The Indian aviation industry has experienced rapid growth and transformation over the past two decades, moving from a government-owned sector to one dominated by private airlines. While domestic passenger traffic has grown at over 18% annually, infrastructure constraints and high costs continue to challenge airline profitability in the competitive Indian market. Further reforms and investments are needed to develop infrastructure and support continued growth in the aviation industry.

1. as service sector

3. 1953: Nationalization of Aircraft Industry
Consequently, assets of 9 existing companies transferred
to two entities in the aviation sector controlled by the
Government in
a) Indian Airlines, primarily serving domestic sectors
b) Air India, primarily serving the international
sectors
Implication
Aviation became a preferred mode of transport for elite
class
Restricted Growth of Aviation Industry
High Cost structure
Underdevelopment of infrastructure
1986: Private Sector Players permitted as Air
taxi operators
Players including Jet, Air Sahara, NEPC,
East West, Modiluft,etc started service
1994: Private Carriers permitted to operate
scheduled services
Six operators granted license however
only Jet and Air Sahara able to service
2003: Entry of low cost carriers
Air Deccan, Spice Jet, Go Air, Indigo
Implication
Aviation has become affordable with check fares and
discount schemes
Various Operators with different business model
Huge growth foreseen in the Aviation Industry

4. HUGE POTENTIAL
Under penetrated Market
- Total Passenger Traffic only 50 mn as on 31st Dec 2005 amounting
to only 0.05 trips per annum as compared to
developed Nations like United States have 2.02 trips per annum
- High Level of potential demand with growth in Indian economy
Untapped Air Cargo Market
- Air Cargo has not yet been fully taped in the Indian markets and is
expected that in the coming years
large no of players would have dedicated fleets
What this means…
- Build up of capacity by existing players and entry of new players
CONSTRAINTS
Infrastructure Constraints
-Shortage of airport facilities, parking
bays,air traffic control facilities and
takeoff and landing slots
- Continued growth might be hampered
Relatively Limited Reach
-Only 454 airports with less than 100
airports having more than one daily
service

5. Competitive landscape
Huge Growth- Huge Plans
Fleet Acquisition
New Fleet Orders -More than 500
Fund Requirement- USD 50-55 bn approx
Order Book – New Players
Indigo 100
Air India 68
Air Deccan 60
Kingfisher 50
Indian Airlines 43
Jet airways 40
Go Air 36
Spice Jet 20
Expected to grow to 125 from 7 by 2025
Competitive
Pressure
FullService
Price
Low cost
Carriers
changing
the game Indigo

6.  With a growth rate of 18 per cent per annum, the
Indian aviation industry is one of the fastest
growing aviation industries in the world.
 Today, private airlines account for around 75 per
cent share of the domestic aviation market.
 India has jumped to 9th position in world's
aviation market from 12th in 2006

7. Many policies
supporting the
infrastructure are
now in place.
100 per cent FDI
under automatic
route is permissible
for greenfield
airports.
For existing airports,
FDI up to 74 per cent
is permitted through
automatic approvals
and up to 100 per
cent through special
permission (from
FIPB).
Private developers
allowed setting up of
captive airstrips and
general airports 150
km away from an
existing airport.
100 per cent tax
exemption for airport
projects for a period
of 10 years.
49 per cent FDI is permissible in
domestic airlines under the
automatic route, but not by
foreign airline companies. 100 per
cent equity ownership by Non-
Resident Indians (NRIs) is
permitted.
74 per cent FDI is
permissible in cargo
and non-scheduled
airlines.

8. DEMAND DRIVERS
GDP Growth has been more than 7%
in the last 4 years
The rising middle class of more
than 300 mn is fuelling the
growth
The Increase in Consumerism and
Affordability of Air travel
Government Liberal Policy to allow
private carriers and entry of Low
Cost Carriers has lead to a
increase in demand in passenger
traffic
Domestic Tourism and International
Business Travel and Tourism has
also greatly fuelled the rise of
Indian aviation sector

9.  Political – Govt.is not stable
Economy – Disposable income is increasing .
GDP grow is more than 9%.
 Social -- Status conscious
-- Awareness is increasing
-- Increase in Entrepreneurship
 Technology – Indigenous technology is coming for aircrafts & airports.
 Legal -- Flexibility in entry .
The five year stringent law towards flying abroad .
 Environment – Stiff competition for hiring pilots (poaching)
Easy FDI(49%) through secondary market

10.  SEGMENTATION
- HNI People .& others
 TARGET
-VPs,CEOs
-Bollywood Stars
-Politicians
-Foreign Tourists
-industrialists
-regular
-Oil exploring companies
 POSITIONING
Chartered air service –
Statement -

13.  Physical evidence - Aircrafts
Helicopters
 People - Pilots
Engineers
 Productivity /process - Giving convenience in
travelling
 Place – Metros & capitals

15.  Declining yields
 Building on cost efficiencies
 High input costs
 Gaps in infrastructure

16.  LCCs and other new entrants together
now command a market share of around
46%
 Legacy carriers forced to match low LCC
fares, during a time of escalating costs
 Increasing growth prospects have
attracted & likely to attract more players
 More players – more competition – lower
fares – a continuous cycle
 The bottom-line – lower yields for all
operators

17.  Low yield regime to continue
 Airlines have to build on their cost efficiencies & drive down costs
below the yield that their product will fetch, to return to profits
 For an industry that is estimating losses of US$ 500-550 million by
end of current fiscal, this is a daunting challenge
 Yet, airlines have no control on external input costs

18. High input costs
 ATF prices in India continue to be far higher than global rates, making ATF account
for 35-40% of operating cost, as against global average of 20-25%
 High basic rates aggravated by high taxes imposed by State Govt.’s
 ATF cost / kilolitre :
◦ US$ 755 in Delhi
◦ US$ 780 in Mumbai
◦ US$ 455 in Singapore
◦ US$ 497 in Dubai
High input costs
 Witholding tax on interest repayments on foreign currency loans for aircraft
acquisition
 Witholding tax proposed on aircraft lease rentals for leases concluded after 1st
April’07.
 Increasing manpower costs due to shortage of technical personnel

20.  A large & growing potential market
 Developing alternative revenue streams
◦ Air cargo operations
◦ Airframe, engine & component overhaul
◦ Ground handling
◦ Training
◦ Leveraging the internet
 Access to new markets

21.  Freight carriage in India currently around 4200 tons per day
 CAGR of 15% over the past 2 years
 Fuelled by a fast growing economy, supported by a strong
industrial base
 Forecast to grow at 11.4% p.a. till 2011-12

22.  Ground handling business in India estimated at Rs. 1074 crores
 Expected to grow at 15% CAGR till 2011-12
 Opportunity lies in 3rd party handling as well as entering into service
contracts with private airports / AAI to offer comprehensive ground handling
solutions, e.g. AI – CIAL at Cochin

23. ◦ Airlines in India will need training for pilots, engineers,
cabin crew, load & trim, etc.
 Projected requirement for 3600 additional pilots in the short to
medium term
 Cabin crew, engineers, technicians will also be required to
support aircraft being inducted
◦ Opportunity for simulator training establishments
◦ IA already has a Central Training Establishment at
Hyderabad, with facilities for most categories / types of
trainings on A320

24. ◦ Increasing numbers are booking directly from the airlines’ websites
 Traditional sales channels with paper tickets cost airlines ~10% of ticket
price
 Comparatively, e-ticket sales from own website cost an airline only ~3% of
ticket price
 For every direct booking from their website, airlines save an estimated US$
4 plus 5% agency commission
◦ Airlines can also turn their websites into one stop shops for all travel
related services, generating additional revenue

25.  As airlines complete 5 years of domestic operations, those with 20+
aircraft will get international access
◦ Access to new revenue streams
◦ Help even out the seasonality factor of domestic operations
◦ Spread the risk of downturn in a single market
 The opportunity for some will be a challenge for the existing
international players
 The risk – cycle of increased competition, low yields, and growth
transferred to the international arena

26.  The Indian aviation industry Is one of the fastest growing aviation industries in the % share
of the world.
 India has 454 airports and airstrips; of these,16 are designated international airports.
 With the liberalization of the Indian aviation sector, aviation industry in India has
undergone a rapid transforamtion.priavate airline account for around 75% share of the
domestic aviation market
 Being primarily a govt-ownwed industry ,the Indian aviation industry is now dominanated by
privately owned full service airlines and low cost carriers.

27.  Domestic and international traffic is up 45% and 15.1
%,respectively.
 Over 135 aircraft have been added in the past two year alone.
 Center for Asia pacific aviation (CAPA) estimates domestic
traffic to grow 25-30 % annually and international traffic
15%untill 2010.

28.  Indian Aviation has seen high growth on account of sustained Indian socio economic growth and
liberalized Government initiatives
 Airport Infrastructure needs to improve significantly to meet the current and future demand of
the Indian Aviation Sector
 Authorities have initiated various steps to implement modernization, reconstruction and
development of airport infrastructure to implement infrastructure development plan
 Provides a huge opportunity for private players operating in Aerospace and allied industries
 Significant opportunity for foreign companies as Indian companies not technologically equipped
to cater to requirements

29.  Despite a growing market, airlines in India are fighting for
survival in a highly competitive environment
 A host of initiatives are required to be taken by all concerned, to
tide over the current situation
◦ Control Costs
◦ Improve quality of service
◦ Develop a large pool of skilled / technical manpower
◦ Attract more professionals to manage the aviation industry
◦ Develop infrastructure to match growth plans
◦ Liberalise rules & regulations governing civil aviation, without
compromising on safety & security
◦ Reduction in ATF prices and taxation on ATF and lease rentals