Challenges for aviation industry in india

Presentation On

“Challenges for Aviation Industry”

Parminder Singh Grover

Aviation Industry (World Wide)

• 2,000 airlines, 23,000 aircrafts

• serve some 3,750 airports through a route network of several million kilometers

• 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 railway.

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, acquisition of land and “obstructive” rules in developing its infrastructure.

• experts had asked the government and the environment agencies to give clearances

Cont’d

• Land acquisition is one of the major challenges

• Asian Institute of Transport Development Director (Aviation) - T R Kesherwani

- 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 Kapil Kaul stressed on the need for air safety and communication

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 present 110 m.

• number of scheduled aircraft is estimated to go up to 1,000-1,500 from 600 at 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 aircraft 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 support growth. While a start has been made to upgrade the infrastructure, the results 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 realistic 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 stimulated due to low fares.

• Maintaining such low levels of fares will be difficult due to excess capacity, especially during the ongoing global slowdown.

Hugh Debt Burden

• Healthy profits and increasing passenger traffic saw airlines raising significant amount of capital from Financial Institutions and Banks

• The top three airlines are now carrying a cumulative debt burden of approximately $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 Industry

• 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, Delhi 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 time 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 across the world during the last decade.

• However, skyrocketing fuel prices, economic slowdown, slashed corporate travel 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 industry which is also experiencing a decline in passenger traffic at the same time.

Thank You!

Parminder Singh Grover, Punjab