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Indian civil aviation market is the 9th aviation market in the world (size of $16 billion) in 2014 and expected to become 3 rd largest market by 2020 driven by growth in low-cost
carriers, modern airports, foreign direct investments (FDI) in domestic airlines, cutting edge information technology (IT) interventions and emphasis on regional connectivity
Industry Overview
RoW;
Mercosur;
5%3%
NAFTA; 22%
Asia; 47%
Europe; 23%
Source: dgca.nic.in
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
0.01
0.02
1.8
4
2
0
0.03
1.6
0.05
0.08
0.09
1.86
1.91
1.89
1.97
2.32
2.28
2.23
2.29
2.48
2.77
0.58
1.08
0.24
0.87
0.48
1.09
0.2
0.82
0.57
1.11
0.23
0.92
0.54
1.08
0.24
0.97
0.5
1.03
0.24
0.97
0.53
0.88
0.27
1.08
0.6
0.67
0.3
1.21
0.55
0.59
0.28
1.23
0.54
0.55
0.27
1.19
0.55
0.61
0.3
1.3
0.57
0.71
0.23
1.29
0.61
0.84
0.23
1.3
1.06
0.94
0.92
0.97
1.16
1.03
1.2
1.17
1.07
1.06
1.07
1.13
41791
41821
41852
41883
41913
41944
41974
42005
42036
42064
42095
42125
Air India
Jet Lite
Spice Jet
Go Air
IndiGo
Air Costa
Air Asia
Vistara
Air Pegasus
Source: dgca.nic.in
Jet Airways
SpiceJet
SpiceJet continued to show the aftereffects of its massive fleet downsizing due to financial problems and
is expected to witness continued
decline in future
AirAsia
Vistara
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
Successful Public-Private
Partnership Model and Other
Government Support
Growth in Income
Successful M&A
Source: makeinindia.com
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
Delhi
NA
20%
Mumbai
NA
25%
Chennai
NA
29%
Andhra Pradesh
16%
1%
Chhattisgarh
25%
5%
Source: airindia.in
Jharkhand
20%
4%
Prices at 4 Metros including Sales Tax for domestic airlines IOC (INR)
Goa
24%
12.5%
Madhya Pradesh
23%
4%
30%
30%
NA
2%
7%1%
50%
35%
5%
Service Tax
1-May-15
1-Jan-15
1-Jan-14
1-Jan-13
1-Jan-12
1-Jan-11
1-Jan-10
Delhi
Kolkata
Mumbai
Chennai
49609.8
52423.0
76241.3
66236.2
63076.7
47815.5
38696.6
59122.8
61525.0
86559.2
75154.0
71358.2
55158.1
46908.5
50844.4
53862.0
78783.8
68446.9
64053.7
48058.6
39910.8
54779.7
57457.0
82853.7
72057.1
67911.7
51275.3
42683.3
J&K
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
Ministry of Civil
Aviation
Airports
Authority of
India
Directorate
General of
Civil
Aviation
Airports
Economic
Regulatory
Authority of
India
Bureau of Civil
Aviation Security
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
5/20 Rule
The Government is in the process of doing away with 5/20 rule and has proposed a complicated formula in which domestic flying credits would be needed for new airlines to fly
overseas
Present regulation mandates Indian carriers to be in operation domestically for at least five years and have a fleet of 20 aircraft to become eligible to fly on
international routes
Budget carrier GoAir, which had started operations in November 2005, is the only domestic airline among the old players, which is not eligible for overseas
operations as it does not have 20 aircraft
Impact of Current
5/20 Rule
Air India could not utilize the liberalized seat allocations under the revised bi-lateral air services agreements and consequently the
middle-east carriers like Emirates, Etihad and Qatar Airways grew to capture almost 50% of Indias international passenger traffic
The regulation has enabled foreign airlines to capture a larger share of the international market at the expense of home carriers
Kingfishers demise can be traced back to the challenges associated with the integration of Air Deccan, an acquisition that was
motivated by the desire to circumvent the 5/20 rule
Proposed Rule
Under the proposed rule, an airline desiring to fly on international routes must have earned a minimum of 200 DFCs. Also, it should have a minimum of five
aircraft to fly international, against the 20 needed currently
On reaching the 300 DFC milestone, the air carrier can approach the government for being designated on a long haul international route of more than 6
hours flying time
Software to
Calculate Credits
DFCs will be calculated by the ministry and dedicated software will be used to calculate them. Air operators would earn
One DFC per available seat kilometer (ASKM) on category-I routes, which are the major trunk routes connecting India's top 20
cities
Three and five credits per revenue earning passenger kilometer (RPSK) flown on category-II and category-IIA routes
Five credits for flying to unused routes for at least two years
Smaller aircraft (less than 20 seats) and helicopter operators can earn 10 DFCs per passenger kilometer flown by them
Other requirements for international operations include conditions such as accident/serious incident-free record of operations and
successful completion of the safety audit by Directorate General of Civil Aviation
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
The Ministry of Civil Aviation plans to list Airports Authority of India and
Pawan Hans Ltd on the stock exchanges to improve efficiency
Also, the government expects that privatization of national carrier Air
India will not happen immediately, but the option cannot be ruled out in
future
Duty Exemption
Aircraft engines and parts are eligible for duty exemption when
imported for servicing, repair or maintenance of aircraft used for
scheduled operations
Infrastructure Development
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
According to SpiceJet
officials the company has
been approached by foreign
airlines seeking to buy a
stake as the company tries
to turn around
The airline is now cutting
costs, renegotiating
contracts with vendors
and is sharing the
turnaround plan with the
government
Ajay Singh took
management control and
ownership by buying out
the 58% stake held by
promoter Kalanithi Maran
and his associate
company, KAL Airways,
and invested $242
million** (or INR1,500
crore) in three equal
tranches till March 2015
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
Advancement in
technology
Setting up of
Manufacturing
Facility
New
Aircraft
Other Developments
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
10
Airport Development
New Aircraft
Airlines are expected to add around 370 aircraft (worth $27.5 billion) to
their fleet by 2017
Investment of $4 billion is expected for General Aviation aircraft in next 5
years
Investment in Technology
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
11
Plans to increase outsourcing to India from $400 million to $2 billion in next five years fro 2015 to 2020. Plans to set-up final
assembly lines and establish supply chain and related infrastructure for military transport aircraft and helicopters in India
Plans to develop and manufacture electronic sensors with a partner in India
Plans to set up a manufacturing unit in India and send team to discuss the possibilities for investment in Telangana state
However, the company has disassociated itself with the Air India's Maintenance Repair Overhaul (MRO) facility in Nagpur
citing financial constraints. Earlier, the company has invested $100 million in the facility
Currently, AirAsia India has halted its expansion plans after a year in business as it waits for a government decision on
whether to change a measure regulating overseas flights
Plans to enhance its engineering capability in India by building a facility in Bengaluru that will employ 500 people by the end
of 2017. Rolls Royce company sought 12 acres of land in Devanahalli Aerospace Park to ramp up their manufacturing
capabilities in Aerospace sector in addition to the 6 acres already allotted in partnership with HAL
Mahindra Aerospace signed a deal with GE aviation under which the two companies collaborate to produce small, metallic
structural sheet details and assemblies within Mahindras new Aerospace facility in Bangalore
After Airbus transfer of work approval, two will work together to manufacture Airbus Single Aisle package of work
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
12
2009- 10**
Additional Equity
Infusion
2010-11**
2011-12**
2012-13**
Note**: 31st Mar 2009: 1 INR = 0.0197 USD; 31st Mar 2010: 1 INR = 0.0222 USD; 31st Mar 2011: 1 INR = 0.0221 USD; 31st Mar 2012: 1 INR = 0.0192 USD (Sourced from oanda.com)
Source: airindia.in
Confidential and proprietary Not to be distributed without the prior written consent of Copal Amba
13