MEDIA OBSESSIONS

Reported by the Indian media everyday:

Bollywood: Latest movie/love pairing/star child
launch/endorsement
The Indian Cricket Team/Indian Premier League:
Latest match/twist/tangle/slander
Aviation (in India): Airline merger/Aircraft
purchase/Airport opening/New route
establishment/Airport Losses
Genesis of the Indian Airline Industry

1932: Mr. J.R.D.TATA flies a De Havilland Puss Moth from Karachi to Bombay as part of
the first Tata Sons Ltd. flight to deliver mail carried by British Imperial Airways

1948: Govt. of India acquires 49% stake in Tata Airlines, designates it a flag carrier and
renames it Air India International (AII)

1953: Jawaharlal Nehru, in friendly transaction, convinces the Tata Group to let the
Govt. of India acquire a majority stake in AII and nationalizes air transport

1953: Indian Airlines formed by merging eight former independent domestic airlines

1960: India enters the jet age with an Air India B707; USA and India are connected for
the first time with an Indian airline

1989: Indian Airlines becomes one of the first airlines to induct the A320 into its
fleet

1990: East West Airlines becomes the 1st private airline since 1953
INDIAN AVIATION SECTOR
Indian aviation sector has the potential to be number one globally by 2030, says the
Indian Aviation report by FICCI-KPMG


Amongst the top 10 in the world with a size of around USD 16 billion

The Asia Pacific region is expected to emerge as the largest aviation market by
2032

Indian carriers plan to double their fleet size by 2020 to around 800 aircrafts

Indian civil aviation industry is amongst the top 10 globally with a size of USD 16
billion

India's current MRO market size is estimated to be around USD 700 million

Total manpower requirement of airlines to rise from 62,000 in FY 2011 to 117,000
by FY 2017
AIRLINES & AIRPORTS
500
400
300
200
100
0
CAGR: 16%
By 2020, passenger traffic at
Indian airports is expected to
increase to 450 million from
159.3 million in 2012- 2013
Third largest aviation market by
2020
2013 2020
Passenger Traffic (in millions)
271
CAGR: 10.8%
The travel & tourism industry is
forecast to grow 7.9 per cent to
USD270.5 billion in 2023 from
USD119.4 billion in 2012
Travel & tourism to be a
USD270.5 billion industry by
2023
2012 2020
Travel and tourism industry (In USD Billions)
Spending on business travel is
estimated to increase to
USD85.6 billion in 2023 from
USD30.9 billion in 2013, while
that on leisure travel is forecast
to rise to USD221.8 billion from
USD77.8 billion
222
250
200
150
100
50
0
Business & leisure travel to
boost growth
2013 2023
Leisure Travel & Tourism Spending
Business Travel & Tourism Spending
Source: World Travel and Tourism Council, Airport Authority of India, Aranca Research
78
86
31

119

450

159
operational
125
travel
Freight traffic also likely to go up as
trade with the rest of the world
By 2020, the MRO industry is likely
to grow over USD1.5 billion from
USD0.5 billion currently

increases
Advantage
India
Increasing investments
Investments totaling USD12.1
billion in the airport sector are likely
to be made during the Twelfth Five
Year Plan (2012-17); of these,
private investments are expected to
total USD9.3 billion
Growing private sector participation
through the Public - Private
Partnership (PPP) route
Policy support
The government has been
encouraging private sector
participation
Tax incentives for developers;
liberalisation of the aviation sector
Open Sky Policy
Government has allowed 49 per
cent FDI in aviation for foreign
carriers



Source: Ministry of Civil Aviation, MRO India, Aranca Research
Notes: FDI Foreign Direct Investment, MRO Maintenance, Repair and Overhaul
2000
GROWING DEMAND OPPORTUNITIES
Rising working group and widening Growth in aviation accentuating
middle class demography is demand for MRO facilities
expected to boost demand
Expenditure in MRO accounts for
India plans to increase the number 13-15 per cent of total revenues; it
of airports to 250 by 2030 to cater is the second-highest expense after
to growing leisure and business fuel cost
2012

No of
operational
airports: 50

No of
airports:
India is the ninth largest civil aviation market in the world
India ranks fourth
1
in domestic passenger volumes (116.3 million
2
)
Indias civil aviation market is set to become the worlds third
3
largest by 2020
Scheduled airlines: distance
flown (mn km)
762
(2011
4
)
2011-12
Non-scheduled airlines in
operation
(2012)
147
Number of aircraft
1,628 (2012)
Passenger handling
capacity at airports
233 million (2012)
Number of operational
airports
125 (2012)
2000
Source: Airports Authority of India, Planning Commission,
Ministry of Statistics and Programme Implementation, Ministry of Civil Aviation, Aranca Research
Notes:
1
India ranks after US, China and Japan,
2
Data for FY13,
3
India ranks after the US and China,
4
Data for Financial Year and not Calendar Year; FY Indian Financial Year (April March), mn km Million Kilometers

50

66 million

225

39

199

5 10
86
84
82
80
78
76
74
72
0 5
P
a
s
s
e
n
g
e
r

l
o
a
d

f
a
c
t
o
r


Jet Airways Market Share:
17.1% Passenger Load Traffic:
75.1%
Jetlite
Market Share: 5.4% Passenger
Load Traffic: 77.2%

15
Market share
20 25 30 3


Spicejet
Market Share: 19.8%
Passenger Load Traffic: 80.9%

Air India Market Share:
19.1% Passenger Load
Traffic: 82%

GoAir
Market Share: 9% Passenger
Load Traffic: 85.8%

Indigo
Market Share: 29.5%
Passenger Load Traffic: 89.6%
Growth in domestic passenger traffic has been
robust
Domestic passenger traffic expanded at a CAGR of 12.5 per
cent over FY0613; by FY17 domestic passenger traffic is
expected to touch 209 million
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
50
40
30
20
10
0
-10
-20
International passenger traffic posted a CAGR of 9.8 per
cent over FY06-13 and is set to touch 60 million by FY17
Growth in passenger traffic set to remain strong in
future
12
th
Plan Period
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*
Domestic (million)
Growth - international (%)
International (million)
Growth - domestic (%)
During April September 2013, domestic passenger
traffic increased by 6.6 per cent compared to similar
period in the previous year
FY02 FY07 FY12 FY17E
During April September 2013, international
International Passenger Throughput International (million)
Domestic Passenger Throughput Domestic (million)
passenger traffic increased by 12 per cent compared to
similar period in the previous year
Source: Airports Authority of India, Ministry of Civil Aviation, Aranca Research
Notes: YoY Year on Year, FY Indian Financial Year (April March)
FY14* (April September)
60

209
11
th
Plan Period
41
10
th
Plan Period

122 14
26

71
26
FORECAST
TRENDS IN AVIATION
Consolidation in aviation sector
The number of passengers traveling by air is on the
rise
For the traveling public, price is paramount in
choosing a carrier
Capacity is growing without much constraint
Cost structures will continue to handicap legacy
carriers as they compete with newer airlines, as well
as with overseas carriers
Oil prices are not expected to fall
Outsourcing
REASONS FOR BOOM IN AVAITION
INDUSTRY
Foreign equity allowed
Low entry barriers
Attraction of foreign shores
Rising income levels and demographic profile
Untapped potential of India's tourism
Glamour of the airlines
CHALLENGES
Infrastructure (Or the lack thereof)
GDP Growth- Estimated that it could be 12 percentage points
higher if infrastructure were adequate
Shortage of trained Employee
Regional connectivity
Rising fuel prices
Coalition Politics- Difficult to bring about change
Fiscal Deficit- Inordinate amount spent on debt service
Lower FDI- Indias $6Bn compared to Chinas $62Bn in 2004
Bureaucracy- 89 days to secure permits to start a business in India
vs. 41 in China and 20 in Turkey (World Bank Report)
Weak State Owned Airline- Distressed State airline syndrome
High input costs
What Airline Model must India
Adopt?