Open sky & emerging airlines

AVIATION SECTOR :

OPEN SKY & EMERGING AIRLINES

SUBMITTED TO:PROF MADHULIKA SINHA

PREP BY:

SOURCES• 2nd U.S.-India Aviation Partnership Summit(2009)• Research Study of the Civil Aviation Sector in India

SUBMITTED TO : The Ministry of Corporate Affairs, Govt. of India (2012)

• WIKIPEDIA• NEWSPAPER UPDATES TILL 20 Nov 2013– THE ECONOMIC TIMES– BUSINESS STANDARD– THE INDIAN EXPRESS– THE TIMES OF INDIA– LIVE MINT & THE WALL STREET JOURNAL.

PREVIEW

• Introduction

• Open sky policy

• JV & Regional Airlines

• Growth Story

• Road Ahead

INDUSTRY OVERVIEW

• India is World’s 9th largest market• Comprises of Domestic Airline, Air Cargo and Airports • Scheduled services available from to/fro 82 airports• Bilateral with 104 countries• Domestic air passenger - Worlds 4th Largest• Enhanced connectivity – 87 foreign airlines of 49 countries• 07 scheduled & 01 regional airline operating exclusively in

passenger sector• Presently it contributes 0.5 % of GDP and it is expected that

by 2030 it will contribute 5 % of GDP

AIRPORTS & AIRCRAFTS- INDIAAIRPORTS & AIRSTRIPS

ORG TOTAL OPERATIONALAAI 97 65DEFENCE 138 90*STATE GOV 161 67JV 06 06PVT 61 53* CIVIL ENCLAVE 25

AIRCRAFTSAIRLINE NOS OF A/CAIR INDIA 131JET 111INDIGO 62SPICEJET 48GO AIR 13BLUE DART 08DECCAN CARGO 02AIR MANTRA 02QUICKJET 01

FUNCTIONAL AIRLINES

DEFUNCT AIRLINES• Airline Commenced operations Ceased operations Headquarters• Air India Cargo 1954 2012 Mumbai• Air Deccan 2004 2007• Merged with Kingfisher Airlines and rebranded as Kingfisher Red Bangalore• Air Mantra 2012 2013 Delhi• Air Sahara 1991 2006• Merged with Jet Airways and rebranded as JetLite Mumbai• Air Services of India 1936 1953 Mumbai[8]• Airways (India) Limited 1945 1955 Kolkata• Ambica Airlines 1947 1949 Bombay• Archana Airways 1991 1999 New Delhi• Aryan Cargo Express 2005 2010 New Delhi• Bhaarat Airways 1995 1999 Mumbai• Crescent Air Cargo 2000 2006 Chennai• Damania Airways 1993 1997• Renamed Skyline NEPC after takover by the owners of NEPC Airlines Mumbai[9]• Darbhanga Aviations 1950 1962 Kolkata• East-West Airlines 1992 1995 Mumbai• Elbee Airlines 1994 1998 Mumbai• Gujarat Airways 1995 2001 Ahmedabad• Himalayans Air Transport & Survey Limited 1934 1935 Kolkata• Himalayan Aviation 1948 1953 Kolkata• Indian 1953 2011• Merged with Air India New Delhi• Indian National Airways 1925 1945 Delhi[8]• Indian Overseas Airlines 1947 1950 Mumbai• Indian State Air Service (ISAS) 1929 1931 Kolkata• Indian Transcontinental Airlines 1933 1948 Kolkata[8]• Indus Airways 2006 2007 New Delhi• Irwaddy Flotilla & Airways 1934 1939 Chennai• Jamair 1946 1977 Kolkata• Jetlite 2007 2012• Merged with JetKonnect Mumbai• Jupiter Airways 1948 1949 Mumbai• Kalinga Airlines 1946 1953 Kolkata• Kingfisher Airlines 2005 2012 Mumbai• Kingfisher Red 2007 2011 Mumbai• MDLR Airlines 2007 2009 New Delhi• ModiLuft 1994 1996 Mumbai• NEPC Airlines 1993 1997 Chennai• Orient Airways 1946 1953 Kolkata• Paramount Airways 2005 2010 Chennai• Pushpaka Airlines 1979 1983 Mumbai• Tata Airlines 1932 1946 Mumbai[8]• Vayudoot 1981 1997 New Delhi• VIF Airways 1993 1996 Hyderabad• Vijay Airlines 1981 1997 Chennai

ECONOMIC REFORMS POST 1991Policies • Liberalisation - Private Players

• Open Sky

• Direct import of ATF - Regulation

• FDI – Domestic Services Sector

• Airports control - Airports Authority of India (AAI)

• Green Field Airport

IMPACT OF LIBERALISATION• With the liberalization of the Indian aviation sector, aviation

industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers.

PASSENGER FLOW2006 - 2011

Market Size

Domestic Air Traffic quadrupled from 13 million to 52 billion in last decade

International Traffic more than tripled to 38 million87 foreign airlines fly to and from India and 5 Indian

airlines fly to and from 40 countries45 million tons of cargo through 920 airlines, using

4200 airports and deploying 27000 aircraftsProjections for traffic during the Eleventh Five Year

Plan, which shows increase in passenger traffic (i.e. 18.8%) as compared to cargo (i.e. 11.4%).

JV & REGIONAL AIRLINES

JET-ETIHAD : JV

JET-ETIHAD : JV

• “Abu Dhabi-based Etihad has a unique airline-cum-airport strategy that is likely to change the way Jet operates. It promises to be an interesting partnership”

• Jet Airways Chairman Naresh Goyal and James Hogan of Etihad Airways signed a code sharing agreement in 2008

• Wet lease signed in Mar 2013

JET-ETIHAD : JV

JET-ETIHAD : JV

• FIPB Cleared Jet-Etihad 2058 Cr deal end Jul 13 Indicating the flexible Nature of GoI for FDI

• Largest foreign investment in 2013• CCI clears JV – Nov 2013• Etihad Assures of Indian Control : • Board Members – Independent directors to be

Indian–Jet-4–Etihad-2

JET-ETIHAD : JV

• Concerns of SEBI and MCA addressed. – Applicability of Indian Law to shareholder dispute.– Arbitration on any other dispute can be carried

out under English law.– 9% stake owned by Tailwinds will have to be

directly held by Chairman Naresh Goyal.– Stake After Deal Ratification• Naresh Goyal – 51%• Etihad – 24%• Public Holding – 25%

ETIHAD :STRATEGY

• Well-crafted airline-cum-airport strategy where Abu Dhabi becomes a crucial hub in this part of the world

• Etihad’s expansive web of bilateral agreements with many airlines is built on the reality that airline hubs bring economic prosperity.

• Not only shaping the future of Etihad, but even the future of the Emirate of Abu Dhabi

HOW ETIHAD WILL DIGEST JET

• Integration of operations & marketing activities• Ground handling atcommonly used airports• Careful nurturing of loyal customers• Renegotiations & cost cutting.• 26 Indian cities access to Etihad• International route change for Jet– Most European routes likely to be dropped– Focus : Connecting Etihads hub ( Abu Dhabi)– Pax feeds to Etihad, more a regional role

HOW ETIHAD WILL DIGEST JET

• Etihad has purchased Jet's landing slots at Heathrow

• Will buy the airline's frequent flier programme Jet Privilege

• Will provide/arrange for loans under soft and discounted rates

– Required by Jet airways to retire its high cost debt

FUTURE : PROSPECTS

AVIATION: TATA

TATA - AIR ASIA : JV

• Tata group (30%) JV with Air Asia(49%) & Telestra Tradespace(21%).

• Airline Scheduled to start operations soon.• Rupees 80 Crore initial investment.• Regulatory Authourity permissions being

sought ( DGCA & BCAS).• Operate from Chennai : Connectivity to tier II

& tier III cities.• Launch will mark return of Tata’s to aviation

sector.

TATA- SIA : JV

• Tata SIA Airlines Ltd- Full service airline• FIPB cleared FDI proposal (12 Nov 13)• Operational by Jun-Jul 2014• Initial investment $ 100 million• Control of airline in Indian hands

– 04 directors : Tata’s– 02 directors : SIA

»REGIONAL AIRLINES

REGIONAL AIRLINES• GoI has set target of building 50 new low cost small

airports by AAI across 11 states to cater for regional connectivity.

• Large airlines mandated to connect smaller cities• Scheduled regional airlines to induct smaller

aircraft for deployment on regional routes• Relaxation on number of aircrafts• Cess and tax relaxation on regional routes• Reduce VAT on ATF and Less Airport charges.• Permission to fly international routes to regional

airlines.

REGIONAL AIRLINES

• Air Costa- Two Ambraer Jets• Lingamaneni business group From Vijaywada• First generation Entrepreneur Mr Bhaskar Rao• Seven Years After Paramount Air: Operated

with Seven Ambraer Jets• Future Plans– 02 E-190 Jets Being added in Nov– !0 E-190 Jets by 2014– Fleet of 25 by 2018.

Competitive Pressure

Ser

vice

Price

Low cost Carriers changing the game

Indigo

Air Costa

Tata- Air Asia

Etihad

Tata- SIA

GROWTH OF THE INDUSTRY

• The growth of airlines traffic in Aviation Industry in India is almost four times above international average.

• Domestic airlines passengers traffic is increasing at the rate of 25%.

• India ranks fourth after US, China and Japan in terms of domestic passengers volume.

The domestic aviation sector is expected to grow at a rate of 9-10 per cent to reach a level of 150-180 million passengers by 2020.

• The industry witnessed an annual growth of 12.8 per cent during the last 5 years in the international cargo handled at all Indian airports.

GROWTH OF THE INDUSTRY

• Increase in tourist charter flights to India with around 686 flights bringing 150,000 tourists.

• It is predicted that international passengers will grow upto 50 million by 2015

• Aviation is now affordable with check fares and discount schemes.

• Various Operators with different business model.

• Regional connectivity – Tier II & Tier III cities

Road Ahead

• The Indian aviation sector is likely to see clear skies ahead in the years to come.

• Passenger traffic is projected to grow at a CAGR of over 15 per cent in the next 5 years.

• The Vision 2020 statement announced by the Ministry of Civil Aviation, envisages creating infrastructure to handle 280 million passengers by 2020.

• Investment opportunities of US$ 110 billion envisaged up to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure.

• Associated areas such as maintenance, repair and overhaul (MRO) and training offer high investment potential. A report by Ernst & Young says the MRO category in the aviation sector can absorb up to US$ 120 billion worth of investments by 2020.

• Aerospace major Boeing forecasts that the Indian market will require 1,000 commercial jets in the next 20 years, which will represent over 3 per cent of Boeing Commercial Airplanes’ forecasted market worldwide. This makes India a US$ 100 billion market in 20 years.

CONCLUSION

THANK YOU