AIRPORTS. November 2010

Transcription

1 AIRPORTS November 2010

2 AIRPORTS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 2

3 ADVANTAGE INDIA Advantage India Domestic passenger traffic is estimated to reach million by 2020, while international passenger traffic is expected to grow to around 50 million by Under the revised Eleventh Five Year Plan ( ), the Government of India (GoI) estimated an investment of around US$ 7.5 billion (INR billion) for the development of airport infrastructure. Growing investments for developing airport infrastructure Growing air traffic Advantage India Increasing scheduled air services In , scheduled air services are available between 82 airports as against 50 in early Raw material such as cement, steel and iron are available in abundance. India is the second-largest producer of cement ( ), the fifth-largest producer of steel ( ) and the largest producer of direct reduced iron ( ) in the world. Easy availability of raw material Enhancing competence Strong focus on safety In 2009, only 1accident per 1.4 million flights was recorded, making airlines the safest way to travel. The Airports Authority of India (AAI) is upgrading and modernising 35 non-metro airports in the country at an estimated cost of around US$ 1 billion (INR 46.6 billion), as well as modernising the airports of Chennai and Kolkata. Sources: Performance of Select Industries, Department of Industrial & Promotion website, accessed 25 January 2010; Ministry of Steel and annual reports; Sector focus: Civil aviation, Indian Infrastructure, October 2010; Ministry of Civil Aviation annual report. 3

4 AIRPORTS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 4

5 MARKET OVERVIEW Airports overview (1/2) Presently, India has 136 airports, of which 128 are owned by the AAI. AAI-managed airports can be categorised as: Airports Number International airports, including joint venture (JV) airports 14 Domestic airports 81 Customs airports 8 Civil enclaves 25 Additionally, the AAI provides CNS-ATM facilities at 11 other airports, which enables India to provide safe and efficient air traffic services Source: Ministry of Civil Aviation annual report. 5

6 MARKET OVERVIEW Airports overview (2/2) In , international airports handled around 80 per cent of aircraft movement, 87 per cent of passenger traffic and 97 per cent of freight traffic. The responsibility of developing, financing, operating and maintaining all government airports in the country rests with the AAI, which was established in 1994 under the Airports Authority Act. The Aircraft Act, 1934 governs the remaining airports. Sources: Ministry of Civil Aviation and annual reports; Traffic News, Airports Authority of India website, accessed 28 January 2010; Statistics, Directorate General of Civil aviation website, accessed 17 November

7 Million MARKET OVERVIEW Traffic handled passenger traffic (1/2) Passenger traffic handled by Indian airports increased at a compound annual growth rate (CAGR) of 15.8 per cent between and The introduction of low-cost airlines, coupled with rising disposable incomes in the country, has resulted in substantial growth in domestic passenger traffic, which increased at a CAGR of 17.5 per cent between and Total passenger traffic handled Total passenger traffic Y-o-y growth (%) Y-o-y growth (per cent) Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 7

8 Million MARKET OVERVIEW Traffic handled passenger traffic (2/2) International passenger traffic increased at a CAGR of 12.1 per cent between and , backed by the growth of the tourism industry and the GoI s open sky policy. During April 2010 September 2010, total passenger traffic increased from 58.2 million in April 2009 September 2009 to 67.7 million, at 16.2 per cent. International passenger traffic reflects growth at 12.2 per cent, and domestic passenger traffic grew at 17.8 per cent during April 2010 September 2010 compared with the same period in International and domestic passenger traffic International Domestic Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 8

9 000 tonnes MARKET OVERVIEW Traffic handled freight traffic (1/2) India has witnessed substantial growth in its international and domestic trade over the past few years, which has resulted in a significant increase in the freight traffic handled by airports in the country. The freight traffic handled by Indian airports increased at a CAGR of 8.9 per cent between and ,500 2,000 1,500 1, Total freight traffic handled 1, , , , , , Y-o-y growth (per cent) Total freight traffic Y-o-y growth (%) Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 9

10 000 tonnes MARKET OVERVIEW Traffic handled freight traffic (2/2) Between and , international cargo traffic increased at a higher CAGR of 9.1 per cent, as compared to a CAGR of 8.5 per cent in the case of domestic freight traffic. The share of international freight in the country s total freight traffic stood at 68 per cent in and 65 per cent in During April 2010 September 2010, international freight traffic and domestic freight traffic have increased by 24.4 per cent and 31.6 per cent, respectively, compared with the same period in ,400 1,200 1, International and domestic freight traffic 1,271 1,147 1,149 1, International Domestic Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 10

11 000 MARKET OVERVIEW Traffic handled aircraft movement (1/2) The introduction of low-cost carriers and a liberalised aviation policy have boosted aircraft movement at Indian airports. Aircraft movement at Indian airports has increased at a CAGR of 15.4 per cent between and Total aircraft movement , , , , Total aircraft movement Y-o-Y growth (%) Y-o-y growth (per cent) Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 11

12 000 MARKET OVERVIEW Traffic handled aircraft movement (2/2) International and domestic aircraft movement has almost doubled between and ,200 1, International and domestic aircraft movement 1, , , International Domestic Sources: Traffic News, Airports Authority of India website, accessed 17 November 2010; Ernst & Young analysis. 12

13 US$ billion MARKET OVERVIEW Growth drivers (1/4) Growth in international trade and the introduction of low-cost airlines have substantially increased the quantum of traffic handled at airports. Growing international trade India s airports handle about 30 per cent of the country s total trade in terms of value. Exports (including re-exports) grew at a CAGR of per cent between and , while imports grew at a CAGR of per cent, driving the growth in traffic handled at the airports Growth in exports and imports (US$ billion) Source: Export Import Data Bank, Ministry of Commerce website, accessed 16 November Exports Imports 13

14 MARKET OVERVIEW Growth drivers (2/4) Introduction of low-cost airlines and rising disposable income Rising disposable income, especially among India s middle class, together with the introduction of lowcost carriers, has positively influenced the country s aviation industry and necessitated further development of airport infrastructure. The number of scheduled passenger airline operators has increased to 15, and the number of aircraft in their fleet size has increased from 184 in to 400 in , of which a large number of aircraft belongs to private players. Sources: Statistics, Directorate General of Civil Aviation website, accessed 28 January 2010; Policies, Ministry of Civil Aviation website, accessed 28 January 2010; Data & Statistics, Ministry of Finance website, accessed 25 January 2010; Ministry of Civil aviation annual report. 14

15 000 MARKET OVERVIEW Growth drivers (3/4) A growing tourism industry and favourable government policies are promoting the development of airport infrastructure in the country. Growing tourism industry: The GoI has been actively promoting the country s tourism industry, which was expected to increase at a CAGR of 11.8 per cent between 2005 and Domestic tourist traffic grew at a CAGR of around 12.1 per cent to 650 million tourists in 2009, compared with 366 million tourists in The share of foreign tourist arrivals (FTAs) by air increased from 85.6 per cent in 2004 to around 89.1 per cent in The Delhi and Mumbai airports cumulatively accounted for more than 50 per cent of these arrivals. 6,000 5,000 4,000 3,000 2,000 1, , ,918.6 FTAs ( 000) 4, , , , Sources: Travel and tourism economic impact: India, 2010, World Travel and Tourism Council website, accessed 17 November 2010; Statistics, Ministry of Tourism (Government of India) website, accessed 17 November

16 MARKET OVERVIEW Growth drivers (4/4) Open sky policy The GoI is gradually liberalising air services and is seeking increased traffic rights under bilateral agreements with foreign countries such as the UAE, Mexico, Thailand and Germany. This has resulted in an increase in the number of international flights in operation, which has necessitated the development of additional airport infrastructure in the country. FTAs by mode of transport, 2008 (per cent) Land Sea Air 89.1 Sources: Statistics, Ministry of Tourism website, accessed 28 January 2010; Publications, Secretariat for Infrastructure, Planning Commission website, accessed 18 January 2010; Ernst & Young analysis. 16

17 MARKET OVERVIEW Key trends (1/2) Backed by government support, private-sector participation is gradually increasing in the sector. Moreover, there is an increasing trend towards the use of non-scheduled airline services, which requires upgrading airport facilities to handle the growing traffic. Increasing privatesector participation The GoI has recognised the need to involve private players in developing world-class airport infrastructure, based on the high growth of traffic handled at airports since With changing government policies, the involvement of private players is gradually increasing in the sector. Increasing the use of non-scheduled airlines With business activity growing, the demand for non-scheduled airline services is increasing. In , the country was home to 99 non-scheduled airline operators with a combined fleet of 241 aircraft, compared with 65 operators with a combined fleet of 201 aircraft in Source: Economic Survey, Ministry of Finance website, accessed 27 January

18 MARKET OVERVIEW Key trends (2/2) Airports are working towards enhancing their aeronautical and non-aeronautical revenue streams. User-development fees Airport developers and operators in the country are charging user-development fees (with permission from the GoI to increase their aeronautical revenues). For instance, the airports at Delhi and Mumbai are charging an airport-development fee (ADF) to fund their expansion plans, while the Hyderabad and Bengaluru airports are charging a user-development fee (UDF) to fund the maintenance and management of facilities at these airports. Increasing focus on non-aeronautical revenue streams Indian airports have been trying to follow the SEZ-aerotropolis model, which focuses on enhancing non-aeronautical revenues, including revenues from areas such as retail, advertising and vehicle parking. This provides the airport operator with a cushion to offset costs and funds for future growth and modernisation. The introduction of low-cost airlines, which, in general, do not offer complementary refreshment and sell a very limited variety of snacks and drinks, has given impetus to the food and beverages retail segment at airports. 18

19 MARKET OVERVIEW Key players Until recently, the AAI was the only major player involved in developing and upgrading airports in the country. However, private-sector players are now becoming increasingly involved in the sector. Some major private sector players include: Company/Group GMR Infrastructure Ltd GVK Power and Infrastructure Ltd Siemens Larsen & Toubro (L&T) Unique Zurich Maytas Infrastructure Limited Major projects Development of Hyderabad International Airport; modernisation of Delhi International Airport Modernisation of Mumbai International Airport Development of Bengaluru International Airport Development of Bengaluru International Airport Development of Bengaluru International Airport Development of Simoga Airport (Karnataka) and Gulbarga Airport (Karnataka) in the build, operate and transfer (BOT) mode Sources: Project search, PPP India Database website, accessed 17 November 2010; Greenfield Airport, Ministry of Civil Aviation website, accessed 29 January Note: This is an indicative list. 19

20 AIRPORTS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 20

21 INVESTMENTS Investments (1/3) Private-sector investment Five international airport projects have been undertaken through the public-private partnership (PPP) mode the development of Cochin, Hyderabad and Bengaluru international airports and the modernisation of Delhi and Mumbai international airports. The table below provides details of some of these ongoing projects: Project PPP type Cost Status Developer Hyderabad International Airport Bengaluru International Airport Modernisation of Mumbai International Airport BOOT* BOOT* LDOT** US$ million (INR 29.2 billion) (Phase-I) US$ million (INR 24.7 billion) (Phase-I) US$ 2 billion (INR 98 billion ) (Phase-I) Phase-I completed in March 2008 Phase-I completed in March 2008 Phase-I completed in 2010 GMR Infrastructure Ltd Consortium led by Siemens, L&T and Zurich GVK Ltd Modernisation of Delhi International Airport LDOT** US$ 1.9 billion (INR 89.8 billion) (Phase-I) Phase-I completed in March 2010 GMR Infrastructure Ltd Development of Terminal 3 (T3) at Delhi International Airport LDOT** US$ 3 billion (INR 144 billion) Completed in July 2010 GMR Group *BOOT: Build-own-operate-transfer, **LDOT: Lease-develop-operate-transfer Source: Project search, PPP India Database website, accessed 19 November

22 INVESTMENTS Investments (2/3) Private players are also undertaking various greenfield projects. Greenfield airport State PPP type Developer Bijapur Airport Karnataka BOT Marg Ltd Simoga Airport Karnataka BOT Consortium of Maytas Infrastructure Limited and VIE India Project Development and Holding Hassan Airport Karnataka BOOT Jupiter Aviation & Logistics Ltd Gulbarga Airport Karnataka BOT Consortium of Maytas Infrastructure Limited and VIE India Project Development and Holding Government investment According to revised Planning Commission estimates, around US$ 7.52 billion is expected to be invested in the airports sector during the Eleventh Five Year Plan, compared to US$ 1.4 billion invested in the Tenth Five Year Plan ( ). The AAI is undertaking projects that involve modernising and expanding the Chennai and Kolkata airports at estimated costs of US$ million (INR 18.1 billion) and US$ million (INR 19.4 billion), respectively. Work at Kolkata Airport is expected to be completed by August 2011 and at Chennai Airport by April Sources: Greenfield Airport, Ministry of Civil Aviation website, accessed 19 November 2010; Economic Survey , Ministry of Finance website, accessed 10 March

23 INVESTMENTS Investments (3/3) The AAI is also upgrading and modernising 35 non-metro airports in the country, including those at Agra, Ahmedabad, Amritsar, Bhopal, Jaipur, Pune and Goa, at an estimated cost of around US$ 1 billion (INR 46.6 billion). Of these 35 airports, 9 have been already developed, while the remaining are likely to be completed by The AAI is also developing airports in Northeast India, including Pakyong Airport (Sikkim) and in Itanagar (Arunachal Pradesh) and Cheitu (Nagaland). The development of Pakyong Airport in Sikkim is underway and is expected to be completed by January 2012 at an estimated cost of US$ 64.5 million (INR 3.1 billion). Cheitu Airport in Nagaland and Itanagar Airport in Arunachal Pradesh are at the approval stage. The GoI is also planning the city-side development of 24 non-metro airports in collaboration with private players. The AAI is currently inviting bids for the city-side development of the Lucknow, Jaipur, Amritsar, Udaipur, Kolkata, Visakhapatnam, Indore, Ahmedabad and Guwahati airports. Furthermore, it has signed a JV for the operation and maintenance of the upcoming airport in Mohali, Punjab. Sources: Ministry of Civil Aviation annual report; Economic Survey , Ministry of Finance website, accessed 10 March

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25 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (1/3) The GoI is encouraging private investment in the sector and has taken the following policy measures: The GoI has approved the policy for greenfield airports in April 2008 to enable the development of greenfield airports in the PPP mode. The Planning Commission has also developed a model concession agreement (MCA) to enable state governments to develop greenfield airports under the PPP mode. The GoI has allowed 100 per cent FDI under the automatic route for greenfield airports. For existing airports, 100 per cent FDI is allowed. However, for FDI exceeding 74 per cent, approval is required from the Foreign Investment Promotion Board (FIPB). 25

26 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (2/3) The GoI has allowed 100 per cent tax exemption on airport projects for a 10-year period. Further, the GoI allows airport developers to charge passengers a development fee. In 2009, a separate regulator authority, the Airport Economic Regulatory Authority (AERA) has been established to provide a level playing field and healthy competition between all airports. 26

27 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (3/3) Growth in the aviation sector is driving the need to develop and modernise infrastructure at Indian airports. Airport operators, including the AAI and private developers, receive ADFs from airlines, which contribute to their revenue stream. The GoI has implemented the following policies to support growth in the aviation sector: FDI of up to 49 per cent is allowed in the domestic airlines sector under the automatic route, but not in the case of foreign airline companies. However, non-resident Indians (NRIs) can hold up to 100 per cent equity in domestic airlines. The Ministry of Civil Aviation (MOCA) has raised the FDI limit in cargo airlines from 49 to 74 per cent. With the rise in fuel prices, the GoI has exempted the 5 per cent customs duty levied on jet fuel to help airlines reduce their operational costs. Some states, including Andhra Pradesh, Rajasthan and Maharashtra (excluding Mumbai and Pune), have reduced their sales tax on aviation turbine fuel (ATF). On 22 May 2010, the GoI established the Civil Aviation Safety Advisory Council (CASAC) under the Director General of Civil Aviation. Sources: Airports Investment Commission of India website, accessed 27 January 2010; Ministry of Civil Aviation annual report. 27

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29 OPPORTUNITIES Opportunities (1/2) Five international airport projects have been undertaken under the PPP mode. These include the modernisation of the international airports in Delhi and Mumbai and the development of the Cochin, Hyderabad and Bengaluru international airports. Increasing opportunities for private players The Planning Commission has also developed an MCA to enable state governments to develop greenfield airports under the PPP mode. The GoI is planning the city-side development of 24 non-metro airports in collaboration with private players. The AAI is currently inviting bids for the city-side development of the Lucknow, Jaipur, Amritsar, Udaipur, Kolkata, Visakhapatnam, Indore, Ahmedabad and Guwahati airports. Under the revised Eleventh Five Year Plan ( ), the GoI expects an investment of around US$ 7.5 billion (INR billion) for the development of airport infrastructure in the country. Of this, 64 per cent is expected to come from the private sector. Airport connectivity The MOCA is focusing on improving connectivity to major airports. It has selected 12 airports in the first phase. These include the Mumbai, Chennai, Bengaluru, Kolkata, Hyderabad, Ahmedabad, Cochin, Coimbatore and the proposed Navi Mumbai and Noida airports. The GoI is promoting the expansion of air connectivity between tier-ii and tier-iii cities and has introduced a separate category named Scheduled Air Transport (Regional) Services. Sources: Ministry Of Civil Aviation annual report.; Airports: Economic Survey , Union Budget And Economic Survey website, accessed 16 November ; Eleventh Five-year plan ( ), Planning Commission website, accessed 11 November 2010; Sector focus, Civil aviation, Indian Infrastructure, August

30 OPPORTUNITIES Opportunities (2/2) The substantial increase in international air traffic and the growth in the fleet size of domestic airlines has given India the opportunity to provide maintenance, repair and overhaul (MRO) services to these airlines. MRO facilities International passenger and cargo traffic have increased at CAGR of 12.1 per cent and 9.1 per cent, respectively between and International tourist traffic is expected to increase up to 50 million by The demand for MRO services has increased substantially in the past five years. In India there is only one established third-party MRO facility. So, there exists an opportunity for MRO services in the country. Both greenfield and brownfield airport projects have a strong focus on setting up MRO facilities. The country s aviation sector has investment opportunities worth US$ 150 billion and GoI has invited Canadian and other global companies to participate. Between April 2000 and August 2010, FDI in the air transport sector (including air freight) amounted to US$ million. Foreign investments in the civil aviation sector The GoI is taking initiatives and liberalising foreign investment conditions to encourage foreigninvestor participation in the civil aviation sector. The GoI has allowed 100 per cent FDI for greenfield airports under the automatic route. The MOCA has raised the FDI limit for cargo airlines from 49 per cent to 74 per cent. Under its open sky policy, the GoI is gradually liberalising air services in the country and is seeking increased traffic rights through bilateral agreements with foreign countries such as the UAE, Mexico, Thailand and Germany. Sources: Ministry of Civil Aviation annual report.; Sector focus, Civil aviation, Indian Infrastructure, August 2010; Press release, Ministry of Civil Aviation website, accessed 17 November

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32 INDUSTRY ASSOCIATIONS Industry associations Airports Authority of India (AAI) Rajiv Gandhi Bhawan, Safdarjung Airport, New Delhi Phone: Directorate General of Civil Aviation (DGCA) Aurbindo Marg, Opp. Safdarjung Airport, New Delhi Phone: Fax:

33 NOTE Note Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Conversion rate used: US$ 1= INR 48 33

34 AIRPORTS November 2010 DISCLAIMER India Brand Equity Foundation (IBEF) engaged Ernst & Young Pvt Ltd to prepare this presentation and the same has been prepared by Ernst & Young in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Ernst & Young and IBEF s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Ernst & Young and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Ernst & Young nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation. 34