Indian Aviation Industry

Last Updated: June 2013 Brief Introduction Aviation as an infrastructure segment has played vital role in facilitating the growth of business and economy in India. A robust civil aviation set-up is key to seamless flow of investment, trade and tourism, with significant multiplier effects through the economy. Aviation sector does not only provide air transport for passengers and goods, but also is a strategic element for employment generation. About one-third of world trade (by value) is delivered by air and about half of international tourism is facilitated by air links. Civil aviation industry is an important engine for innovation and technological progress in a world of decreasing barriers to trade. Market Size Total domestic passengers carried by the scheduled domestic airlines between January and April 2013 were 20.289 million, revealed the official statistics. No-frill carrier IndiGo lead in terms of market share with 29.8 per cent of the pie, followed by Jet Airways-Jet Lite combine at 22.6 per cent, Spice Jet 19.6 per cent, Air India Domestic 19.2 and Go Air at 8.9 per cent for the January-April 2013 period. The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 449.26 million from April 2000 to march 2013, as per the data released by Department of Industrial Policy and Promotion (DIPP).

Key Developments and Investments Jet Airways, India's second largest airline by market share, is in talks with Abu Dhabi-based Etihad Airways for a strategic alliance. In the light of the discussions, the two have been involved in various collaborative agreements. Jet has recently leased a wide body aircraft along with 60 of its cabin crew to Etihad. According to the aviation jargon, a wet lease of an aircraft is an arrangement whereby the lessor (Jet in this case), provides crew, maintenance and aircraft for a consideration. In turn the lessor takes on the responsibility for supplying and operating the aircraft. Jet Airways, that carried the largest number of international passengers from India in 2012, would also be offering visa procurement services to its passengers who have travel plans for the United Arab Emirates (UAE) and are flying the carrier. It has partnered with Dubai-based travel service firm Dnata wherein the travellers from India to Abu Dhabi, Dubai and Sharjah would have the option to individually secure their visa prior to departure. Passengers would be guided through the visa process by Dnata's travel specialists, who will collect all the necessary documents and submit the visa application to the UAE Government on the passengers behalf. In a bid to offer a more convenient transit to international passengers, the Rajiv Gandhi International Airport in Hyderabad is set to commence visa on arrival facility, after it gets a nod from the Centre. Visitors from 11 countries will be eligible to get a visa on arrival with effect from May 31, 2013. The tourist visa-on-arrival, with a maximum validity of 30 days and single entry facility, shall be granted by the immigration officers at the airport to the citizens of 11 countries-- Finland, Japan, Luxembourg, New Zealand, Singapore, Cambodia, Laos, Vietnam, Philippines, Myanmar and Indonesia. Chhatrapati Shivaji International Airport (CSIA), managed by Mumbai International Airport Pvt. Ltd. (MIAL) has been honoured with ISO 14064-1:2006 certification for its Carbon Emissions Accounting by Bureau Veritas, a global leader in carbon certification worldwide, for the second

year in a row. In 2012, CSIA had become the first ever airport in India and the second in Asia, to be acknowledged for its consistent efforts in reducing its carbon footprint. With the certification in 2013, CSIA is now in the process of upgrading its ACI Airport Carbon Accreditation Rating from Mapping (Level 1) to Reduction (Level 2). CSIA has introduced a variety of measures to reduce carbon emissions from its operations. CSIA was the first airport in India, to initiate the mapping process voluntarily and submit emission levels to Directorate General of Civil Aviation (DGCA), in 2012. Government Initiatives The Indian Government is dedicated to the development of the Indian aviation industry and has introduced several policies and regulatory reforms to boost private participation and investments in the same. Recently, the Government allowed 49 per cent FDI by foreign airlines in the sector. Some of the deals like Tata-Air Asia and Jet Airways Etihad have already been announced and are likely to boost civil aviation in a big way. Moreover, in order to fuel growth in maintenance, repair and operations (MRO) business and to make it competitive, the Government has made several concessions in the Union Budget for 2013-14 including extension of time period allowed for utilisation of aircraft parts and equipments from three months to one year, exemption of custom duty on parts, equipment, accessories, spares required for MRO purposes to private category aircrafts also and inclusion of foreign airlines for the purpose of duty-free imports of parts, etc as applicable for scheduled air transport services. The industry has widely welcomed these concessions. The Indian government has also proposed investment of US$12.1 billion in the airport infrastructure during the 12th Plan period, of which US$ 9.3 billion is anticipated to come from the private sector. The scope of development would include construction of new airports, expansion, modernisation of existing airports and development of low cost airports to keep the tariff at its minimal at smaller airports, improvement in connecting infrastructure, and development of world class Air Navigation Services infrastructure. The Government has also made significant initiative to spur development of the aviation industry by privatising five major airports under public-private partnership (PPP) model and endorsing emergence of Greenfield airports which envisages synergy between the public and private sector. Road Ahead Private participation in expanding air transport network and related infrastructure has propelled growth of air traffic in a big way in India. Industry analysts estimate that India would be the third largest aviation market by 2020, whereby it would be well-equipped to handle 336 million domestic and 85 million international passengers Mr Ajit Singh, the Minister for Civil Aviation, has further revealed that in order to enhance air connectivity, airlines are expected to add around 370 aircrafts, worth US$ 27.5 billion, to their fleet by the year 2017. Moreover, it is estimated that commercial fleet size would reach 1, 000 by 2020 from 400 today, and 1, 000 General aviation aircrafts by 2020 including fleet renewal. Estimated investment requirement for the General aviation aircrafts alone is to the tune of US$ 4 billion. Exchange Rate Used: INR 1 = US$ 0.01719 as on June 10, 2013