The aviation industry encapsulates the development, operation and management of aircrafts.

While the common perception about the sector is that its only about pilots and airhostesses, there are numerous other, equally significant job options that the industry cannot function without; from in-flight trainers and aircraft maintenance engineers to baggage handlers and reservations agents. Research indicates the global aviation industry is poised to grow at a healthy 5.6% CAGR over the next 15 years. While major conventional mature markets such as the US and Europe will witness a significant fall in market share from 61% to 52%, emerging markets, such as India, China and the Middle East, offer a great growth potential.

Performance The economic slowdown which began in 2008 hit the global aviation industry severely, with many airlines such as United and British Airways in the red. This was due to falling passenger numbers and increasing competition from low-frills airlines coupled with rapidly rising fuel costs. Despite passengers now resuming air travel, the increase has been very gradual. In fact, International Air Transport Association (IATA) Director General and CEO, Giovanni Bisignani, in December 2009, stated the global economic crisis has cost the aviation industry 2 years of growth as the improvement that has started since passenger traffic hit rock-bottom in March 2009 is similar to the pace of growth in 2006-2007.

Growth Potential In India, the industry sector continues to look promising. The liberalization of the Indian aviation sector in the mid-nineties resulted in significant growth due to the entry of private service airlines. There was, and continues to be a strong surge in demand by domestic passengers, due primarily to the burgeoning middle class with its massive purchasing power, attractive low fares offered by the low cost carriers, the growth of domestic tourism in India and increasing outbound travel from India. In addition, the Government has also focused on modernizing non-metro airports, opening up new international routes, establishing new airports and renovating existing ones. Some estimate industry growth at 25% YoY. Unfortunately, most major airline operators in India such as Air India, Indian Airlines, Jet Airways and Kingfisher Airlines have reported large losses since 2006, due to high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. As a result of the already weak domestic scenario, the airlines suffered even further when the recession, which exacerbated all these factors, hit. Suffice to say, though that the Indian aviation industry has been more resilient than its global counterparts. Despite many private airlines being in the red, the industry itself remains robust. According to Kapil Kaul, CEO India & Middle East, Centre for Asia Pacific Aviation (CAPA), India's civil aviation passenger growth is among the highest in the world. The sector is slated to cruise far ahead of other Asian giants like China or even strong economies like France and Australia. The number of passengers who will be airborne by 2020 is a whopping 400 million. To keep pace with this accelerated demand, existing players have been trying to increase fleets and widen their footprint to regional destinations as well. There has also been increasing attention from

international low cost airlines such as Air Asia (Malaysian) and JetStar Asia (Australian) to capture part of this lucrative opportunity.

Future Prospects As a result of the strong growth trajectory of the industry, there is likely to be a massive need for skilled personnel to helm this growth. India is already experiencing a shortage of pilots and is likely to face similar shortages across the wide direct and indirect employment pool. Hence, it is a great time to consider playing a role in this sector, as it holds great promise for development over the coming ten years, at least.

CIVIL AVIATION (EXIM POLICY):

The Airport Authority of India (AAI) manages total 120 Airports in the country, which include 5 International Airport, 87 domestic airports and 28 civil enclaves. Top 5 airports in the country handle 70% of the passenger traffic out of which Delhi and Mumbai together alone accounts for 50% traffic. Passenger and cargo traffic has has growth at an average of about 9% over the last 10 years. It is estimated that the domestic passenger segment is likely to grow at 12% per annum. Anticipated growth for International passenger segment is 7% while the growth for International Cargo is likely to grow at a healthy rate of 12%. Privatization of International Airports is in offing through Joint Venture route. Three greenfield airports are getting developed at Kochi, Hyderabad and Bangalore with major shareholding of private sector. The work on Bangalore airport is likely to commence shortly. Few selected non-metro airports are likely to be privatized.100% foreign equity has also been allowed in construction and maintenance of airports with selective approval from Foreign Investment Promotion Board. The total aircraft movements handled in October 2003 has shown an increase of 15.4 percent as compared to the aircraft movement handled in October 2002. The international and domestic aircraft movements increased by 15.4 percent each during the period under review. The reason for increase in aircraft movements is due to increase of operation of smaller aircraft by airlines and the introduction of new airlines viz., Air Deccan in southern region and international airlines (Air Canada, Polar Air Cargo, Qatar Airways (Freghter), Turkish Airways, Air Slovakia at IGI Airport with effect from October 2003.

International and Domestic passenger traffic handled in October 2003 has increased by 15.4 percent and 6.7 percent over the period of October 2002 leading to an overall increase of 9.4 percent. The total passenger increased by 9.2 percent, 7.6 percent, 8.9 percent and 17.0 percent respectively at five international airports six developing international airports, eight custom airports and 26 Domestic airports. The total cargo traffic handled in October 2003 has shown an increase of 3.5 percent as compared to the cargo handled in October 202. The international and domestic cargo traffic increased by 4.3 percent and 2.1 percent respectively during the period. During the month of October 2003, 5346 thousand aircraft movements (excludes defense & other non-commercial movements), 40.33 lakh passengers and 88.59 thousand tones of cargo were handled at all the airports taken together.

Main features of foreign trade procedures / Policy year 2006-2007 & 2008-2009 Import of Reconditioned/ Second Hand Aircraft Spares (Foreign Trade Procedures)

2006-2007 Air India, Indian Airlines, Vayudoot, Pawan Hans Ltd. and scheduled domestic private airlines, private sector/public sector companies and State governments operating executive/ training aircraft or those engaged in the aerial spraying of crops and non-scheduled airlines and charter service operators will be eligible to import, without a license/ certificate/permission, reconditioned/ second hand aircraft spares on the recommendation of the Director General of Civil Aviation, Government of India. Foreign airlines shall also be eligible to import without a license/ certificate/ permission, reconditioned/second hand aircraft spares on the recommendation of the Director General of Civil Aviation, Government of India. 2008-2009

Import Authorization for reconditioned / second hand aircraft spares is not needed on recommendation of Director General of Civil Aviation, Government of India (DGCA).

Re-import of goods repaired abroad (Foreign Trade Policy) Capital goods, equipment, components, parts and accessories, whether imported or indigenous, except those restricted under ITC (HS) may be sent abroad for repairs, testing, quality improvement or up gradation or standardization of technology and re-imported without an Authorization.

EXTRACT

Foreign trade procedure 2006-2007 & 2008-2009 governed by Directorate General of Foreign trade wherein reconditioned / repair aircraft parts are permitted to import freely, which were earlier subjected to recommendation from DGCA (FTP 2006-2007) such restriction has been lifted by government in 2008-2009 FTP stating the recommendations from DGCA are no more required for reconditioned / second hand aircraft spares. In view of above clarification, aircraft spare parts which were exported for repair or reconditioned can be imported as a fresh / normal imports claiming benefit of duty under main notification 21/2002 serial number 346D subjected to notification condition stated at serial number 102.

SPECIAL NOTE

Even though restrictions on repaired / reconditioned aircraft spares have been lifted by GOI, still it is mandatory to certify parts as aircraft spare / parts to claim the notification benefits. Non aircraft parts are still governed by the restrictions for imports, while re-importing non aircraft parts procedure will still remain same as for normal re-import shipment subjected to identification / establishing identity of goods with export documents.

Only those parts which were sent abroad can be imported without any restrictions (refer to foreign trade policy 2007-2008 serial number 2.22) which make it clear that any specified goods which are exported for repair / upgrade or any other activity related to improvement in technology can be imported without any license, has to undergo re-import clearance procedure of identification that goods were exported from India.