FROM NEG­A­TIVE TO POS­I­TIVE GROWTH, AVI­A­TION SOARS

From neg­a­tive growth rate in 2012 to mak­ing In­dia, the land of con­sis­tent 20 per cent growth, NDA Gov­ern­ment is truly trans­form­ing In­dia

SP's Airbuz - - Table Of Contents - BY R. CHANDRAKANTH

From neg­a­tive growth rate in 2012 to mak­ing In­dia, the land of con­sis­tent 20 per cent growth, NDA Gov­ern­ment is truly trans­form­ing In­dia

2016 WILL BE A MILE­STONE YEAR in the his­tory of In­dian civil avi­a­tion. It is in 2016, the NDA (Na­tional Demo­cratic Al­liance) Gov­ern­ment took de­ci­sive and for­ward-look­ing steps that are ex­pected to change the course of civil avi­a­tion, with civil avi­a­tion be­com­ing a crit­i­cal in­put in the na­tion’s eco­nomic progress. The Na­tional Civil Avi­a­tion Pol­icy (NCAP) and the Re­gional Con­nec­tiv­ity Scheme (RCS) are go­ing to be the cornerstones of this civil avi­a­tion mo­men­tum which will cat­a­pult In­dia into third place, af­ter China and US, in terms of civil avi­a­tion mar­ket. That is a steep as­cent, thanks to the lead­er­ship role of the Prime Min­is­ter Naren­dra Modi and some of his cabi­net col­leagues, in­clud­ing the Min­is­ter of Civil Avi­a­tion P. Ashok Ga­jap­athi Raju. PRIME MIN­IS­TER AVI­A­TION TWEETS PROP UP SEC­TOR. The Prime Min­is­ter, not just in a se­ries of tweets but on many oc­ca­sions un­der­scored the im­por­tance of civil avi­a­tion. He has tweeted “A new avi­a­tion pol­icy has been re­leased un­der this Gov­ern­ment. It looks at growth of the avi­a­tion sec­tor.” “Con­nec­tiv­ity is be­com­ing very im­por­tant in this century. Air con­nec­tiv­ity is vi­tal from the point of view of tourism sec­tor growth.” “Bet­ter air con­nec­tiv­ity means more tourists and this means bet­ter eco­nomic growth.” The NCAP and RCS, along with a proac­tive gov­ern­ment, is go­ing to rad­i­cally trans­form the sec­tor which at present is the ninth-largest civil avi­a­tion mar­ket with a mar­ket size of around $16 bil­lion.

The growth num­bers are all there. We look at three broad pa­ram­e­ters of growth in 2016 — air­line; air­ports and gen­eral/ busi­ness avi­a­tion. AIR­LINES IN EX­PAN­SION MODE. As per the Direc­torate Gen­eral of Civil Avi­a­tion (DGCA), there are 16 sched­uled op­er­a­tors (in­clud­ing air­line sub­sidiaries and freighters) hav­ing 472 air­craft. A new re­gional com­muter air­line — Zoom Air — was ex­pected to take flight in Novem­ber, but is yet to get its air op­er­a­tor cer­tifi­cate. It is hoped that it will take off in Jan­uary 2017, in a way, in­di­cat­ing that air­lines in In­dia are go­ing to zoom into a ex­pan­sion mode, con­sid­er­ing the highly en­cour­ag­ing pas­sen­ger and freight num­bers. 100 MIL­LION PAS­SEN­GERS SOON. The pas­sen­ger traf­fic growth has been phe­nom­e­nal. The data pro­vided by DGCA shows a con­tin­u­ous up­ward move­ment. From Jan­uary to Novem­ber 2015, the to­tal pas­sen­ger traf­fic was 733.82 lakhs which this year has climbed to 903.36 lakhs, reg­is­ter­ing a 23.10 per cent growth. Low-cost car­rier, SpiceJet had the high­est pas­sen­ger load fac­tor in Novem­ber 2016 at 92.5 per cent, fol­lowed by In­diGo (88 per cent) and GoAir (87.3 per cent). The for­eign tourist ar­rivals from Jan­uary to Novem­ber 2016 were 78.53 lakhs with a growth of 10.4 per cent as com­pared to 71.14 lakhs the pre­vi­ous year for the same pe­riod. The rea­sons at­trib­uted to this growth have been low fares, fu­elled by drop in avi­a­tion tur­bine fuel; im­proved con­nec­tiv­ity; new des­ti­na­tions and a surge in first-time air trav­ellers. In­dian do­mes­tic air traf­fic is ex­pected to cross 100 mil­lion pas­sen­gers in 2017, com­pared to 81 mil­lion pas­sen­gers in 2015.

With such en­cour­ag­ing trends, air­lines have al­ready set them­selves in an ex­pan­sion mode. The na­tional car­rier Air In­dia is em­bark­ing on ‘ great ex­pan­sion plans’, ac­cord­ing to its Chair­man and Manag­ing Di­rec­tor Ash­wani Lo­hani. In 2017 it has planned to add six new in­ter­na­tional des­ti­na­tions. Air In­dia which turned op­er­a­tionally prof­itable in the last fi­nan­cial year, is work­ing on ways to re­vive its for­tunes. It is ramp­ing up the fleet with more fuel-ef­fi­cient A320­neo (new en­gine options) planes. Presently, Air In­dia has a fleet of 135 air­craft, in­clud­ing nearly 70 from Air­bus.

Jet Air­ways (In­dia) Ltd had in­di­cated in 2015 that it would be buy­ing 75 fuel-ef­fi­cient Boe­ing 737 MAX air­craft at a list price of $8 bil­lion. The de­liv­ery of the planes is ex­pected from mid-2018. “In­cor­po­rat­ing the lat­est design and tech­nol­ogy fea­tures, the highly ef­fi­cient 737 MAX will al­low us to drive our op­er­a­tional ef­fi­ciency and reaf­firms our com­mit­ment to pro­vid­ing a best-in-class full-ser­vice travel ex­pe­ri­ence to our guests,” said Naresh Goyal, founder-Chair­man of Jet Air­ways. “This or­der is an en­dorse­ment of our con­fi­dence in the long-term prospects of the In­dian avi­a­tion sec­tor, which re­flects the pos­i­tive fore­cast for the coun­try’s econ­omy and of­fers tremen­dous po­ten­tial for growth and devel­op­ment.” The Jet Air­ways group cur­rently op­er­ates a fleet of 116 air­craft com­pris­ing Boe­ing 777-300ERs, Air­bus A330-200/300, Next Gen­er­a­tion Boe­ing 737s and ATR 72-500/600s. In Q2 FY17, the air­line car­ried 6.77 mil­lion pas­sen­gers up from 6.37 mil­lion in Q2 FY16. The group had a prof­itable quar­ter with a profit of 85 crore for the pe­riod end­ing Septem­ber 30, 2016, de­spite a tra­di­tion­ally ‘ lean’ quar­ter and do­mes­tic yields be­ing un­der pres­sure.

The Tata-Sin­ga­pore Air­lines ven­ture, Vis­tara, has pro­posed to in­vest 250 crore in the air­line, sig­nalling a ma­jor ex­pan­sion plan. At present, it op­er­ates 11 Air­bus A320 air­craft and has a mar­ket share of 2.4 per cent. The air­line will in­crease its fleet to 13 next month and ac­cord­ing to its ini­tial plans, it will have 20 air­craft by June 2018. LOW-COST CAR­RI­ERS CON­TINUE TO RULE. The low­cost car­rier which is al­most get­ting ev­ery­thing right is In­diGo. Hav­ing found suc­cess in nar­row-body air­craft, the air­line is now opt­ing for big­ger air­craft in the sin­gle-aisle seg­ment as it steps up over­seas ex­pan­sion plans. It re­cently tweaked its air­craft or­der of con­vert­ing 20 Air­bus A320­neo planes to A321­neos, the lat­ter will have ad­di­tional seat­ing ca­pac­ity of 230, up from 180. In­diGo has a to­tal of 422 planes on or­der, a whop­ping num­ber that has sur­prised the avi­a­tion world.

In­diGo has a record of eight con­sec­u­tive years of prof­itable op­er­a­tions. As of Novem­ber 2016, its mar­ket share was 42.1 per cent. It has a fleet of 125 air­craft in­clud­ing 13 new gen­er­a­tion A320s. Air­bus has con­firmed that it will de­liver 24 fuel-ef­fi­cient A320­neo air­craft by March 2017.

Sim­i­larly, all the other air­lines are in an ex­pan­sion mode. SpiceJet had dis­closed plans in Novem­ber last to buy over 150 planes. It re­cently added three Bom­bardier Q400 air­craft to ex­pand re­gional ser­vices in the North East. The air­line has 14 Q400 air­craft in ser-

THE NA­TIONAL CIVIL AVI­A­TION POL­ICY AND THE RE­GIONAL CON­NEC­TIV­ITY SCHEME ARE GO­ING TO BE THE CORNERSTONES OF THIS CIVIL AVI­A­TION MO­MEN­TUM WHICH WILL CAT­A­PULT IN­DIA INTO THIRD PLACE, AF­TER CHINA AND US, IN TERMS OF CIVIL AVI­A­TION MAR­KET

vice from its orig­i­nal or­der. An­other low-cost air­line, GoAir has cho­sen Air­bus for its fur­ther ex­pan­sion plans by sign­ing a me­moran­dum of un­der­stand­ing (MoU) for 72 A320­neo air­craft.

Re­gional air­line Air Costa, which re­cently got pan-In­dia li­cence al­low­ing it to op­er­at­ing flights to any part of the coun­try, has on or­der 50 E2 E-Jets from Embraer, de­liv­er­ies of which is ex­pected to com­mence from mid-2018. Presently it has a fleet of four 112-seater Embraer 190 air­craft.

AirAsia In­dia, owned jointly by Tata Sons and Malaysia’s AirAsia Ber­had, is ex­pand­ing its fleet to 20 air­craft, which would al­low it to fly abroad. Its Board of Di­rec­tors ap­proved new fund­ing into the air­line this month. “We are at seven air­craft and want to get to 20 at the ear­li­est. We are not go­ing to stop at 20,” Amar Abrol, Chief Ex­ec­u­tive Of­fi­cer at AirAsia In­dia, has said. An­other re­gional player, Hy­der­abad-based TruJet which op­er­ates three ATR 72-500s has be­come a new ATR 72-600 op­er­a­tor, hav­ing leased the same from Dubai Aerospace En­ter­prise. The air­line which con­nects Hy­der­abad, Au­rangabad, Ben­galuru, Chen­nai, Kadapa, Goa, Nag­pur, Ra­jah­mundry, Tiru­pati and Vi­jayawada has an­nounced that it would ex­pand ser­vices to more cities in the months to come.

FREIGHT SLOWLY CATCH­ING UP. Pas­sen­ger traf­fic is cer­tainly adding joy to the air­lines, while freight which has been lag­ging be­hind has also showed signs of con­sid­er­able growth. Freight traf­fic is ex­pected to be five times the cur­rent level by the end of the next two decades. It is ex­pected to be 11.4 mil­lion tonnes by 2032.

The In­dian air cargo sec­tor has a highly un­tapped po­ten­tial. Growth in e-com­merce and gov­ern­ment ini­tia­tives are ex­pected to boost the air cargo busi­ness in In­dia. Amidst chal­lenges, the In­dian air cargo sec­tor throws in­nu­mer­able op­por­tu­ni­ties. As per an Air­ports Au­thor­ity of In­dia (AAI) re­port, the in­ter­na­tional and do­mes­tic freight traf­fic have shown growth of 8.1 per cent and 7 per cent re­spec­tively re­sult­ing into over­all in­crease of 7.7 per cent in to­tal freight traf­fic dur­ing the pe­riod April-Septem­ber 2016-17 as com­pared to April-Septem­ber 2015-16. FO­CUS ON AIR­PORT IN­FRA­STRUC­TURE. With pas­sen­ger and freight traf­fic grow­ing at phe­nom­e­nal pace, it is only time for air­port devel­op­ment to catch up. Presently, there is a prob­lem of ca­pac­i­ties, but the gov­ern­ment has plans to in­vest mas­sively in air­port in­fra­struc­ture devel­op­ment. AAI has plans to make in­vest­ments of 15,000 crore over the next five years, in­clud­ing

10,000 crore on upgra­da­tion and ex­pan­sion of 20 air­ports. Con­sul­tancy firm CAPA has said In­dia needs to build 50 new air­ports at an in­vest­ment of 2,72,000 crore to han­dle the grow­ing air traf­fic. Presently, there are 125 air­ports man­aged by AAI and only 69 of them re­ceive com­mer­cial flights. Now with the NCAP and RCS, the fo­cus is go­ing to be on de­vel­op­ing no-frills air­ports to con­nect the hin­ter­land.

CAPA in its re­port ti­tled ‘In­dia’s Air­port Ca­pac­ity Cri­sis’ has listed that six air­ports — Delhi, Mum­bai, Ben­galuru, Chen­nai, Kolkata and Hy­der­abad — re­ceive around 66.5 per cent of In­dia’s to­tal air traf­fic. And that these six cities them­selves would need new air­ports by 2025-26 to han­dle the traf­fic growth. The pres­sure to de­velop sec­ondary air­ports and also air­ports in Tier-II and -III cities is build­ing up. GEN­ERAL AVI­A­TION FOL­LOW­ING AVI­A­TION TRENDS. Ac­cord­ing to Price­wa­ter­house­Coop­ers, the gen­eral avi­a­tion (GA) mar­ket in In­dia is ex­pected to grow at 10 per cent per an­num to cross 1,600 crore by FY-2017. In­dus­try es­ti­mates show that around 300 busi­ness jets, 300 small air­craft and 250 he­li­copters are ex­pected to be added in the cur­rent GA fleet by FY-2017. As per the re­port by the Work­ing Group of the Twelfth Five Year Plan, a to­tal in­vest­ment of more than 20,000 crore in GA is ex­pected dur­ing the plan pe­riod. This un­der­lines the fact that to­day busi­ness jets are no longer seen as a lux­ury but as a tool for en­hanc­ing pro­duc­tiv­ity. The heli­copter mar­ket in In­dia is equally promis­ing, with grow­ing re­quire­ments in tourism, min­ing, cor­po­rate travel, air am­bu­lance, home­land se­cu­rity, etc. The surge of tourist traf­fic into In­dia has been a key driver of the growth of the gen­eral avi­a­tion sec­tor in the coun­try. Along­side, as sup­port to the avi­a­tion in­dus­try, the op­por­tu­nity to pro­vide main­te­nance, re­pair and op­er­a­tions (MRO) ac­tiv­i­ties will grow with the in­dus­try. In­dia’s MRO seg­ment is es­ti­mated to grow at 10 per cent and reach $2.6 bil­lion by 2020.

The pic­ture looks highly op­ti­mistic. The present gov­ern­ment has shown keen­ness in pro­mot­ing the avi­a­tion sec­tor, of course along with other sec­tors too. From neg­a­tive growth rate in 2012 to mak­ing In­dia, the land of con­sis­tent 20 per cent growth, NDA Gov­ern­ment is truly trans­form­ing In­dia.

Lead­ing from the Front: Min­is­ter of Civil Avi­a­tion P. Ashok Ga­jap­athi Raju

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