProgressinTechnologyatAirlinessince2010

Deploymentoftechnologyhasbeenslowsince2010,mostlydue to the financialstraincausedby

highfuelprices.Mobilitysolutionsgatheredsomepace intheir implementationwithmany leading

airlines launching mobile websites and applications to offer mobile checkin, information updates

andbooking.

Moreover,

many

airlines

also

upgraded

their

websites

to

make

them

more

user

friendly and inorder to reducedependencyon GDS. Websites were alsoupgraded to offer more

ancillary services suchas tourpackages, airport transfersetc.Progresswasalso seenon thecore

technologies frontwith theupgradeof revenuemanagement systems,maintenance systems,and

passenger and cargo management systems. MIS and business intelligence systems also saw an

increaseintheirapplicationwithairlineslookingtocontrolcostsandincreaserevenuestreams.


Airlines are very optimistic about mobility solutions, and are striving hard to utilize them for

passengerandemployees.Additionally,airlinesarealsoplanningtointroducemobilitysolutionsfor

communicationbetweencockpitandgroundstaff.Forcargooperations,airlinesplanto introduce

tracking,baggagereceiptanddigitalapplicationstoreducepaperandmakeprocessesleaner.

Application Statusin

2010

Statusin

2012

Remarks

SelfService

Facilities

WebCheckin

KioskCheckin

MobileCheckin

AncillaryRevenues Highinterestarea

Ecommerce Highinterestarea

Businessintelligence Highinterestarea

Remotelocationcheckin AtAirportMetrolink

ERP&costoptimizationsoftwares

FlightOperations

Inventory&RevenueManagement

upgrade

Distributionthroughownwebsite Highinterestarea

RFID Majorimplementationfor

cargooperations

IntegrationinITplatforms

SocialNetworkingpresence TowardsfeedbackandCRM


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36


StatusofMobilityApplications*

LostBaggagereporting

Notificationflightstatus

Checkinviamobile

Boardingpassestomobile

Targetingpassengers

with

offers

Automatedaccesstolounges(BCBP)

Integratingwithsocialnetworks

100%

60%

50%

50%

40%

50%

50%

50%

50%

50%

50%

50%

50%

Alreadydone Byendof2012 Byendof2014 Noplans

Socialnetworking

is

being

considered

to

enhance

feedback

mechanisms,

information

sharing

with

passengersandproductpromotionsoverthenexttwoyears.Ticketsalesthroughsocialnetworking

arebeingconsideredbyafewairlinesoverthenextfiveyears.

Virtualization and cloud services have seen increased deployment, with server and storage

virtualizationregistering60percentdeploymentwhileanother20percentisunderadvancedstages

of implementation. Stakeholders are implementing virtualization applications in order to achieve

betteragility,flexibilityandlowercosts.

StatusofVirtualization*

Serverandstorage

virtualization

Application

virtualization

Desktopvirtualization

60%

40%

20%

40%

20% 20%

20%

20%

40% 20%

Alreadydone Byendof2012 Byendof2014 Underevaluation Noplans

Cloud computing is being considered only by a few airlines, specifically as a private cloud

environment.Securityof informationhasbeen citedas thebiggest concern towardsdeployment.

Additionally,inflightmobileconnectivityandonboardinternetarefocusareasforairlines,someof

whomarelookingtodeploytheseservicesby2014.


*PercentageofrespondentsSampleSize 14

SampleSize 14


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37


TechnologyoutsourcingstatusAirlineshaveadoptedahybridmodelbyoutsourcingmajorityofnoncoreITfunctions.Oneofthe

largestLCCoperatorsinIndiaoutsources80percentofnoncoreITfunctions.

ChallengesinTechnologyImplementation

Major challenges faced by airlines include limited scalability and lack of aviation IT skills with 90

percent and 85 percent of respondents citing them respectively. An additional bottleneck for IT

deploymentwasdependencyonotherstakeholders.However,budgetarylimitationmayprovetobe

aseriouschallengeconsideringthedeterioratingfinancialhealthofairlinesinIndia.

GreenTechnology

GreenTechnologyinitiativesinIndianaviationarebecomingextremelyimportantastheycontribute

notjusttotheenvironmentbutalsohelpinsavingcosts.Greentechnologyisgoodbusiness.Indian

aviationhasmadeastartbut it isfarfrombeingpartofthe industrysDNA.Moststakeholdersdo

notyethaveawelldevelopedstrategytowardstheuseofgreentechnologybeyondafewindividual

initiatives.

Thereislimiteddefinitionoflongertermgreengoalsbothatanindustryandanorganizationallevel

interms

of

acomprehensive

programme

and

set

of

targets

with

respect

to

air

quality,

water,

noise,

wasteandemissions.

Airportsarearguably furtherahead in this regard thanairlines,with someprivateairportshaving

obtained internationally recognized LEED certification highlighting their environmentfriendly

initiatives inareassuchasrainwaterharvesting,useofelectricvehicles,recyclingandanemphasis

ontheuseofnaturallight.ThefactthatIndiasairportinfrastructureisbeingdevelopedlargelyfrom

scratchmeans that there isanopportunity to incorporate the latest technologieswith respect to

intelligentandgreenairports.Aproactiveapproachisnecessary,asenvironmentalactivismislikely

tobebecomesignificantlymorepronouncedintheyearstocome.

TechnologyOutsourcingStatus KeyChallengestowardsITImplementation

85%

60%

90%

80%

80%

50%

AviationIT

skillscarcity

Budgetary

limitations

Limited

scalability

Dependencies

Regulatory

approval

Lackof

commanality

PriorityLevel

SampleSize 14


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38


GreenInitiatives

Outsourcing

Technology outsourcing strategy for most stakeholders follows a hybrid approach in which the

majority of noncore IT functions are outsourced. In most cases, 6080 percent of the noncore

functionsareoutsourcedtoadomainexpertwhile therestareretained inhousedue tostrategic

reasons. Noncore functions include management information systems, call centres, security

solutionsetc.AnexceptiontotheoutsourcingmodelisaprivateairportoperatorinSouthernIndia,

whereallITfunctionsareretainedinhouseinordertodevelopexpertiseinternally.

GroundHandlers

Groundhandling

agencies

saw

slow

implementation

of

technology,

on

the

back

of

rising

competition

impacting their bottom line. However, technological implementation has increased due to the

privatizationofmajorairports.Automationofmaintenancetaskingandreportingsystemshasbeen

implemented along with airline and airport operations systems. Ecargo initiatives are being

consideredinordertosimplifycargooperations.Theexpansionofapplicationsusingbarcodingand

RFIDtaggingarealsounderevaluation.Moreover,groundhandlingapplicationsused inIndiawere

observedtobeinlinewithglobalstandards.Themajorbottleneckisdependencyonfactorssuchas

securityprocessesandtheagenciesresponsibleforsecurity.

BorderControl

Initiatives towards Border Management Solutions (BMS) have witnessed slow deployment since

2010 broadly on account of policy issues. Initiative towards APIS systems at major international

airports saw deployment towards increasing security and efficiency of border control. Solutions

towards prescreening of passengers and using PNRs for risk assessment have already been

implemented. Plans outlined in 2010 for biometric systems and electronic documentation (bar

codedboardingpasses) inpassengerprocessinghavehadsomeprogressbutwilltakeanother34

yearstoimplement.MajorchallengesimpactingBMSisthelackofskilledITpersonnelandtheslow

decision

making

process

in

government

organizations.


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AirTrafficManagement

Innovation in ATM is critical for the development of a sustainable aviation industry. The Inter

GovernmentalPanelonclimatechangeestimatesthataddressingairportandairspaceinefficiencies

could

reduce

emissions

by

12

percent.

Key

innovations

being

adopted

globally

include:

Greater coordination between civil and military departments to create more direct airroutes.

IntroductionofmeasuressuchasContinuousDescentcansaveasmuchas400kgoffuelperlanding,or1tonneofCO2

Gate to Gate Management initiatives which take into account potential delays along theentireroute.Aircraftdonottakeoffifcongestionisexpectedatthedestinationtoprevent

unnecessaryholdingpatterns.Aircraft inholdingpatternsat loweraltitudescanburnfives

times

as

much

fuel

as

at

cruising

heights.

USD58billionofinvestmentisrequiredinATMglobalby2020.TheSingleEuropeanSkyandtheUSNextGenAirTransportSystemarekeyprioritiesandthefocusis

nowswitchingtoIndiaandAsia.ATMinIndiahaswitnessednumeroustechnologicaldevelopments

since2010.Keydriverspushingthepaceoftechnologyupgradationarerapidlyincreasingtrafficflow

andinternationalcompliancerequirements.

Followingarethekeyinitiativesplannedoverthenext45years:

Streamlinedfilingofflightplansthroughtheinternet. IssuanceofNoObjectionCertificatestob

CAPA-SITA Report on Innovation & Technology

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