aviation poliy review

LawDocs

AVIATION POLICY REVIEW

Get In Black

#Get

In B

lack

About LawDocs

LawDocs provides the online legal and docu-

mentation services to the corporates and public

at large. At LawDocs, our purpose is to build

trust in society and solve important problems.

We’re a network of firms and are committed to

delivering quality in assurance, advisory and tax

services.

Find out more www.lawdocs.in

FOREWARD

I am pleased to present the Aviation Policy Review. It comprises diverse points of view across

different industry sectors, this report provides a perspective of the economy in this sector in In-

dia. Through this report, we aim to highlight the upcoming events and possibilities with the ob-

jective of doing business in India.

I hope that this report will help business leaders navigate the increasing complexity around value

delivery in today’s environment. I would like to express my sincere gratitude to all the partici-

pants of the survey.

I hope you find the report useful and insightful.

Best regards,

Priyanka Prajapati

CEO, LawDocs.

INDEX

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5

SECTOR POLICY . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . 6

STRATEGIES ADOPTED . . . . . . . . . .. . . . . . . . . . . . . . . . . ..7

TRENDS IN THE Aviation SECTOR. . . . .. . . . . . . . . . . . . . .8

REASONS TO INVEST. . . . . . . . . . . . . . . . . . . . . . . . ... .. .9

Investment Opportunities. . . . .. . . . . . . . . . . . . . . . . .. 10

.FINANCIAL SUPPORT. . . . . . . . . . . . . . . . . .. . . . . . . . . . 11

MAJOR AIRLINES OPERATING IN INDIA. . . . . . . . . . . . .12

ACHIEVEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 13

FOREIGN INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Introduction

Aviation refers to the activities surrounding mechanical flight and the aircraft industry. Aircraft

includes fixed-wing types, morphable wings, wing-less lifting bodies, as well as lighter-than-

air craft such as airships. The aviation industry in India has emerged as one of the fastest

growing industries in the country during the last three years. India has become the third larg-

est domestic aviation market in the world and is expected to overtake UK to become the third

largest air passenger market by 2024. India has 91 international carriers out of which 5 are

domestically owned. India has air connectivity with 59 countries through 344 routes. India’s

domestic year-on-year Revenue Passenger Kilometre (RPK) growth of 18.6% in 2018 was

almost thrice the global RPK growth of 6.5%..The global revenue for commercial airlines in

2018 stood at US$ 812 bn and is forecasted reach US$ 865 bn in 2019.

SECTOR POLICY

• Regional connectivity scheme of Ude Desh ka Aam Nagrik(UDAN) 1.0 and 2.0, launched by the Govern-

ment aims to connect 66 airports and 31 heliports across the Country.

• Under Ude Desh ka Aam Nagrik(UDAN) 3.0, proposals for 235 routes were awarded for 16 unserved air-

ports, 17 under-served airports, 50 served airports, and 6 water aerodromes.

• Scheduled air transport service/ / regional air transport service /domestic scheduled passenger airline:

Up to 49% allowed under the Automatic route beyond which Government approval is required.

• Non-scheduled air transport services and helicopter services, seaplane services which require DGCA ap-

proval: 100% FDI allowed under the Automatic route.17

• NABH Nirman, announced in 2018-19 Union Budget, aims to expand airport capacity by more than 5

times to handle a billion trips in one year. The expansion is planned to be funded by leveraging the bal-

ancesheet of Airports Authority of India.

• MROs were required to provide proof of their requirements of parts or orders from their client airlines.

• Restriction of one year for utilization of duty-free parts has been extended to three years to enable

economies of scale.

• The tools and tool-kits used by the MRO have been exempted from Customs duty.

STRATEGIES ADOPTED

1Expansion

• Capacity will also increase with new terminals coming up in Mumbai, Chennai, Bengaluru, and Kolkata

• Indian carriers are expected to double their fleet capacity to around 1,100 aircrafts by 2027 .

2. Increasing operations

• Indian LCC’s are looking forward to increase their low cost products on routes which will take up to four

hours (shorter international routes)

• This will allow deleveraging of domestic fleet, increasing aircraft utilisation and improving commercial

performance

• Chennai, with its strategic location in South India has a strong potential to become a hub, with con-

necting flights to Gulf and across South East Asia

3 Ancillary services

•The AAI has allowed the BRTS buses to foray in the airport premises in Surat. The initiative is to allow the passengers to reach

airports on time and allow smoother transit.

• Indian LCC’S are looking forward to increase their ancillary services, without tampering their business models. This includes

services like priority boarding, customer loyalty memberships and customer meals .

4.Government’s push

• Under Union Budget 2018-19, the government introduced NextGen Airports for Bharat. Nirman Scheme which aims a five-

fold increase in India’s airport capacity to handle a billion trips per year.

• In September 2018, the Prime Minister of India also inaugurated Sikkim’s first ever airport, Pakyong Airport. It is AAI’s first

greenfield airport construction.

• In September 2018, the Prime Minister of India inaugurated Jharsuguda Airport in Odisha.

• In February 2018, the Prime Minister of India launched the construction of Navi Mumbai airport which is expected to be built

at a cost of US$ 2.58 billion. The first phase of the airport will be completed by end of a2019.

NOTABLE TRENDS IN THE Aviation SECTOR

1.Rising private participation and Investments:

• Investment made by private sector during the 12th Five Year Plan (2012–17) is expected to increase by

69.1 per cent to US$ 9.3 billion over that during the 11th Five Year Plan .

• Currently, five international airports have been completed successfully under PPP mode .

• Four existing airports and two greenfield projects will be offered on PPP basis which is expected to

attract investments from private players .

• Delhi International Airport, a GMR led consortium, signed a land license agreement with Airbus to set

up India’s 1st full flight simulator at the Aerocity, Indira Gandhi International Airport.

2.User development fees:

• Increasing use of development fees by airport developers and operators .

• Airport Development Fee: Delhi, Mumbai airports to fund expansion .

• User Development Fee: Hyderabad, Bengaluru airports for maintenance.

3.Greater use of non scheduled airlines

• Rising business activity leading to higher demand for non-scheduled airlines

• As on July 2017, there are 112 operators (NSOP)

4.Focus on nonaeronautical revenue

• Indian airports are emulating the SEZ-aerotropolis model to enhance revenues focus on revenues from

advertising, vehicle parking, etc.

• Absence of complementary meals in low-cost airlines have boosted the F&B retail segment at airports.

• With the initiative of displaying “Art for a cause, Nagpur airport became India’s 1st airport to take up

the cause of empowering the girl child in a unique way.

REASONS TO INVEST

• India is projected to be the 3rd largest aviation market by 2024, as per IATA.

• Ministry of Civil Aviation has received bids for 43 out of 50 airports in country, which

were planned to be revived and operationalized to improve regional and remote air con-

nectivity.

• The Indian aviation sector is likely to see investments around US$ 15 bn during 2016-20.

one-third of this is expected to come from the private sector.

• Skill India Mission has a clear focus to leverage India's human capital potential and create

job opportunities.

• Cabinet Committee on Economic Affairs has approved scope for revival and development

of unserved and under-served airstrips with US$ 643 mn budgetary support.9

• Tremendous growth of aviation sector is also increasing the demand for Maintenance,

Repair and Overhaul facilities.

• Greater focus on infrastructure development such as Open Sky Policy and Airports Au-

thority of India’s drive for modernization of airports and air navigation systems.

• Skill India Mission has a clear focus to leverage India's human capital potential and create

job opportunities.

• Six new airports in Ahmedabad, Jaipur, Lucknow, , Thiruvananthapuram , Guwahati and

Mangaluru have received approval for leasing out under the PPP mode.

• e-Governance for Civil Aviation (eGCA) offers online delivery of 162 licensing and regu-

latory processes of Directorate General of Civil Aviation (DGCA).

• GPS-Aided Geo Augmented Navigation is India's first Satellite-based Augmentation Sys-

tem. It provides additional accuracy for safety in civil aviation and has expansion capability

for seamless navigation services across geographies.

•

INVESTMENT OPPORTUNITIES

• Indian Carriers plan to increase their fleet size by 2020 to around 1,200 aircraft.

• 300 business jets, 300 small aircrafts and 250 helicopters are expected to be added to the current fleet

of Indian carriers between 2017-22.

• Investment opportunities worth US$ 3 bn in greenfield airports under PPP mode at Navi Mumbai

(Maharashtra) and Mopa (Goa).

• AAI is going to invest Rs 15,000 crore (US$ 2.32 billion) in 2018-19 for expanding existing terminals and

constructing 15 new ones.

• The AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-

regional hubs.

• In June 2018, India has signed an open sky agreement with Australia allowing airlines on either side to

offer unlimited seats to 6 Indian metro cities and various Australian cities.

• Indian airports are emulating the Special Economic Zone Aerotropolis model to enhance revenues. The

model focuses on revenues from retail, advertising, vehicle parking, security equipment and services.

• Indian aircraft Manufacture, Repair and Overhaul service providers are exempted completely from cus-

toms and countervailing duties.

FINANCIAL SUPPORT

MRO, ground handling, cargo and Aviation Turbine Fuel infrastructure facilities collocated at an airport, including heli-

port licensed by DGCA, are covered under the ‘harmonised list of infrastructure’ in the National Civil Aviation Policy

2016. The Regional Connectivity Scheme under the Policy provides for following financial support:

• Revival of airstrips/ airports as No-Frills Airports at an indicative cost of US$ 7.1 mn to US$ 14.3 mn.

• Viability Gap Funding (VGF) to airline operators

• Reduced Service Tax on tickets for 1 year initially

• Demand-driven selection of airports/ airstrips for revival in consultation with State Governments and airlines

• Reduced Excise Duty at 2% on ATF picked at RCS airports.

MAJOR AIRLINES OPERATING IN INDIA

SpiceJet- Market share: 12.4 % . Passenger load traffic: 93.6%

GoAir

Market share: 8.9 % Passenger load traffic: 84.6%

Jetlite

Market share: 1.4 %

Passenger load traffic: 79.2 %

Indigo

Market share: 41.9 %


Air India


Passenger load traffic: 82.3%

Jet Airways



ACHIEVEMENTS

• In September 2018, Jharsuguda Airport in Odisha & Pakyong Airport in Sikkim were inaugurated. Pakyong airport is Sikkim’s

1st ever airport and AAI’s first Greenfield airport construction.

• FDI grew 5 times - from US$229 mn (2010-14) to US$1148 mn (2014-18) in Air Transport sector.

• In December 2018, Kannur International Airport was inaugurated making Kerala the only state in India to have 4 internation-

al airports.

• National Civil Aviation Policy boosted regional air connectivity. It provided an integrated ecosystem to promote tourism and

generate employment.

• Domestic passenger traffic crossed the 100 mn mark in 2017, reaching 123.32 mn during 2017-18.

• Revival and operationalisation of 160 airports

• Operationalisation of 16 Common User Domestic Cargo Terminals.

• Approval provided for 18 greenfield airports.

• A total of 75 airports were opened in 75 years of Independence while 33 new airports were started in just one year between

2016 and 2017.

• The GPS-Aided Geo Augmented Navigation system (GAGAN) launched.

FOREIGN INVESTORS

Airbus (France)

Boeing International Corporation (US)

AirAsia (Malaysia)

Rolls Royce (UK)

Malaysia Airports Holdings Berhad (Malaysia)

GE Aviation (US)

Airports Company South Africa Global (South Africa)

Alcoa Fastening Systems Aerospace (US)

Frankfurt Airport Services Worldwide (Germany)

Honeywell Aerospace (US)

Singapore Airlines (Singapore)

Etihad Airways (UAE)

Fairfax (London)

GLOSSORY

N O T E S

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclaimer

This publication has been prepared for general guidance on matters of interest only, and does not

constitute professional advice. No representation or warranty (express or implied) is given as to the

accuracy or completeness of the information contained in this publication, and, to the extent per-

mitted by law, LawDocs, its members, employees and agents accept no liability, and disclaim all re-

sponsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on

the information contained in this publication or for any decision based upon it.

This publication contains certain examples extracted from third party documentation and so

being out of context from the original third party documents; readers should bear this in mind when

reading the publication. The copyright in such third party material remains owned by the third par-

ties concerned, and LawDocs expresses its appreciation to these firms/institutions/ companies for

having allowed it to include their information in this publication. Kindly take note that the inclusion

of a company in this publication does not imply any endorsement of that company by LawDocs nor

any verification of the accuracy of the information contained in any of the examples.

© 2020 LawDocs All rights reserved.

Designed by: LawDocs Brand and Communications, India.

In association with wPractical.com

Take informed decisions.

Click to connect

Get business advisory, now.

[email protected]

http://www.wpractical.com/

https://www.youtube.com/channel/UCJRzAGkSdcWfxcHx3tA5jLA

https://twitter.com/lawdocsservices

https://www.instagram.com/lawdocsservices/?hl=en

https://www.facebook.com/lawdocsservices/

https://t.co/RQDOS0Ct3c

https://www.lawdocs.in/business-advisory-plan/

aviation poliy review

Documents