Civil Aviation – A Booming Sector

Civil Aviation - A Booming Sector

A projected expenditure in the amount of US $9 billion will be put into 2012. These are the facts and figures that pertain to Indian Aviation Industry.

SIZE

India boasts the largest airport in India, with 454 runways and airstrips. Of those, 16 of them are designated international airports.

In 2006-07 Indian airports served around 95 million people and 1.5 million tons of freight.

Passenger traffic increased by an excess 30 per cent in the period 2006-07 compared to 2005 and 2006. Cargo was up by 11 per cent over last year.

STRUCTURE

There are currently 97 airports operated and managed through the airport’s authority in India(AAI).

The Government is hoping to draw private investment in the aviation infrastructure.

Mumbai and Delhi airports are being privatized and are currently being upgraded with an estimated investment of $ 4 billion in 2006-16.

Airports with greenfields at Bangalore and Hyderabad is being constructed by private consortia with a total cost of 800 million dollars.

Second, Greenfield airport is being planned for Navi Mumbai, which will be built by using the PPP model at the estimated price in the range of US$2.5 billion.

Thirty-five other city airports are also being upgraded. Cityside development is to be carried out in a PPP model, which will see an investment of $357 million is in the pipeline in the next three years.

India now has 12 airlines, including the Indian national carrier Air India and Indian.

Indian private airlines, including Jet, Kingfisher, Spicejet, Go – accounted for about 70% of passengers in 2006 who travelled within the country. Certain airlines have begun international flights.

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POLICY

100 100% FDI is allowed for airports. FIPB approval is required for FDI greater than 74 per cent.

An FDI of -100% under the automatic route is allowed in greenfield airports.

-49% FDI is permitted for domestic airlines using the automatic route but not for foreign airlines.

Equity ownership of -100% by NRIs is permitted. (NRIs) is allowed.

The Act was amended to create the legal framework to allow airport privatisation.

Tax exemption of -100% for airport projects over a period of 10 years.

-Indian Govt. plans to establish the Airport Economic Regulatory Authority to ensure a fair playing field for all players.

“Open Sky” policy of the Federal Government and an explosion in air traffic have led to the opening of several privately owned airlines and the increase in frequency and flights of international airlines.

74% FDI permitted in cargo and non-scheduled airlines.

OUTLOOK

Passenger traffic is expected to increase by a CAGR of more than 15% over the next five years.

It is expected to reach 145 million people p.a. in 2010.

Vision 2020 envisions the creation of infrastructure that can accommodate around 280 million people by 2020.

Opportunities for the investment of US$110 billion could be envisioned up to 2020. This includes US$80 billion of new aircraft and 30 billion dollars for the developing infrastructure for airports.

Related areas such as MRO and training provide the highest investment potential.

Cargo traffic is expected to increase by more than 20 per cent p.a. in 5 years and is anticipated to exceed 3.3 million tonnes by 2010.

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Major investments are planned for new airports and upgrading existing airports.

POTENTIAL

Favourable population demographics and the rapid growth of economic activity indicate an increase in passenger numbers within the country and international outbound travel.

International traffic inbound to India will increase rapidly as more investment and trade and because India’s vast history and nature-based beauty are advertised to leisure travellers from around the world.

The result is a high demand for investment in aviation infrastructure.

MAJOR OPPORTUNITIES

Greenfield airport projects in resort areas and emerging metros like Kannur, Goa, Pune, Navi Mumbai, Ludhiana and many more.

Cityside development possibilities for the up-gradation to 35 airports that are not metro.

-About 25 regional greenfield/unutilised airports are likely to be bid out for private development.

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