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By: - Mithilesh Trivedi
Batch: - PGP/SS/13-15/T2
Subject: - Economics for Managerial Decision Making-II
1
Table of Content Sr. No. Particulars Page No. I. Acknowledgement 2 II. Declaration 3 III. Executive Summary 4 IV. Introduction to Aviation Industry 6 V. Indian Aviation Industry 14 VI. Unlocking the Indian Aviation Sector 21 VII. State Government Initiative 31 VIII. The Way Forward 48 IX. Bibliography 51
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Acknowledgement
I would like to thank all people who made a major contribution to our EMDM Project on Aviation Industry of India 2014. My Professors, Colleagues and associates at “Indian Institute of Planning and Management (IIPM)”.
I would also like to thank the Professor of EMDM-II, for supporting us in all areas. Whenever I required help regarding this project, he helped us every time.
I would also like to thank all members of 5onn group and their contribution towards project.
I believe that the credit goes to all who knowingly and unknowingly have supported me during my internship period.
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DECLARATION
I hereby declare that all the information has been collected, analysed and documented for the project is entirely authentic. I would also like to mention categorically that the work done here have not been purchased or acquired by any other unfair means or from any external sources. The data and information presented in this report are accurate.
However, for the purpose of the project, information, already compiled in many sources has been utilized.
Mithilesh Trivedi
PGP/SS/13-15/T2
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The Indian civil aviation industry is on a high growth trajectory, albeit with minor hiccups. India has a vision of becoming the third largest aviation market by 2020 and is expected to be the largest by 2030.
Despite facing a reduced growth rate in the past few years, the Civil Aviation Industry in India has ushered in a new era of expansion driven by factors such as Low Cost Carriers (LCC), modern airports, Foreign Direct Investments (FDI) in domestic airlines, cutting edge Information Technology (IT) interventions and a growing emphasis on regional connectivity. Simply going by the market size, the Indian civil aviation industry amongst the top 10 in the world with a size of around USD 16 billion.
However, in order to achieve the vision of becoming the third largest aviation market by 2020, a lot more needs to be done.
The Asia Pacific region along with other emerging economies of Latin America and Eastern Europe are projected to lead the growth of the global aviation sector in the next few decades. Steady economic development of China and India would lead to higher spending power and increased need to travel. With one third of the world's population residing in these two nations, there is a huge untapped potential. As per the 12th Five Year Plan (2012-2017), improving air connectivity in tier-2 and tier-3 cities in India is one of the key priorities of the government. This expansion will not only add a much needed boost to the industry, but also increase the viability of new trends like low cost airports and airlines in the country. With the unfortunate downgrade of India to Category 2 by USA's Federal Aviation Administration (FAA), expansion in the global routes may be constrained. That too will lead to greater focus on the domestic market in the short run. All this will have a multiplier effect in terms of higher growth of local economic activities, tourism and employment.
India sells one of the costliest Aviation Turbine Fuel (ATF) in the world, nearly 60% costlier than competing nations in the Middle East and ASEAN regions. This is thanks to myopic tax policies at the central and state level. The raw material - ATF – accounts for nearly half of the operating cost of Indian carriers. This explains why domestic flight tickets in India are often costlier than a 3 days weekend package in Thailand and Malaysia' No wonder tourism traffic in India is a fraction of its immense God-gifted potential.
Executive Summary
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The irony is that the common man in whose name high taxes are imposed on ATF, is himself prevented from flying due to high travel costs! According to a rough estimate, nearly 99.5 percent of the world's third largest economy, have NOT seen the insides of an aircraft. Most Indian carriers therefore are facing financial ruin and are hoping for a white knight to bail them out.
Some recent initiatives such as allowing import of ATF are a step in the right direction but more proactive measures are needed in order to make industry more competitive and investor friendly. The positive Indian airlines are slowly becoming evident. Removal of unwritten ban on A380s will help bring down cost of travel and increase tourist arrivals. The 5/20 rule and other regulatory other hurdles in approval of new airlines and import of aircraft need to be abolished at the earliest.
The regulatory regime governing Maintenance, Repair and overhaul (MRO) of aircrafts is another classic case of tax and procedural overkill. Not a single commercial aircrafts of Indian carriers undergoes repairs in India. Empty aircrafts are flown to MRO facilities in our neighboring countries and paid for in foreign exchange. The loss of revenue, foreign exchange, employment and direct taxes is immense. All this is thanks to the short-sighted policies regarding indirect taxes (service Tax and VAT) and cumbersome customs procedures regarding import of aircraft parts and consumables.
With the growth of air traffic in the region, focused efforts to upgrade the Air Navigation Services (ANS) has become imperative. Segregation or ANS directorate from Airport Authority of India (AAI) into a world class organization with latest infrastructure and well trained professionals is key. Government is expected to decide on the matter soon.
In pursuit of becoming a strong aviation player; India perhaps did not put the right emphasis on development of human capital and regulatory frameworks. The FFA downgrade has been fallout of the same. India needs to put its act together to address these issues. The creation of a financially and operationally independent Civil Aviation Authority (CAA) and the National Aviation University (NAU) need to be undertaken on a war footing.
There is a large untapped potential growth in the Indian Aviation industry due to the fact that access to aviation is still a dream for nearly 99.5 percent of its large population, nearly 40 percent of which is the upwardly mobile middle class. It is critical for the industry stakeholders to engage and collaborate with policy makers to come up with efficient and rational decision that will shape the future of Indian Civil Aviation Industry. With right policies and a relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third largest aviation market by 2020 and the largest by 2030.
6
Introduction to Aviation Industry
Air transportation services have evolved into a crucial building block for the world's socio-economic growth. In the last four decades, the air travel across the world has grown by more than 1000% and the air freight has increased by over 1400% while the national economies have grown only three to four times. This phenomenal growth is due to a combination of three key global drivers, namely, increase in disposable incomes, accelerated globalization and deregulation of the aviation industry.
Key Global Drivers of Aviation Industry
Increasing competition, technological advancements and improved operational efficiencies have enabled the cost of air travel to remain relatively low despite severe volatility of global fuel prices and leading currencies.
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Socio-economic benefits of Air Transport Services
Air transport is essential for global business and tourism because of the growing value of time and money. Aircrafts transported around 3.1 billion passengers and over 51.6 million tonnes of freight in 2013'. Over 35%oof the inter-regional exports of goods by value and 51% of international tourists are served by air transport services.
The development of air transportation services and socio-economic development are highly correlated. According to the International Civil Aviation Organization (CAO), an additional dollar invested in air transport leads to a benefit of around three dollars to the local economy. Moreover, every additional job created in the air transport results in creation of over six new jobs in the local economy. Figure 2 describes the distribution of employment generated by aviation services around the world.
Distribution of global employment in the aviation sector
8
Trends in Aviation Industry
Year on Year (YoY) comparison of key parameters for the global aviation industry are represented in following table.
Global Passenger and Cargo growth trend (2013 v/s 2012)
The growth in passenger traffic has been led by a strong progress made by the Middle East countries supported by the other emerging economies of Latin America, Africa and Asia-Pacific. The developed economies of North America and Europe lagged behind in terms of growth in passenger traffic.
The cargo traffic growth rate has recovered from a decreasing trend during 2012. While Middle East nations have managed a strong growth during 201-3, Asia Pacific and North America showed a decline. The details regarding regional passenger and cargo traffic are presented in the following table.
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Regional international passenger and cargo traffic growth trends (2013 vs. 2012)
It has been observed that during economic upswing, airline traffic grows roughly around twice the rate of growth of GDP. The following figures display the trend of scheduled passengers and cargo during the last decade. The recession caused by the Global Financial Crisis in 2008 has led to a negative growth in both passenger as well as cargo traffic.
Global scheduled Air Passenger Traffic, 2004-2013 (in Million)
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Global Air freight tonnage, 2OO4-2O13 (in Millions)
As the economies develop, es
0โดย: -Mithilesh Trivediชุด: - PGP/SS/13-15/T2หัวข้อ: -เศรษฐศาสตร์การจัดการตัดสินใจทำ-II1ตารางหมายเลข Sr. เนื้อหา อย่างหน้า I. หมายเลขรับรอง 2 II ประกาศ 3 III บทสรุปสำหรับผู้บริหาร 4 IV แนะนำให้อุตสาหกรรมการบิน 6 V. บินอินเดียอุตสาหกรรม 14 VI ปลดล็อกบินอินเดียภาค 21 VII รัฐรัฐบาลริเริ่ม 31 VIII วิธีการส่งต่อ 48 IX บรรณานุกรม 512ยอมรับอยากจะขอบคุณทุกคนที่ทำส่วนใหญ่จะบินอุตสาหกรรมของอินเดีย 2014 โครงการ EMDM ของเรา ฉันอาจารย์ เพื่อนร่วมงานและสมาคมที่ "อินเดียสถาบันของการวางแผนและการจัดการ (IIPM)"ยังอยากจะขอบคุณอาจารย์ของ EMDM-II สำหรับสนับสนุนเราในทุกพื้นที่ เมื่อใดก็ ตามที่ฉันต้องการความช่วยเหลือเกี่ยวกับโครงการนี้ เขาช่วยเราทุกครั้งยังอยากจะขอบคุณสมาชิกทั้งหมดของกลุ่ม 5onn และสัดส่วนของพวกเขาต่อโครงการผมให้เครดิตไปที่เจตนา และโดยไม่รู้ตัวได้อย่างช่วงฝึกงานของฉัน3การรายงานภาษีผมขอประกาศว่า ทุกข้อมูลที่ถูกเก็บรวบรวม analysed และเอกสารโครงการเป็นทั้งอาหาร ยังอยากจะพูดถึง categorically ที่นี่มีการทำงานไม่ได้ถูกซื้อ หรือได้มา โดยวิธีใด ๆ ธรรมอื่น ๆ หรือ จากแหล่งภายนอกใด ๆ ข้อมูลและข้อมูลที่นำเสนอในรายงานนี้ถูกต้องอย่างไรก็ตาม เพื่อโครงการ สารนิเทศ อยู่ในแหล่งข้อมูลมีการใช้ประโยชน์Mithilesh TrivediPGP/SS/13-15/T24อุตสาหกรรมการบินพลเรือนอินเดียอยู่ในวิถีการเจริญเติบโตสูง แม้ว่ากับ hiccups รอง อินเดียมีวิสัยทัศน์ของ ตลาดการบินมากที่สุดสาม 2563 และคาดว่าจะใหญ่ที่สุดปี 2030แม้จะหันหน้าอัตราการเติบโตลดลงในไม่กี่ปีที่ผ่านมา อุตสาหกรรมการบินพลเรือนในประเทศอินเดียมี ushered ในยุคใหม่ของการขับเคลื่อน ด้วยปัจจัยเช่นต้นทุนต่ำสายการบิน (LCC), สนามบินทันสมัย ต่างประเทศโดยตรงการลงทุน (FDI) ในประเทศสายการบิน งานเทคโนโลยีสารสนเทศ (IT) ขอบตัดและเชื่อมต่อภูมิภาคเน้นการเติบโตขยายตัว เพียงแค่ไปตามขนาดตลาด อุตสาหกรรมการบินพลเรือนอินเดียอยู่อันดับแรกในโลกด้วยขนาดของรอบ 16 พันล้าน USDอย่างไรก็ตาม เพื่อให้บรรลุวิสัยทัศน์ของ ตลาดการบินมากที่สุดสาม 2563 มากต้องทำให้เสร็จภูมิภาคเอเชียแปซิฟิกรวมทั้งประเทศเกิดใหม่อื่น ๆ ของสหรัฐอเมริกาและยุโรปตะวันออกคาดว่าจะนำไปสู่การเติบโตของภาคการบินสากลในถัดไปไม่กี่ทศวรรษที่ผ่านมา พัฒนาเศรษฐกิจที่มั่นคงของจีนและอินเดียจะทำให้อำนาจการใช้จ่ายสูงและต้องเพิ่มการเดินทาง กับหนึ่งในสามของประชากรโลกในประเทศเหล่านี้ทั้งสอง มีขนาดใหญ่เป็นไปไม่ได้ใช้ ตาม 12 5 ปีแผนการ (2012-2017), ปรับปรุงอากาศ เชื่อมต่อในระดับ 2 และระดับ 3 เมืองในประเทศอินเดียเป็นหนึ่งในความสำคัญหลักของรัฐบาล ขยายตัวนี้จะไม่เพียงแต่เพิ่มเพิ่มจำเป็นมากเพื่ออุตสาหกรรม แต่ยัง เพิ่มศักยภาพแนวโน้มใหม่เช่นสนามบินต้นทุนต่ำและสายการบินในประเทศ กับลดโชคร้ายของอินเดียเป็น 2 ประเภทโดยของสหรัฐอเมริกาสหพันธ์การบินจัดการ (ฟ้า), การขยายตัวในเส้นทางทั่วโลกอาจจะจำกัด ที่มากเกินไปจะทำให้โฟกัสมากขึ้นในตลาดภายในประเทศในระยะสั้น ทั้งหมดนี้จะมีผลตัวคูณสูงเจริญเติบโตของเศรษฐกิจ การท่องเที่ยวและทำงานในอินเดียจำหน่ายหนึ่งของ costliest บินกังหันเชื้อเพลิง (ATF) ในโลก costlier ห้างกว่าประเทศแข่งขันในภูมิภาคตะวันออกกลางและอาเซียนเกือบ 60% นี้คือขอบคุณนโยบายภาษี myopic ระดับกลาง และรัฐ บัญชีวัตถุดิบ - ATF – เกือบครึ่งหนึ่งของต้นทุนการดำเนินงานของสายการบินอินเดีย นี้อธิบายทำไมตั๋วเครื่องบินในประเทศอินเดียมัก costlier ห้างกว่าแพคเกจวันหยุด 3 วันในประเทศไทยและมาเลเซีย ' จราจรไม่ท่องเที่ยวพบในอินเดียเป็นเศษส่วนของพระเจ้ามีพรสวรรค์ศักยภาพอันยิ่งใหญ่บทสรุปสำหรับผู้บริหาร5ประชดเป็นคนทั่วไปในชื่อที่มีภาษีสูงจะเก็บ ATF ว่าตัวเองทำไปเนื่องจากต้นทุนเดินทางสูง ตามหยาบ ประมาณ เกือบ 99.5 เปอร์เซ็นต์ของเศรษฐกิจโลกที่สามที่ใหญ่ที่สุด ได้เห็น insides ของเที่ยวบิน สายการบินอินเดียมากที่สุดดังนั้นกำลังเผชิญกับการทำลายเงิน และหวังสำหรับอัศวินขาวการประกันเหล่านั้นออกบางโครงการล่าสุดเช่นการอนุญาตให้นำเข้าของ ATF มีขั้นตอนในทิศทางที่ถูก แต่จำเป็นเพื่อให้อุตสาหกรรมแข่งขันและนักลงทุนเป็นมาตรการเชิงรุกเพิ่มเติม สายการบินอินเดียบวกกลายชัดช้า เอาของบ้าน unwritten บน A380s จะช่วยนำมาลงทุนเดินทาง และเพิ่มนักท่องเที่ยวที่เข้ามา 5/20 กฎและข้อบังคับอื่น ๆ อุปสรรคอื่น ๆ ในการอนุมัติของสายการบินใหม่และนำเข้าเครื่องบินจำเป็นต้องถูกยกเลิกในสุดระบบการกำกับดูแลปกครองควบคุมบำรุงรักษา ซ่อมแซมและยกเครื่อง (MRO) ของเครื่องบินเป็นกรณีคลาสสิกอีกของ overkill ภาษีและขั้นตอน ไม่เป็นเดียวโมเดลเครื่องบินของสายการบินอินเดียผ่านการซ่อมแซมในอินเดีย เครื่องบินว่างไปอำนวย MRO ในประเทศเพื่อนบ้านของเรา และชำระสำหรับการแลกเปลี่ยนเงินตรา สูญเสียรายได้ แลกเปลี่ยนเงินตรา จ้าง และภาษีโดยตรงเป็นอย่างมาก ทั้งหมดนี้เป็นนโยบาย sighted สั้น ๆ เกี่ยวกับภาษีทางอ้อม (บริการภาษีและ VAT) และขั้นตอนยุ่งยากศุลกากรเกี่ยวกับการนำเข้าชิ้นส่วนเครื่องบินและเครื่องบริโภคมีการเติบโตของการจราจรทางอากาศในภูมิภาค เน้นพยายามอัพเกรดบริการนำทางอากาศ (ANS) ได้กลายเป็นความจำเป็น การแบ่งแยกหรือฝ่าย ANS จากสนามบินประเทศของอินเดีย (AAI) เป็นองค์กรระดับโลกที่ล่าสุดโครงสร้างพื้นฐานและผู้เชี่ยวชาญเป็นอย่างดีเป็นคีย์ รัฐบาลคาดว่าการตัดสินใจเรื่องเร็ว ๆ นี้แสวงหาเป็น เครื่องบินที่แข็งแกร่งเล่น อินเดียอาจจะไม่ได้ใส่ที่เน้นพัฒนาบุคลากรและกรอบทางขวา ลด FFA ได้รับออกมาเสียของเหมือนกัน อินเดียจำเป็นต้องใส่การกระทำร่วมกันเพื่อแก้ไขปัญหาเหล่านี้ การสร้างการเงิน และ operationally อิสระแพ่งบินอำนาจ (ซีเอเอโฮ) และมหาวิทยาลัยการบินแห่งชาติ (NAU) ต้องดำเนินการบนหลักการสงครามThere is a large untapped potential growth in the Indian Aviation industry due to the fact that access to aviation is still a dream for nearly 99.5 percent of its large population, nearly 40 percent of which is the upwardly mobile middle class. It is critical for the industry stakeholders to engage and collaborate with policy makers to come up with efficient and rational decision that will shape the future of Indian Civil Aviation Industry. With right policies and a relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third largest aviation market by 2020 and the largest by 2030.6Introduction to Aviation IndustryAir transportation services have evolved into a crucial building block for the world's socio-economic growth. In the last four decades, the air travel across the world has grown by more than 1000% and the air freight has increased by over 1400% while the national economies have grown only three to four times. This phenomenal growth is due to a combination of three key global drivers, namely, increase in disposable incomes, accelerated globalization and deregulation of the aviation industry.Key Global Drivers of Aviation IndustryIncreasing competition, technological advancements and improved operational efficiencies have enabled the cost of air travel to remain relatively low despite severe volatility of global fuel prices and leading currencies.7Socio-economic benefits of Air Transport ServicesAir transport is essential for global business and tourism because of the growing value of time and money. Aircrafts transported around 3.1 billion passengers and over 51.6 million tonnes of freight in 2013'. Over 35%oof the inter-regional exports of goods by value and 51% of international tourists are served by air transport services.The development of air transportation services and socio-economic development are highly correlated. According to the International Civil Aviation Organization (CAO), an additional dollar invested in air transport leads to a benefit of around three dollars to the local economy. Moreover, every additional job created in the air transport results in creation of over six new jobs in the local economy. Figure 2 describes the distribution of employment generated by aviation services around the world.Distribution of global employment in the aviation sector8Trends in Aviation IndustryYear on Year (YoY) comparison of key parameters for the global aviation industry are represented in following table.Global Passenger and Cargo growth trend (2013 v/s 2012)The growth in passenger traffic has been led by a strong progress made by the Middle East countries supported by the other emerging economies of Latin America, Africa and Asia-Pacific. The developed economies of North America and Europe lagged behind in terms of growth in passenger traffic.The cargo traffic growth rate has recovered from a decreasing trend during 2012. While Middle East nations have managed a strong growth during 201-3, Asia Pacific and North America showed a decline. The details regarding regional passenger and cargo traffic are presented in the following table.9Regional international passenger and cargo traffic growth trends (2013 vs. 2012)It has been observed that during economic upswing, airline traffic grows roughly around twice the rate of growth of GDP. The following figures display the trend of scheduled passengers and cargo during the last decade. The recession caused by the Global Financial Crisis in 2008 has led to a negative growth in both passenger as well as cargo traffic.Global scheduled Air Passenger Traffic, 2004-2013 (in Million)10Global Air freight tonnage, 2OO4-2O13 (in Millions)As the economies develop, es
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0
By: - Mithilesh Trivedi
Batch: - PGP/SS/13-15/T2
Subject: - Economics for Managerial Decision Making-II
1
Table of Content Sr. No. Particulars Page No. I. Acknowledgement 2 II. Declaration 3 III. Executive Summary 4 IV. Introduction to Aviation Industry 6 V. Indian Aviation Industry 14 VI. Unlocking the Indian Aviation Sector 21 VII. State Government Initiative 31 VIII. The Way Forward 48 IX. Bibliography 51
2
Acknowledgement
I would like to thank all people who made a major contribution to our EMDM Project on Aviation Industry of India 2014. My Professors, Colleagues and associates at “Indian Institute of Planning and Management (IIPM)”.
I would also like to thank the Professor of EMDM-II, for supporting us in all areas. Whenever I required help regarding this project, he helped us every time.
I would also like to thank all members of 5onn group and their contribution towards project.
I believe that the credit goes to all who knowingly and unknowingly have supported me during my internship period.
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DECLARATION
I hereby declare that all the information has been collected, analysed and documented for the project is entirely authentic. I would also like to mention categorically that the work done here have not been purchased or acquired by any other unfair means or from any external sources. The data and information presented in this report are accurate.
However, for the purpose of the project, information, already compiled in many sources has been utilized.
Mithilesh Trivedi
PGP/SS/13-15/T2
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The Indian civil aviation industry is on a high growth trajectory, albeit with minor hiccups. India has a vision of becoming the third largest aviation market by 2020 and is expected to be the largest by 2030.
Despite facing a reduced growth rate in the past few years, the Civil Aviation Industry in India has ushered in a new era of expansion driven by factors such as Low Cost Carriers (LCC), modern airports, Foreign Direct Investments (FDI) in domestic airlines, cutting edge Information Technology (IT) interventions and a growing emphasis on regional connectivity. Simply going by the market size, the Indian civil aviation industry amongst the top 10 in the world with a size of around USD 16 billion.
However, in order to achieve the vision of becoming the third largest aviation market by 2020, a lot more needs to be done.
The Asia Pacific region along with other emerging economies of Latin America and Eastern Europe are projected to lead the growth of the global aviation sector in the next few decades. Steady economic development of China and India would lead to higher spending power and increased need to travel. With one third of the world's population residing in these two nations, there is a huge untapped potential. As per the 12th Five Year Plan (2012-2017), improving air connectivity in tier-2 and tier-3 cities in India is one of the key priorities of the government. This expansion will not only add a much needed boost to the industry, but also increase the viability of new trends like low cost airports and airlines in the country. With the unfortunate downgrade of India to Category 2 by USA's Federal Aviation Administration (FAA), expansion in the global routes may be constrained. That too will lead to greater focus on the domestic market in the short run. All this will have a multiplier effect in terms of higher growth of local economic activities, tourism and employment.
India sells one of the costliest Aviation Turbine Fuel (ATF) in the world, nearly 60% costlier than competing nations in the Middle East and ASEAN regions. This is thanks to myopic tax policies at the central and state level. The raw material - ATF – accounts for nearly half of the operating cost of Indian carriers. This explains why domestic flight tickets in India are often costlier than a 3 days weekend package in Thailand and Malaysia' No wonder tourism traffic in India is a fraction of its immense God-gifted potential.
Executive Summary
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The irony is that the common man in whose name high taxes are imposed on ATF, is himself prevented from flying due to high travel costs! According to a rough estimate, nearly 99.5 percent of the world's third largest economy, have NOT seen the insides of an aircraft. Most Indian carriers therefore are facing financial ruin and are hoping for a white knight to bail them out.
Some recent initiatives such as allowing import of ATF are a step in the right direction but more proactive measures are needed in order to make industry more competitive and investor friendly. The positive Indian airlines are slowly becoming evident. Removal of unwritten ban on A380s will help bring down cost of travel and increase tourist arrivals. The 5/20 rule and other regulatory other hurdles in approval of new airlines and import of aircraft need to be abolished at the earliest.
The regulatory regime governing Maintenance, Repair and overhaul (MRO) of aircrafts is another classic case of tax and procedural overkill. Not a single commercial aircrafts of Indian carriers undergoes repairs in India. Empty aircrafts are flown to MRO facilities in our neighboring countries and paid for in foreign exchange. The loss of revenue, foreign exchange, employment and direct taxes is immense. All this is thanks to the short-sighted policies regarding indirect taxes (service Tax and VAT) and cumbersome customs procedures regarding import of aircraft parts and consumables.
With the growth of air traffic in the region, focused efforts to upgrade the Air Navigation Services (ANS) has become imperative. Segregation or ANS directorate from Airport Authority of India (AAI) into a world class organization with latest infrastructure and well trained professionals is key. Government is expected to decide on the matter soon.
In pursuit of becoming a strong aviation player; India perhaps did not put the right emphasis on development of human capital and regulatory frameworks. The FFA downgrade has been fallout of the same. India needs to put its act together to address these issues. The creation of a financially and operationally independent Civil Aviation Authority (CAA) and the National Aviation University (NAU) need to be undertaken on a war footing.
There is a large untapped potential growth in the Indian Aviation industry due to the fact that access to aviation is still a dream for nearly 99.5 percent of its large population, nearly 40 percent of which is the upwardly mobile middle class. It is critical for the industry stakeholders to engage and collaborate with policy makers to come up with efficient and rational decision that will shape the future of Indian Civil Aviation Industry. With right policies and a relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third largest aviation market by 2020 and the largest by 2030.
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Introduction to Aviation Industry
Air transportation services have evolved into a crucial building block for the world's socio-economic growth. In the last four decades, the air travel across the world has grown by more than 1000% and the air freight has increased by over 1400% while the national economies have grown only three to four times. This phenomenal growth is due to a combination of three key global drivers, namely, increase in disposable incomes, accelerated globalization and deregulation of the aviation industry.
Key Global Drivers of Aviation Industry
Increasing competition, technological advancements and improved operational efficiencies have enabled the cost of air travel to remain relatively low despite severe volatility of global fuel prices and leading currencies.
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Socio-economic benefits of Air Transport Services
Air transport is essential for global business and tourism because of the growing value of time and money. Aircrafts transported around 3.1 billion passengers and over 51.6 million tonnes of freight in 2013'. Over 35%oof the inter-regional exports of goods by value and 51% of international tourists are served by air transport services.
The development of air transportation services and socio-economic development are highly correlated. According to the International Civil Aviation Organization (CAO), an additional dollar invested in air transport leads to a benefit of around three dollars to the local economy. Moreover, every additional job created in the air transport results in creation of over six new jobs in the local economy. Figure 2 describes the distribution of employment generated by aviation services around the world.
Distribution of global employment in the aviation sector
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Trends in Aviation Industry
Year on Year (YoY) comparison of key parameters for the global aviation industry are represented in following table.
Global Passenger and Cargo growth trend (2013 v/s 2012)
The growth in passenger traffic has been led by a strong progress made by the Middle East countries supported by the other emerging economies of Latin America, Africa and Asia-Pacific. The developed economies of North America and Europe lagged behind in terms of growth in passenger traffic.
The cargo traffic growth rate has recovered from a decreasing trend during 2012. While Middle East nations have managed a strong growth during 201-3, Asia Pacific and North America showed a decline. The details regarding regional passenger and cargo traffic are presented in the following table.
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Regional international passenger and cargo traffic growth trends (2013 vs. 2012)
It has been observed that during economic upswing, airline traffic grows roughly around twice the rate of growth of GDP. The following figures display the trend of scheduled passengers and cargo during the last decade. The recession caused by the Global Financial Crisis in 2008 has led to a negative growth in both passenger as well as cargo traffic.
Global scheduled Air Passenger Traffic, 2004-2013 (in Million)
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Global Air freight tonnage, 2OO4-2O13 (in Millions)
As the economies develop, es
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