The sum­mit brought to­gether the movers and shak­ers of the global avi­a­tion in­dus­try to brain­storm on the fac­tors that will im­pact the in­dus­try in the fu­ture

SP's Airbuz - - Table of Contents - BY RO­HIT SRI­VAS­TAVA

CEL­E­BRAT­ING 50 MONTHS OF sus­tained dou­ble-digit growth for the In­dian civil avi­a­tion in­dus­try, in the first week of Septem­ber this year, the Min­istry of Civil Avi­a­tion along with the Air­port Au­thor­ity of In­dia (AAI) and In­ter­na­tional Air Trans­port As­so­ci­a­tion (IATA), or­gan­ised the ‘In­ter­na­tional Avi­a­tion Sum­mit – In­dia’ at New Delhi. The event saw the at­ten­dance of around 700 del­e­gates from all sec­tors of the In­dian civil avi­a­tion in­dus­try in­clud­ing some em­i­nent per­son­al­i­ties.

Ad­dress­ing the sum­mit, the Min­is­ter of Civil Avi­a­tion Suresh Prabhu said, “We are here to cel­e­brate In­dia’s phe­nom­e­nal growth in the avi­a­tion sec­tor in the last 50 months. Many busi­nesses, par­tic­u­larly avi­a­tion, can­not sur­vive and thrive with­out part­ner­ship. The Min­istry of Com­merce is pre­par­ing a road map for In­dia to be a $5 tril­lion econ­omy. 60 per cent of that will come from the ser­vice sec­tor and avi­a­tion will re­main amongst the prin­ci­pal con­trib­u­tor. We have planned build 100 new air­ports in In­dia in the next 15 years, with an in­vest­ment of $60 bil­lion. Vi­sion 2035 for air­port de­vel­op­ment will adopt an in­te­grated ap­proach and

we wel­come ev­ery­one across the in­dus­try to of­fer sug­ges­tions.”

Giv­ing his per­spec­tive on the In­dian civil avi­a­tion sec­tor, the Min­is­ter of State for Civil Avi­a­tion, Jayant Sinha said, “The growth wit­nessed by the In­dian civil avi­a­tion in­dus­try is un­prece­dented and is not seen any­where in the world. IATA has fore­casted 500 mil­lion trips in In­dia in the next 20 years and has rec­om­mended the need to brace up and be pre­pared for this growth.”

He fur­ther stated, “I would like to re­as­sure ev­ery­one that we are in fact pre­par­ing for a bil­lion trips. The de­mand for avi­a­tion is not a con­cern. We an­tic­i­pate huge de­mand from cities across In­dia. It is the sup­ply side that needs to keep pace. There­fore, we are plan­ning air­port in­fra­struc­ture based on a 20-year per­spec­tive through Nex­tgen Air­ports for Bharat (NABH) Nir­man ini­tia­tive which will pre­pare us for one bil­lion trips.”

Talk­ing about how the In­dian avi­a­tion sec­tor is adding new pas­sen­gers, Jayant Sinha said “On a per-km ba­sis, our air fare is among the low­est in the world. I am not im­ply­ing you use planes for short dis­tances. That is not the point of the com­par­i­son, it is just to be able to demon­strate how af­ford­able our air fares are.” He also talked about the po­ten­tial in the smaller In­dian cities and how air trans­port can be­come the pre­ferred mode for long dis­tance travel in In­dia.

While de­liv­er­ing his ad­dress, Alexan­dre de Ju­niac, Di­rec­tor Gen­eral and CEO, IATA, talked about the many chal­lenges be­ing faced by the In­dian avi­a­tion sec­tor. Pri­mar­ily fo­cus­ing on the high tax bur­den that In­dian air­lines have to bear, he said that fuel cost con­sti­tutes up to 34 per cent of op­er­at­ing cost for air­lines in In­dia, 10 per cent higher than the global av­er­age. “All air­lines are al­ready suf­fer­ing from the rise in fuel prices and In­dia’s reg­u­la­tory and tax frame­work re­lated to fuel, hits air­lines serv­ing this mar­ket even harder,” Ju­niac said.

“To start, there is no real com­pe­ti­tion for fuel sup­pli­ers at air­ports, so there is lit­tle com­mer­cial in­cen­tive to keep fuel prices com­pet­i­tive. Then the air­port takes fuel through­put fees. Adding in­sult to in­jury, GST is then ap­plied to the through­put fee, the in­fra­struc­ture fee and the into-plane ser­vice fee,” he added. “While it is easy to find In­dian pas­sen­gers who want to fly, it is very dif­fi­cult for air­lines to make money in this mar­ket. In­dia’s so­cial and eco­nomic de­vel­op­ment needs air­lines to be able to prof­itably ac­com­mo­date grow­ing de­mand. We must ad­dress in­fra­struc­ture con­straints that limit growth and govern­ment poli­cies that de­vi­ate from global stan­dards and drive up the cost of con­nec­tiv­ity,” said Alexan­dre de Ju­niac. Ju­niac also raised con­cern over the ex­cise duty and state taxes of up to 30 per cent on fuel sup­plied for do­mes­tic flights.

Ra­jiv Nayan Choubey, Sec­re­tary, Min­istry of Civil Avi­a­tion, who par­tic­i­pated dur­ing the in­au­gu­ral and ple­nary ses­sion, in his in­ter­ven­tion em­pha­sised that the 50 months of dou­ble digit growth is the high­est in the world and the In­dian avi­a­tion mar­ket has the po­ten­tial to main­tain this growth for next 50 months as well. To­wards this ob­jec­tive, Dr Gu­ruprasad Mo­ha­p­a­tra, Chair­man, AAI, ex­pressed his or­gan­i­sa­tion’s com­mit­ment for pro­vid­ing world-class air­port in­fra­struc­ture to sup­port the un­prece­dented growth of the In­dia civil avi­a­tion in­dus­try. SKY FIT. Dur­ing the con­fer­ence, AAI re­leased ‘Sky Fit’ brochure on life man­age­ment for avi­a­tion in­dus­try pro­fes­sion­als and pas­sen­gers through breath­ing tech­nique. “The long term ex­po­sure to high stress is af­fect­ing the health of the per­son­nel ad­versely, lead­ing to con­di­tions such as hy­per­ten­sion, di­a­betes, low en­ergy lev­els, headaches, up­set stom­ach, aches, pains, tense mus­cles, chest pain, rapid heart­beat, in­som­nia, fre­quent colds and in­fec­tions,” it said.

To help avi­a­tion pro­fes­sional in tack­ing pro­fes­sional haz­ards, AAI has worked closely with the ex­perts of the Yo­gis Tra­di­tion and med­i­cal ex­perts, to de­velop sim­ple breath­ing ex­er­cises that can help in manag­ing all kinds of stress. IATA RE­PORT ON IN­DIAN AVI­A­TION. In last seven years, the In­dian avi­a­tion sec­tor has seen dou­bling up of its pas­sen­ger num­bers whereas, In­dian Rail­ways, the pre­ferred mode for long dis­tance travel, has seen just six per cent rise in pas­sen­ger traf­fic. With the ob­jec­tive of over 500 mil­lion pas­sen­gers per year in the next twenty years from 158 mil­lion of 2018, In­dia is in­vest­ing heav­ily in in­fra­struc­ture and trained man­power. At the event, IATA shared a re­port on the In­dian avi­a­tion sec­tor A ac­cord­ing to which, the air trans­port mar­ket in In­dia em­ploys over 3,90,000 and sup­ports an­other 570,000 in the sup­ply chain. Over­all con­tri­bu­tion of the sec­tor is close to $30 bil­lion to the coun­try’s GDP.

For the next 20 years, IATA has fore­cast av­er­age growth rate of 6.1 per cent per year which will add 350 mil­lion pas­sen­gers mov­ing close to 520 mil­lion jour­neys by 2037. Re­flect­ing on the re­spec­tive size of do­mes­tic and in­ter­na­tional mar­kets, the re­port sug­gests that since 2007, the share of do­mes­tic traf­fic has in­creased from 54.4 per cent to 61.7 per cent. Talk­ing about air­craft, the re­port states that “The com­po­si­tion of the cur­rent in-ser­vice fleet is heav­ily tilted to­wards nar­row-body air­craft, which ac­count for around 75 per cent of the cur­rent fleet. The wide-body con­sti­tutes only 10 per cent of the fleet and the rest 15 per cent con­sist of tur­bo­prop and re­gional jets.

The In­dian avi­a­tion mar­ket in the do­mes­tic seg­ment is cur­rently the fastest grow­ing do­mes­tic mar­ket in the world. Till June 2018, the In­dian do­mes­tic avi­a­tion mar­ket has grown by 17.6 per cent. This is al­most ten per cent above the global av­er­age. Cor­re­spond­ing to the growth per­cent­age, the num­ber of pas­sen­ger jour­neys in­creased by 15 mil­lion in a year to reach 97.7 in 2017 from 83 mil­lion in 2016. The re­port does not see any sign of abrupt end to this per­for­mance in the near fu­ture. High­light­ing the po­ten­tial of the mar­ket, it said, “The mag­ni­tude of the po­ten­tial growth in the In­dian do­mes­tic mar­ket is high as the num­ber of do­mes­tic flights un­der­taken in 2017 rep­re­sents just 7.3 per cent of In­dia’s to­tal pop­u­la­tion.”

The rea­sons for high de­mand are lower air­fares and rapid ex­pan­sion in the do­mes­tic air net­work. “This is ev­i­dent in the no­table rise in the num­ber of air­port pairs in op­er­a­tion in In­dia. Th­ese have risen by over 50 per cent since 2015. Also, there is in­crease in the av­er­age fre­quency of flights on each route,” the re­port opines.

IATA also high­lights the mis­match be­tween growth in pas­sen­ger traf­fic and in­fra­struc­ture. In re­cent years, In­dia do­mes­tic de­mand has grown faster than ca­pac­ity growth. “While the de­gree of out­per­for­mance has been mod­er­ated from that seen


in late 2014 and early 2015, the an­nual pas­sen­ger growth still ex­ceeds the ca­pac­ity growth by three per cent on an av­er­age each month over the past two years. The pas­sen­ger load fac­tor which marks the util­i­sa­tion of as­sets, for the year 2018 has ex­ceeded 90 per cent for the first time ever, an all-time high for the seven global do­mes­tic mar­kets that we track each month.”

In the early part of last decade, the load fac­tor had even dipped below 50 per cent. “The In­dian do­mes­tic mar­ket now ac­counts for around 1.5 per cent of to­tal in­dus­try-wide pas­sen­ger de­mand and is below that of the US and China. In a sim­i­lar way, of the top 10 air­ports in terms of growth in pas­sen­ger traf­fic in 2017, two are lo­cated in In­dia, namely Delhi and Ben­galuru,” the re­port states.

Talk­ing about the coun­try’s in­ter­na­tional air trans­port, the re­port said that the in­ter­na­tional mar­ket has not grown as fast as the do­mes­tic mar­ket. For the last three years, the In­dian mar­ket has wit­nessed dou­ble-digit pas­sen­ger in pas­sen­ger traf­fic.

On the In­dian avi­a­tion busi­ness model, the re­port, em­pha­sis­ing the sig­nif­i­cance of the Low Cost Car­rier (LCC) said that in last five years, the num­ber of LCC seats had dou­bled from 64 mil­lion and it now com­mands 70 per cent of to­tal num­ber of seats. The re­port as­cribes the broad­en­ing and deep­en­ing of the avi­a­tion mar­ket to LCCs. Th­ese de­vel­op­ments have cre­ated huge de­mand for air­craft in In­dia which, cur­rently has 600 air­craft with 1123 on order. How­ever, in spite of all th­ese, the air­lines are not mak­ing sig­nif­i­cant profit. They have failed to match the global in­dus­try per­for­mance in terms of op­er­at­ing mar­gins as well.

Apart from em­ploy­ment op­por­tu­ni­ties of­fered by the In­dian Civil avi­a­tion in­dus­try, other as­so­ci­ated sec­tors such as tourism etc, add over six mil­lion jobs. The sec­tor, di­rectly and in­di­rectly, con­trib­utes around $9 bil­lion and spend­ing by for­eign tourists con­trib­utes a fur­ther $ 21.2 bil­lion to the In­dian econ­omy. In terms of gross value ad­di­tion, an avi­a­tion trans­port ser­vice em­ployee adds Rs 13 lakh which is ten times more than econ­o­my­wide av­er­age.

Ac­cord­ing IATA, the long-term pas­sen­ger fore­cast for In­dia is bright and “by 2037, there will be al­most 520 mil­lion pas­sen­gers.” Do­mes­tic pas­sen­ger will con­trib­ute over 60 per cent to the growth. But, In­dia ranks 133 in air trans­port in­fra­struc­ture cat­e­gory, 108 in num­ber of de­par­ture/1,000 pop­u­la­tion, 87 in hu­man re­source, 114 in se­cu­rity con­cerns among oth­ers. Th­ese do not cre­ate a good pic­ture of the coun­try’s pre­pared­ness in the sec­tor and govern­ment is tak­ing steps in right di­rec­tion. SUM­MIT. Apart from in­au­gu­ral ses­sion, the sum­mit had four ple­nary ses­sions in which lead­ers of in­dus­try and the In­dian govern­ment in­clud­ing the two Min­is­ters par­tic­i­pated and dis­cussed the chal­lenges faced by the In­dian and global avi­a­tion sec­tor.

In the first ple­nary ses­sion on air­port in­fra­struc­ture ca­pac­ity chal­lenge, the par­tic­i­pants dis­cussed the need for sig­nif­i­cant air­port ca­pac­ity ex­pan­sion with fo­cus on ways to in­crease the pas­sen­ger through­put. The de­lay in ex­pan­sion of the air­port in­fra­struc­ture is one of the ma­jor con­straints in the ex­pan­sion of the air travel net­work. They also dis­cussed prob­lems and chal­lenges faced by In­dia in ex­pand­ing its ex­ist­ing air­ports and con­struct­ing Green­field air­ports and how global play­ers may have a role in air­port in­fra­struc­ture de­vel­op­ment roadmap.

Dur­ing the ple­nary on reg­u­la­tory and pol­icy land­scape, Ra­jiv Nayan Choubey said that In­dia un­veiled its new pol­icy in 2016 to make air travel safe and af­ford­able for the mid­dle class. The 20 per cent month-on-month growth is a tes­ti­mony of suc­cess of the pol­icy, he said. He called the In­dian civil avi­a­tion pol­icy a com­pre­hen­sive, work­able and suc­cess­ful pol­icy.

The ple­nary ses­sion dis­cussed the ne­ces­sity of the role of reg­u­la­tor in the avi­a­tion in­dus­try which is one of the most reg­u­lated in­dus­tries. Par­tic­i­pants also dis­cussed the emer­gence of drone and other tech­nolo­gies which re­quires reg­u­la­tors to evolve to keep pace with it. Chris Roche­leau of the Fed­eral Avi­a­tion Ad­min­is­tra­tion of the US, in his in­ter­ven­tion, said that build­ing flex­i­ble reg­u­la­tory frame­work is im­por­tant for drones.

Look­ing at the emer­gence of newer tech­nol­ogy, the ple­nary ses­sion de­manded that the reg­u­la­tory sys­tem ought to have bet­ter trained, smart reg­u­la­tors and a rev­enue model for reg­u­la­tory bodies as well. The ses­sion also dis­cussed the chal­lenges of en­vi­ron­men­tally sen­si­tive is­sues. The Sec­re­tary MoCA stated In­dia’s po­si­tion on en­vi­ron­men­tal reg­u­la­tion and called for a mu­tu­ally agree­able base­line for reg­u­la­tions.

In the next ple­nary ses­sion which was ded­i­cated to things that may shape the fu­ture of avi­a­tion. The par­tic­i­pants de­lib­er­ated on the im­pact of in­for­ma­tion tech­nol­ogy such as app, face recog­ni­tion etc on the avi­a­tion sec­tor. Les­lie Thng, CEO Vis­tara was of the opin­ion that ev­ery air­line should have their own dig­i­tal strat­egy to im­prove pro­cesses and ways to en­gage cus­tomers. Sim­i­larly, Jef­ferey Goh, CEO, Star Al­liance, talked about how tech­nol­ogy does and will countinue to shape the in­dus­try. He also cau­tioned about over dig­i­tiz­ing and called for co­or­di­na­tion be­tween ser­vices rather than their own par­al­lel dig­i­tal sys­tem. Re­spond­ing to the dis­cus­sion, Jayant Sinha said that the in­dus­try needs to take into ac­count the pow­er­ful dis­rup­tors that are emerg­ing on the scene. He said that it is the cus­tomer who de­mands bet­ter dig­i­tal ex­pe­ri­ence whereas tech­nol­ogy and in­dus­try play­ers have de­vel­oped at­tacker strat­egy.

In the fi­nal ple­nary ses­sion on whether In­dia can be a global avi­a­tion player, Suresh Prabhu talked about the de­sire of 1.25 bil­lion peo­ple for air travel and In­dia needs in­dus­try’s per­spec­tive to make this hap­pen. He talked about the In­dian avi­a­tion sec­tor in 2035. He also high­lighted the large In­dian di­as­pora who would like to travel to visit In­dia.

Vi­nay Dubey, CEO, Jet Air­ways, ex­pressed pos­i­tive out­look for the In­dian avi­a­tion mar­ket and said that the low prof­itabil­ity sit­u­a­tion is not un­usual and the In­dian avi­a­tion sec­tor will come out bet­ter off. Ajay Singh of SpicJet, talked about the cost com­pet­i­tive­ness of do­mes­tic air­lines and paucity of air­port in­fra­struc­ture. Ak­bar Al Baker, CEO, Qatar Air­ways called In­dia a sleep­ing gi­ant and dis­cussed the coun­try’s im­por­tance in the global avi­a­tion in­dus­try.


Suresh Prabhu, Min­is­ter for Civil Avi­a­tion, ad­dress­ing the del­e­gates of In­ter­na­tional Avi­a­tion Sum­mit in New Delhi

Con­rad Clif­ford, Re­gional Vice Pres­i­dent, IATA (Ses­sion Mod­er­a­tor); Don Thoma, CEO, Aireon; Jef­frey Goh, CEO, Star Al­liance; Jayant Sinha, Min­is­ter of State for Civil Avi­a­tion; V.K. Mathews, Ex­ec­u­tive Chair­man, IBS Soft­ware; Les­lie Thng, CEO, Vis­tara and David Wal­ton, COO, BOC Avi­a­tion on the dias.

Panelists Se­bas­tian Mikosz, Group MD & CEO, Kenya Air­ways; Ajay Singh, Chair­man & MD, SpiceJet; Ak­bar Al Baker, Group CEO, Qatar Air­ways; Pi­eter El­bers, CEO, KLM; Vi­nay Dube, CEO, Jet Air­ways with Ses­sion mod­er­a­tor Jan­me­jaya Sinha, Chair­man - Asia Pa­cific, The Bos­ton Con­sult­ing Group.

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