Aviation

IBEF

The Indian aviation industry is one of the fastest growing aviation industries in the world with private airlines
accounting for more than 75 per cent of the sector. With a CAGR at 18 per cent and 454 airports and airstrips in place
in India, of which 16 are designated as international airports, Union Civil Aviation Minister Praful Patel has stated that
aviation sector will witness revival by 2011. The last quarter of 2009 has also raised some hopes of revival in the
country.

With an increase in traffic movement during December 2009 and increase in revenues by almost US$ 21.4 million, the
Airports Authority of India seems set to accrue better margins this fiscal, as per the latest estimates released by the
Ministry of Civil Aviation. This is being primarily attributed to increase in the share of revenue from Delhi
International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL) along with increase in
airport charges. The number of passengers carried by domestic airlines during the month of October 2009 was 4.02
million as compared to 3.56 million in September 2009, according to the previous monthly report released by the
Ministry of Civil Aviation.

The Hyderabad International Airport has been ranked amongst the world's top five in the annual Airport Service
Quality (ASQ) passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. The Hyderabad
International Airport is managed by a public-private joint venture consisting of the GMR Group, Malaysia Airports
Holdings Berhad and both the State Government of Andhra Pradesh and Airports Authority of India (AAI).

The second US-India Aviation Partnership Summit was held in USA from December 07 –09, 2009 where the Joint
Aviation Steering Committee Working Group Meeting was also held. On the sidelines of the Summit, the delegation
also discussed trade opportunities with the Federal Aviation Administration, transportation security administration and
the US Trade and Development Agency.

Bilateral Air Service Agreement between India and Bhutan was also formally signed in New Delhi. Also, an
agreement for the co-operation on Search and Rescue Services has also been signed between the two countries.

According to MM Nambiar, Civil Aviation Secretary, in addition to creating state-of-the-art airports in Delhi and
Mumbai, the Airports Authority of India (AAI) is also spending US$ 427.5 million on developing the airports in
Kolkata and another US$ 384.7 million on Chennai airport. The AAI is also looking at upgrading and modernising 35
non-metro airports. Both Chennai and Calcutta airports will be completed by next year. In addition to actual airport
infrastructure, the government is also looking at building infrastructure in the air in terms of air traffic control (ATC)
and CNS systems. Safety and surveillance is another huge area being worked upon.

The government has also merged national carriers Air India and Indian Airlines into a single entity, the National
Aviation Company Ltd (NACIL). The civil aviation ministry has prepared a blueprint to convert Delhi airport into an
international hub for passenger airlines with effect from August 2010 to help the airport, which is being expanded by a
GMR-led consortium, utilise large amounts of additional capacity that will be ready by July 2010. Under the plan,
NACIL will set up its hub in Delhi (Delhi currently serves as the hub for domestic operations and Mumbai for
international operations).The government is also planning to make Delhi a regional hub to connect south-east Asia to
Europe by capitalising on the capital’s strategic mid-point location, according to ministry sources.

The government, on the advice of the Kelkar Committee, has opened up the aerospace industry to the private sector.
State governments too are taking interest in setting up special economic zones (SEZs) for the aerospace industry.

Investment Policy
With the draft FDI compendium being finalised in end of March 2010, changes are expected in the aviation policy too.

Currently,

 Foreign equity participation in airport infrastructure is permitted upto 74 per cent with automatic
approvals and upto 100 per cent in special permission.
 FDI upto 40 per cent is permitted in domestic air-transport services.
 Foreign investors are allowed to have representation (upto 33 per cent in domestic airline
companies).

The Road Ahead

Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80 billion in new aircraft and
US$ 30 billion in development of airport infrastructure, according to the Investment Commission of India.

 Indian aerospace companies are growing too. Hindustan Aeronautics Limited (HAL) was ranked
40th in Flight International's list of the top 100 aerospace companies last year.
 Aircraft manufacturing major, Boeing is in the process of setting up the US$ 100 million proposed
Maintenance Repair Overhaul (MRO) facilities in Delhi. Air India is also in the process of launching
Cargo Hub in Nagpur while Deccan Aviation has already started one from the city.
 North India's first private sector greenfield international airport, Aerotropolis, will soon come up
near the industrial hub of Ludhiana in Punjab. Aerotropolis will be built with an allocation of almost
US$ 3.77 billion covering an area of 3000 acres by Messrs Bengal Aerotropolis which has
partnered Changi International Airport of Singapore.
 Punjab will also become the first state in the country to set up a Maintenance, Repair and
Overhaul (MRO) hub at Ropar, 45 km from Chandigarh, for the civil aviation sector at a cost of
US$ 6.4 million
 The country's first SEZ dedicated to the Aerospace Hattaragi, 37 km from Belgaum, in Karnataka
was also inaugurated. The SEZ is spread over 300 acres of land and will come up with an
investment of US$ 32.06 million in November 2009.
 An Aerospace and Precision Engineering Special Economic Zone with a proposed investment of
US$ 641.2 million has also come up at Adibatla, Ranga Reddy district, Andhra Pradesh.

Exchange rate used: 1 USD = 46.79 INR (as on December 2009)

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