INDIA S AVIATION INDUSTRY: AN OVERVIEW

Transcription

1 INDIA S AVIATION INDUSTRY: AN OVERVIEW Prepared by The MITRE Corporation/CAASD Authors: Dr. Satish C. Mohleji Cheryl R. Andrews Mimi Dobbs Bob Humbertson December 7, 2009 Submitted to the Association of American Airport Executives (AAAE) for the U.S. Trade Development Agency (USTDA)

2 EXECUTIVE SUMMARY The civil aviation sector in India had been growing at a dramatic rate into 2008; however the global economic recession in 2009 negatively affected this growth. During fiscal year (April 1, 2005 to March 31, 2006), the sector experienced a 22 percent increase in domestic air travel. International air travel grew 15 percent, while air cargo grew at an annual rate of 20 percent. During fiscal year , total passenger traffic grew 27.2 percent, while cargo traffic grew 11.2 percent. This year total aircraft movements increased 27.5 percent. However, in fiscal year , the global economic slump and higher fuel prices adversely impacted growth, resulting in a 5 percent decline in domestic passenger traffic. Domestic air cargo continued to grow at 14.5 percent. With the economy now stabilizing, domestic air traffic is projected by various sector experts and observers to grow by up to 180 million passengers and international traffic is expected to increase by 50 million passengers by International traffic is expected to grow at an average annual rate of 8 percent by 2013 and by 7 percent from 2014 to Domestic traffic will experience a slower growth rate of 3.4 percent annually until 2013 and increase to an average rate of 8 percent until International passenger growth will average 10 percent until 2013 and 9 percent until Annual growth in domestic and international cargo operations is estimated to increase by 4.5 percent and 12 percent annually until In the last few years, the sector experienced tremendous growth for a number of new air carriers providing domestic services. Starting from a relatively small base, the civil aviation sector in India faces the prospect of significant expansion as the overall economy recovers and India retains the second-highest growth rate worldwide. Some 639 new commercial jet aircraft were ordered by November 2008 and the number of General Aviation (GA) aircraft is projected to grow to 1,000 by Much of this significant growth has been made possible by a combination of favorable policies and timely initiatives that liberated much of the sector from the earlier highly regulated regime. These include: An Open-Sky policy adopted in April The policy allowed air taxi operators to operate flights from any airport and decide their own flight schedules, cargo, and passenger fares. Repeal of the Air Corporation Act effective from March 1, 1994 that led to: Removal of monopoly of air corporations on scheduled services, Ability of private airlines to operate scheduled services, 1 Latest ANS Development in India, P. Seth, 4th CANSO Asia Pacific ANSP Conference, Singapore, April i -

3 Conversion of Indian Airlines and Air India (national flag carriers) to limited companies, and Increased scope for private participation in the national carriers. AAI was set up on April 1, 1995 by merging the International Airport Authority of India and the National Airport Authority of India. AAI was designated to handle all civil air traffic infrastructure matters. In August 1996, the Government of India (GOI) allowed the private sector to set up air cargo complexes in a bid to ensure smooth movement of export cargo. Furthermore, domestic and foreign investors, including non-resident Indians (NRIs), were invited to participate in the development of infrastructure support at select airports. Cochin International Airport, the first private airport, began operations in June The United Progressive Alliance (UPA), which assumed political leadership of the Union Ministry on May 22, 2004, renewed its commitment to continue liberalization in the sector. The Honorable Minister Praful Patel assumed leadership of MOCA and was re-elected in The U.S. and India Aviation Cooperation Program (ACP) was established in 2007 as a Public Private Partnership (PPP) between the U.S. Federal Aviation Administration (FAA), the U.S. Trade and Development Agency (USTDA), U.S. companies, and the Government of India. Establishment of 103 bilateral air service agreements as of Final agreements and the transfer of Mumbai and Delhi Airports under PPP took place in May The first phase of modernization at Delhi Airport started in January 2007 and is expected to be completed by March The modernization work at Mumbai Airport started in January 2007 and is expected to be finished this year. Modernization of Kolkata and Chennai Airports started in 2008 and will be completed by either 2010 or The Greenfield International Airports at Bangalore and Hyderabad started commercial operations in The AAI commissioned stateof-the-art CNS and ATM systems at these airports. The GOI formed the Maharashtra Airport Development Company (MADC) for development of the Multi-Modal International Cargo Hub and Airport of Nagpur (MIHAN) at a cost of about $90 million. Maintenance, Repair and Overhaul (MRO) opportunities exist for servicing 1,000 commercial aircraft and 500 GA aircraft. AAI is planning to invest about $1.2 billion to modernize 35 non-metro airports. The development of 24 of these airports will be undertaken with private sector participation. - ii -

4 AAI has been granted Mini-Ratna status under Category-I (CAT I). Mini-Ratna status will enable AAI to make investments in projects up to $107.5 million (Rs 500 Crore) and provide greater decision making autonomy to its management. 2 The Airport Economic Regulatory Authority (AERA) Bill was passed by the Indian Parliament to ensure that India s aviation infrastructure meets cost, efficiency, and service targets by making policies consistent with the International Civil Aviation Organization (ICAO) standards. The GOI merged Air India and the Indian Airlines to form the National Aviation Company of India Limited (NACIL), which consolidated international and domestic flight operations. Based on the strategic and guiding principles of the ICAO ATM vision of global harmonization, India developed a Future Indian Air Navigation System (FIANS) Master Plan for seamless airspace operations. Clearly, these are interesting times for identifying investment opportunities for those who follow civil aviation sectors around the world. External commercial borrowing to finance aviation infrastructure development increased from $145 million in fiscal year to $4.74 billion in fiscal year , but decreased due to the economic downturn during fiscal year to $1.91 billion. However, the direct investment potential of the sector is about $9 billion, not including spill-over benefits and positive externalities. In order to facilitate overall economic growth, these investments will have to take place in a short period of time. For a country that is in the middle of a transition process involving sector and institutional reforms, materialization of new opportunities may take time. While some investments and business opportunities may be closer to fruition, many others depend on the speed at which new reforms are implemented, economic growth is sustained, and bureaucratic procedures are relaxed. The first section of this report provides a broad overview of the economy and the civil aviation sector. The second section documents investment and business opportunities, in different phases from conceptualization to maturation, for possible involvement by U.S. firms. 2 Mini Ratna is a status granted by the Department of Public Enterprises (DPE) to Indian public sector undertakings in view of consistent performance records, annual investment figures, and profitability. - iii -

5 TABLE OF CONTENTS Section 1. Country Overview: India...1 Section 2. Sector Overview: Civil Aviation...6 Section 3. Sector Overview: Institutional Arrangements...12 Section 3A. Ministry of Civil Aviation and Airports Authority of India Joint GOI/Private Partnership for Airport Development...15 Section 3B. Directorate General of Civil Aviation The Organizational Framework The Regulatory Framework...17 Section 4. Sector Opportunities...21 Section 4A. Airports: Selected Opportunities Opportunity for Airport Modernization and Expansion...22 (a) Delhi and Mumbai Airport Modernization and Expansion...22 (b) Modernization of Airports at Chennai and Kolkata...25 (c) Modernization Programs at 35 Non-Metro Airports...27 (d) Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN)...28 (e) Completion of Greenfield Airports at Bangalore and Hyderabad Procurement of Materials for Airside and Landside Modernization...30 Section 4B. Air Transportation Management: Selected Opportunities Opportunities for CNS/ATM Modernization...32 (a) Future Indian Air Navigation System (FIANS) Master Plan...32 (b) Current Airspace and Operations...32 (c) CNS/ATM Master Plan Update...34 (d) CNS Upgrades...35 (e) GAGAN Certification and Implementation...35 (f) ATM Enhancements Weather System Enhancements Opportunities for Commercial Aircraft MRO Opportunities for Training...39 Some Useful References...41 U.S. Government Resources...43 Key Point of Contacts...44 Appendix: Airports in India and Institutional Arrangements iv -

6 TABLE OF FIGURES Figure 1. Offshore BPO Market: Total and India...2 Figure 2. Foreign Direct Investment (FDI) Stocks Inward...2 Figure 3. India: Share of Top Investing Countries' FDI Inflows (Aug to Sept. 2005)...3 Figure 4. Aircraft Movements in India...6 Figure 5. Traffic Network in India...8 Figure 6. International Tourism: In and Out of India...9 Figure 7. Orders of New Aircraft by Specific Airlines (2009)...11 Figure 8. Organizational Structure of the Ministry of Civil Aviation...13 Figure 9. Corporate Functioning of AAI...14 Figure 10. Organizational Structure of the DGCA...17 Figure 11. Consortium of Partners...22 Figure 12. Vertical Segmentation of Typical Airspace: An Example...33 Figure 13. GAGAN Network in India...37 Figure 14. Airline Order Book in India (End of 2006)...38 TABLE OF TABLES Table 1. Planned Investments in Indian Aviation Infrastructure...10 Table 2. Financial Profile of AAI...15 Table 3. Non-Metro Airport Development v -

7 CONVERSION TABLE 2 nd U.S.-India Aviation Partnership Summit US $ 1 = Rupees 46.5 (Average rate November 2009) 1 Crore = 10 million 1 Lakh = 100,000 All monetary references in US Dollars ($) LIST OF ABBREVIATIONS A-SMGCS AAAE AAI ACC ACP ACSA ADS-B ADS-C AERA AFTM AFTN AMSS ANS ANSP APD ASEAN ATC ATF ATM ATR ATS BCAS BIAL BOO BOOT BOT BPO CAASD CAGR Advanced-Surface Movement Guidance and Control System American Association of Airport Executives Airport Authority of India Area Control Centers Aviation Cooperation Program Airports Company of South Africa Automatic Dependent Surveillance-Broadcast Automatic Dependent Surveillance-Contract Airport Economic Regulatory Authority Air Traffic Flow Management Aeronautical Fixed Telecommunication Network Aeronautical Mobile Support System Air Navigation Service Air Navigation Service Providers Airport Planning Directorate Association of South East Asian Nations Air Traffic Control Aviation Turbine Fuel Air Traffic Management Avions De Transport regional Air Traffic Services Bureau of Civil Aviation Security Bangalore International Airport Limited Build-Own-Operate Build-Own-Operate-Transfer Build-Own-Transfer Business Process Outsourcing Center for Advanced Aviation System Development Cumulative Annual Growth Rate - vi -

8 CANSO CAR CAT CFR CIAL CNS CPDLC DGCA DGPS DIAL DME DOC DPE DPR DVOR EMARSH FAA FANS FAR FBO FDI FDPS FIANS FIR FOP GA GAGAN GDP GE GEO GOI GOK GPS HIAL IAAMS IATA ICAO Civil Air Navigation Services Organization Civil Aviation Requirements Category Code of Federal Regulations Cochin International Airport Limited Communications, Navigation, and Surveillance Controller Pilot Data Link Communications Directorate General of Civil Aviation Differential Global Positioning System Delhi International Airport Limited Distance Measuring Equipment Department of Commerce Department of Public Enterprises Detailed Project Report Doppler Very High Frequency Omnidirectional Range Europe Middle-East, Asia Route Structure of Himalayas Federal Aviation Administration Future Air Navigation System Federal Aviation Rules Fixed Base Operator Foreign Direct Investment Flight Data Processing System Future Indian Air Navigation System Flight Information Region Final Operational Phase General Aviation GPS Aided Geo Augmented Navigation Gross Domestic Product General Electric Geostationary earth Orbiting Government of India Government of Karnataka Global Positioning System Hyderabad International Airport Limited Integrated Automatic Aviation Meteorological Systems International Air Transport Association International Civil Aviation Organization - vii -

9 ILS IMD INRSS ISO ISRO IT ITes JVC LCCs MADC MET MIAL MIHAN MOCA MRO MSSR NACIL NDB Instrument Landing System Indian Meteorological Department Indian Navigation Regional Satellite System International Organization for Standardization Indian Space Research Organization Information Technology Information Technology-enabled Services Joint Venture Companies Low-Cost Carriers Maharashtra Airport Development Company Meteorological Mumbai International Airport Limited Multi-modal International Cargo Hub and Airport of Nagpur Ministry of Civil Aviation Maintenance, Repair and Overhaul Monopulse Secondary Surveillance Radars National Aviation Company of India Limited Non-Directional Beacon NH8 National Highway No. 8 NRI O&M OAG ONGC PPP PSR PSU R-FDPS RCAG RJ RNAV RNP RVSM SAARC SBAS SESAR SID SITA Non-resident Indians Operations and Maintenance Official Airline Guide Oil and Natural Gas Commission Public Private Partnership Primary Surveillance Radar Public Service Unit FDPS with Radar Radio Controlled Augmentation Regional Jets Area Navigation Required Navigation Performance Reduced Vertical Separation Minimum South Asian Association of Regional Cooperation Satellite Based Augmentation System Single European Sky ATM Research Standard Instrument Departure Societe Internationale de Telecommunication Aeronautiques - viii -

10 SOW Scope of Work STAR Standard Terminal Arrival route TA Technical Assistance TAR Terminal Area Radars TDS Technology Demonstration System TDWR Terminal Doppler Weather Radar U.N. United Nations U.S. United States UPA United Progressive Alliance US $ US Dollars ($) USTDA United States Trade and Development Agency VHF Very High Frequency VOR Very High Frequency Omnidirectional Range - ix -

11 SECTION 1. COUNTRY OVERVIEW: INDIA India is the world s second most populous country with more than 1.1 billion people, encompassing a rich diversity of cultures, regions, and languages. India has experienced tremendous economic and social development in recent years. Since its independence in 1947 from the United Kingdom, India has reached several key milestones [World Bank (2009)]: 3 Maintained electoral democracy. Reduced absolute poverty by more than half. Improved literacy and health conditions. Developed into one of the world s fastest growing economies with an average growth rate of about 9 percent from 2003 to 2007, and is expected to grow at an average rate of 8.5 percent from 2009 to Emerged as a global player in information technology, business process outsourcing (BPO), telecommunications, and pharmaceuticals. Ranked as the world s fourth largest economy in terms of purchasing power parity. Although India is one-third the size of the United States and almost four times larger in terms of population, India has a relatively small economy (approximately 7 percent of the U.S. nominal Gross Domestic Product [GDP]). However, as the country integrates with the global economy, which is happening at a faster pace since the economic liberalization of 1991, a greater opportunity exists for the outside world to collaborate, cooperate, enhance trade, and increase production of goods and services with India. India s development embodies contradictions, and the path to economic growth is rarely linear as evidenced by sector inequality and the overall pace of reforms. However, what has been accomplished in the service sector can be used as an example of what India can deliver in a short time. Using the country s available human resources, a supportive policy environment, and the opportunities that a global marketplace offers, India has nurtured, led, and is now at the forefront of a knowledge-based economy that promises to play a key role in shaping the future of the global economy. 3 See India: Country in Brief at

12 Starting from less than $1 Figure 1. Offshore BPO Market: Total and India billion per year, India s BPO and Information Technologyenabled Services (ITes) sector has become a $14 billion industry, which represents over a 14-fold increase in just six years, as shown in Figure 1. With a cumulative annual growth rate (CAGR) of almost 70 percent, Gartner Research 4 estimates that India now holds approximately 60 percent of the total offshore BPO and ITes market share. Total BPO and ITes markets are estimated to be somewhere between $173 and $200 billion in fiscal year As shown in Figure 2, the sector continued growth from year 2000 to Based on Foreign Direct Investment, it is likely that the sector growth will continue as the economy recovers because of India s unique market position. Figure 2. Foreign Direct Investment (FDI) Stocks Inward Despite this success, uneven economic growth has spurred rising inter-state disparities. For example, while larger and relatively economically advanced states have reduced poverty by successfully attracting private investment, relatively poorer states Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh are lagging behind. Private investments have been a major vehicle fueling India s economic growth. As India opened its economy during the last 15 years, foreign investments slowly began to trickle into the country. The World Investment Report (2006) by the United Nations (U.N.) Conference on Trade and Development 5 indicates that FDI in 4 5 See for more details. See for more details

13 India lags far behind that of China. In recent years, however, India has been more successful in attracting FDI. A.T. Kearney 6 reports that China s FDI flows in 2008 were larger ($108.3 billion/year) and primarily capital-intensive, while FDI flows into India are comparatively smaller ($41.5 billion/year), but also skill-intensive and concentrated primarily in ITes. While total FDI inflows into Figure 3. India: Share of Top Investing Countries' FDI Inflows India remain relatively (Aug to Sept. 2005) lower than China, the U.S. has been at the forefront of investment in India. The Government of India (GOI) reports that from 1991 to 2005, the U.S. invested almost $5 billion in India and remains India s second largest investment partner based on FDI inflows. Figure 3 shows that Japan, the Netherlands, the United Kingdom, Germany, Singapore, France, South Korea, and Switzerland Source: Ministry of Statistics and Programme Implementation: are some of the other major foreign investors in India. While the majority of U.S. FDI has focused on service provisions targeted for U.S. domestic markets, U.S. exports to India are primarily of goods and services where it has global comparative advantages. These exports include educational services, computers and peripherals, telecom equipment, pollution control equipment, and equipment for mining, medical, and construction. Expenditures in the economy are also accelerating. Greater use of financial tools (e.g., credit cards, automatic teller machines, and cell phone-linked money transfers) will enhance consumption expenditure. Transition from cash to credit will likely boost the overall consumption and induce even more FDI flows into the country. India s infrastructure needs a major overhaul. The World Bank conservatively estimates that India needs to invest, on average, an additional three to four percent on planned infrastructure improvements to sustain benefits of growth across the transportation sector. Given the present GDP, this amount would represent an annual investment of around $24-$30 billion. 6 See for more details

14 Indian airport infrastructure investment was $5 billion in 2008 and is expected to reach $9 billion by India s aviation sector offers investment opportunities of $200 to $300 billion by India is confident of overcoming temporary economic hurdles in order to continue civil aviation growth. The current fleet replacement offers an investment opportunity of $80 billion, while $30 billion will be required for airport infrastructure development by Many of these investments will be made possible through Public Service Unit (PSU) reforms. Systematic reforms in healthcare, education, power, mining, water supply, and transportation will likely induce private investments at a rapid rate, thus closing the gap between demand from an expanding economy and supply through available infrastructure. The GOI has guided many of these investments carefully, particularly in civil aviation. Although full private participation, including foreign equity, is allowed and encouraged at greenfield airports, the GOI limits private equity (both domestic and foreign) in PSUs. Thus, PPPs have become a common vehicle for building and delivering public services, particularly in the transportation sector. In reforming the PSUs that were former monopolies, the GOI has taken a minority role and allowed private involvements either foreign or Indian private or joint ventures to use three much tested models (build-own-transfer [BOT], build-own-operate [BOO], or build-own-operatetransfer [BOOT]) for service deliveries. While the needs remain great, the sudden surge in transportation investments, particularly post-2000, demonstrates that the GOI s policy may be bearing fruit. India s recent economic growth has been impressive compared to the country s development record in the decades following independence in With growth, the economy has become flexible, people-driven, and more responsive to institutions. Nevertheless, numerous challenges remain. 7 Rigid elements that once characterized the economy are still visible in certain areas including [Khandelwal (2006)]: 8 High intermediation costs in economic and business transactions, Low productivity in many sectors of the economy, Lack of infrastructure, Lack of transparent corporate governance, Need for improvement in productivity and efficiency in line with advanced markets, safety, and environmental procedures and standards, and Lack of trained human resources in advancing sectors of the economy. Empirical evidence indicates that these factors are inversely related to the pace of economic growth and development. While the regional unevenness and inequality in sectors (rural vs. 7 8 For an excellent presentation of these issues in contemporary India, see the recently released In Spite of the Gods: The Strange Rise of Modern India, by Edward Luce, Doubleday, Doing Business in India. The Big Picture: A Banker s Perspective by A. K. Khandelwal at the U.S.-India Business Summit, November 29,

15 urban) and across classes (skilled vs. non-skilled) is skewed and both are areas for improvement, the pace of economic reforms will likely continue in the country. In a marked departure from earlier policies, 1990 economic reforms that have been accelerated in recent years have started to produce results. If the GOI continues to be fiscally responsible by managing the budget deficit, carefully monitoring the large trade deficit, and continuing the pace of overall economic liberalization, India will continue to improve its economic performance before the end of this decade

16 SECTION 2. SECTOR OVERVIEW: CIVIL AVIATION Aviation growth in India has been tremendous in recent years. Aircraft movements, consisting of one aircraft arrival or one departure, have grown 50 percent in the last three years. Starting from a total of less than 838,000 movements per year in fiscal year , total aircraft movements in India are estimated at 1.24 million in Approximately 400 commercial aircraft operated those scheduled movements. Figure 4 shows the expected future growth of aircraft movements in India until Figure 4. Aircraft Movements in India Source: Airports Authority of India (AAI) As the economy has grown at an extraordinary rate (about 9 percent in the past few years, and forecasted to have an average 8.5 percent growth until 2011) and in addition to the liberalization of the aviation sector, both domestic and international aircraft movements have experienced significant growth. As a result of the open skies policy that India adopted, India now has bilateral Air Services Agreements with 103 countries. These air service agreements are subject to several directives: a designation clause allowing multiple destinations between countries; code share arrangements allowing airlines from both countries to enter into code share arrangements; and a tariff clause allowing free fare setting by airlines. Airlines are also no longer required to submit fare schedules to AAI. Aviation safety and security clauses guarantee India s compliance with the - 6 -

17 ICAO standards. 9 Within these broad guidelines, the bilateral agreements ensure different levels of access. For example, the agreement with the U.S. (signed in April 2005) allows the designated airlines of one country to operate unlimited air service to and through any point in the territories of the other country via any intermediate points and without any restriction on the aircraft type, except cabotage. 10 Under the agreements with the Association of South East Asian Nations (ASEAN) and the South Asian Association of Regional Cooperation (SAARC), 11 designated countries are allowed to fly up to seven times per week to Mumbai, Delhi, Chennai, and Kolkata, in addition to eighteen specific tourist points within the country. Following these agreements, growth of international traffic skyrocketed in India. At the opening ceremony of the Aero India conference 12, the Honorable Mr. Praful Patel, Minister of Civil Aviation, said, Not long ago we were spectators to the world of aviation. Today, the clock has turned full circle and the whole world wants to know what's happening in India I wouldn't be surprised if that number increases to 100 million [number of domestic passengers] in a few years. International traffic is expected to grow at an average rate of 8 percent up to 2013 and at 7 percent from 2014 to Domestic traffic will have a slower growth rate of 3.4 percent until 2013 and will increase to an average rate of 8 percent until International passenger growth is expected to be 10 percent until 2013 and 9 percent from 2014 to Corresponding domestic passenger growth is expected to be very low until 2013, but will pick up from 2014 to 2023 at a rate of 8 to 10 percent annually. Annual growth in domestic and international cargo operations also is estimated to increase by 4.5 percent and 12 percent annually until year For a country of more than one billion people with a sizeable middle class ( million) that can afford air travel, the size of the aviation sector is relatively small. While the U.S. has, on average, 50,000 commercial scheduled aircraft movements per day, India has a little over 2,200 each day. Furthermore, much of the traffic flow is located in the five major cities of the country: Mumbai in the West; Delhi in the North; Bangalore and Chennai (Madras) in the South; and Kolkata (Calcutta) in the East, as shown in Figure 5. 9 See India s Internal and External Policies and Challenges, by R. K. Singh, Joint Secretary, MOCA at the EU-India Aviation Summit, November 22-24, 2006; Retrieved from on March 6, Cabotage means transporting domestic passengers within a country for commercial purpose. 11 Association of South East Asian Nations and South Asian Association of Regional Cooperation. ASEAN was formed on August 8, 1967 and presently consists of the following member countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. SAARC was established on December 8, 1985 and composed of the following member countries: India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, and Bhutan. 12 This conference was organized by MOCA, the Federation of Indian Chambers of Commerce, and Industry (FICCI), and Farnborough International Limited and took place in Bangalore during February 7-11, 2007; See for more details

18 Figure 5. Traffic Network in India Source: Official Airline Guide (OAG): August 1-7, 2005; from Williams (2006) These five major cities make up almost 70 percent of the traffic, with Bangalore (recently renamed Bengaluru) and Hyderabad emerging as new traffic destinations. In the past, India had few international tourists. However, liberal bilateral aviation pacts with other countries have started to impact tourism, as shown in Figure

19 Figure 6. International Tourism: In and Out of India Trends in International Tourism: Projections for India Source: Market Indicators and Forecasts, India May 2009, Copyright 2009 Economist Intelligence Unit Given this sizable growth and the state of aviation infrastructure, MOCA faces numerous challenges. The most critical among these is the country s need to improve infrastructural bottlenecks. The Committee on Infrastructure, headed by the Prime Minister and other experts from both inside and outside the federal United Progressive Alliance (UPA) cabinet, has taken up the urgent task of improving the country s infrastructure. According to the GOI/MOCA s estimate, the aviation sector alone will need over $9 billion in investment by This figure represents a significant boost over prior investments, and will test the absorption capability of the sector and the country as a whole. It is likely that most of these investments will come from private sources, as opposed to direct government subsidies or public funds. A breakdown of these investments is given in Table

20 Table 1. Planned Investments in Indian Aviation Infrastructure Particulars Restructuring/Modernization for world class airports Greenfield Airports Delhi & Mumbai Airport Chennai & Kolkata Bangalore, Hyderabad, Pakyong, Sikkim, Cheithu-Nagaland, Itanagar, Goa, Pune, Nagpur (Hub), Navi Mumbai, Halwara-Punjab Indicative Cost US $Million 3, , , Upgradation 35 selected airports 1, Modernization/Improvement Other than above airports Total investment by , Source: Committee on Infrastructure as reported by MOCA, GOI, October Traffic growth and the GOI s decision to accelerate aviation infrastructure development prior to the Commonwealth Games to be held in Delhi in 2010 have accelerated the reform process. Currently, a foreign airline is not permitted to invest in Indian scheduled passenger airlines, nonscheduled airlines, and chartered airlines. Equity ownership is likely to be further relaxed to facilitate new investments in the sector. Limited equity share ownership of FDIs may be relaxed from its present 49 percent cap to 74 percent for airline-airport investments under the pending aviation reform bill. Similarly, there is a possibility of cargo being placed under 100 percent foreign ownership. Finally, foreign equity of 100 percent is already allowed in Greenfield airports investment. The GOI s decision to liberalize the aviation market for private airlines, slowly in the beginning and then rapidly over the last five years in particular, has brought tremendous interest from both low-cost carriers (LCCs) and full-service carriers. 13 This interest is reflected in the airlines order book, which shows that the Indian fleet will double in size (from 287 to 745) over the next five to seven years. 14 The projections indicate that the Indian aviation sector will require about 1,000 aircraft by Figure 7 highlights current orders of new aircraft by specific airlines. 13 This liberalization is far from complete. Numerous regulatory hurdles still exist today. In the past, the GOI maintained the monopoly rights of Indian Airlines and Air India over the Middle Eastern and Gulf markets. However, with the incorporation of NACIL, the Competition Commission may rule in favor of allowing private carriers to fly into these markets as well. 14 Over the next two decades, Boeing forecasts that India will need 856 extra aircraft worth a total of US $72 billon. Airbus, on the other hand, forecasts that the country will need 1,100 aircraft worth US $105 billion over the same period. In their respective forecasts [see and for market forecasts], both companies note that improvements in the aviation infrastructure would tend to even faster growth

21 Figure 7. Orders of New Aircraft by Specific Airlines (2009) India s largest airline company is actually a combination of two state-owned carriers, plus subsidiaries. The GOI formed the National Aviation Company of India Limited (NACIL) to merge Air India and Indian Airlines, consolidating international and domestic flight operations. The NACIL inherited flights from Mumbai and 12 other cities as well as flights to 28 international destinations from Air India. In addition, the NACIL inherited domestic operations from 58 airports in India and 18 international destinations from Indian airlines. The NACIL also code-shares flights with other operators to Europe, North America, Asia Pacific, and the Middle East. The NACIL inherited 115 aircraft from the two airlines and has 68 new aircraft on order to be delivered by The NACIL also recently launched a low-fare airline with 21 B aircraft fleet operating from 16 Indian cities to 14 international destinations, mostly in the Middle East. India has large GA operators as well. For example, Pawan Hans Helicopters Limited is a GOI helicopter operator established in It has a fleet of 36 helicopters servicing Oil and Natural Gas Commission (ONGC), Hydroelectric Power Corporation Limited, ministry of home affairs, the state governments, the North Eastern States, as well as other remote inaccessible areas. Expanding aircraft fleets over a very short period time has put operational and safety agencies under tremendous strain. Broadly speaking, MOCA has two autonomous agencies described in Section 3 that are entrusted with the country s air traffic operational and safety needs: the Airport Authority of India and the Directorate General of Civil Aviation

22 SECTION 3. SECTOR OVERVIEW: INSTITUTIONAL ARRANGEMENTS The civil aviation sector in India is under the union (or federal) jurisdiction of MOCA [see and headed by the Honorable Minister Praful Patel. At present, the federal government is led by the UPA. AAI was formed on April 1, 1995 by an act of the Indian Parliament and was assigned the following responsibilities: Design, construction, and maintenance of aerodrome infrastructure. Commercial utilization of this infrastructure. Management of Indian air space. Provision of route navigation facilities to aircraft flying in Indian air space. AAI is responsible for airport operations and management, except for the two metro airports in New Delhi and Mumbai and two Greenfield airports in Bangalore, Hyderabad. Additionally, AAI meets air traffic service needs by providing the CNS services. The DGCA is primarily responsible for overseeing the airworthiness certification, licensing, and operations safety, and ensuring proper standards and procedures. Recently, the Ministry of Civil Aviation also established an Airport Economic Regulatory Authority (AERA) as an independent regulator to facilitate the development of airports. The AERA will also approve tariff structure and user fees, as well as monitor quality, continuity, and reliability of service provided by the airports under their purview with an annual passenger throughput exceeding 1.5 million. Section 3A. Ministry of Civil Aviation and Airports Authority of India The minister is an elected official and a member of the federal cabinet. The organizational structure of the ministry is given in Figure

23 Figure 8. Organizational Structure of the Ministry of Civil Aviation A senior civil service official, called the Secretary, serves as the functional head of the Ministry. Depending on the structure and workload, the Secretary is assisted by additional and joint secretaries. In addition, MOCA now has one additional secretary and a financial adviser, three joint secretaries, several directors, and deputy secretaries. At present, ministry functions are distributed over 16 sections and an administrative wing that oversees pay and accounting [see Civilaviation.nic.in/ for more detail]. In addition to framing policies, MOCA provides policy guidelines, monitors and evaluates performance, and facilitates interactions with the federal elected body (called Parliament) and the organizations listed above. Furthermore, MOCA supervises implementation of special programs (e.g., minority reservations). Under the ministry, three organizations have direct influence over the daily functioning of civil aviation in the country. In addition to NACIL, AAI, DGCA, and BCAS are three of the most important organizations in the civil aviation system. AAI is directly responsible for safe and efficient functioning of both airports and air navigation service provisions at the airport terminals and en route, BCS is responsible for security, and the DGCA is the regulatory authority over civil aviation in the country. Figure 9 shows the broad organizational structure of AAI

24 Figure 9. Corporate Functioning of AAI Source: In addition, there are parallel agencies that oversee different aspects of AAI in particular and civil aviation in general. For example, the Finance Controller and the Joint Secretary of MOCA oversee the financial and operational functioning of AAI while representing the sector in the parliamentary and union ministry discussions and decisions. The DGCA, on the other hand, has the regulatory authority over the civil aviation while the Bureau of Civil Aviation Security is responsible for civil aviation safety and security [see for more details]

25 The financial profile of AAI is fairly robust (see Table 2 below). At present, there are 11 international airports (excluding Delhi and Mumbai and three civil enclaves), seven custom airports where aircraft can land and take-off to and from international destinations, 26 civil enclaves (Goa, Srinagar, and Bangalore are declared international airports), 89 domestic airports, and two joint venture airports (Delhi and Mumbai). Altogether, there are 86 operational and 41 non-operational airports under the direct jurisdiction of AAI (See Appendix for an overview of the locations and airport infrastructure in India). AAI provides CNS/ATM services to all civil airports, air navigation services, and the entire civil airspace in India. Table 2. Financial Profile of AAI Particulars Revenue US $Million Expenditure US $Million Profit Before Tax US $Million Profit After Tax US $Million Source: MOCA 1. Joint GOI/Private Partnership for Airport Development Ownership of the Mumbai and Delhi airports was transferred to Mumbai International Airport Limited (MIAL) and Delhi International Airport Limited (DIAL) in May However, management of these two airports was not transferred until September Both groups are now held by a PPP model that is the primary instrument for reforming not only these two extremely important Indian airports but also the entire airports sector. Instead of completely privatizing airports, the GOI has decided to form joint venture partnerships in the form of PPPs. While most of the project risks are shouldered by the private owners, the public/government sector shares the rewards. Thus, the public sector would typically share in additional revenues or profits if the PPP achieves greater results than expected in the plan. This anticipated result is common in PPP agreements The present arrangement appears to be no deterrence to further private sector involvement judging from the recent developments in the sector. For example, Delhi s DFS Construction Limited has formed a partnership consortium with Austria s Vienna International Airport; Tata Group has formed a partnership consortium with Singapore s Changi International Airport in early Similar partnerships are expected in the future as MOCA and AAI firm up the liberalization process even more

26 DIAL is led by the GMR Group 16 consortium, while MIAL is led by the GVK group consortium 17. The ownership composition of the Bangalore International Airport Limited (BIAL) is given as an example. The Government of Karnataka (GOK) [ and AAI together hold 26 percent ownership, representing public or government interests, while the private entities hold the rest: Larsen & Toubro, India with 17%; Germany s Siemens AG with 40%; and Unique Zurich International Airport with 17%. A similar structure of equity ownership exists for the other three airports that are under PPP. 16 GMR Group of India is a private business group focused on developing infrastructure in India. 17 The GVK-SA Consortium consists of Airports Company South Africa (ACSA), Bidvest Group Limited India and GVK Industries of India. The Consortium was awarded a contract in 2006 valued at US$1.5 billion to modernize Mumbai airport

27 Section 3B. Directorate General of Civil Aviation The DGCA is the regulatory authority of Indian civil aviation. It ensures the safety of operations by issuing appropriate certifications and licenses designed to guarantee air worthiness of aircraft within the Indian airspace and also by providing inspections to flight operations. In addition, the DGCA issues civil aviation requirements and conducts other procedures. 1. The Organizational Framework The organizational structure of the DGCA is presented in Figure 11. [See Figure 10. Organizational Structure of the DGCA 2. The Regulatory Framework The guiding regulatory framework for civil aviation is referred to as Civil Aviation Requirements (CAR). The CAR is defined in Section 3, Air Transport, Series C, Part II, issued in It stipulates the minimum requirements for granting permission to operate and maintain scheduled passenger air transport services in the country [see Gohain (2006) 18 and for more detailed discussions on requirements]. A scheduled operator's permit can be granted to: A citizen of India. 18 Airline Operations Regulatory Issues in India, K. Gohain; DGCA, internal document,

28 A company or a corporation provided that: o o o It is registered and has its principal place of business within India. Its chairman and at least two-thirds of its directors are citizens of India, and Its substantial ownership and effective control is vested in Indian nationals. Furthermore, an airline wishing to operate international air services (under the existing numerous bi-lateral agreements) must receive permission from both MOCA and the aeronautical authorities of the destination country. In order to receive a permit for scheduled operation, an applicant is required to show the following: A subscribed equity capital of $2.3 to $7 million, depending upon the types and weights of aircraft. A fleet of five or more aircraft either directly owned or leased with maximum certified take-off weight of 5,700 kilograms (kg) and other category of aircraft carrying passengers acceptable to DGCA. However, to facilitate initiation of operations, scheduled operators are allowed to operate with three aircraft and given one year to expand the fleet size to five. The aircraft should be registered in India with a current certificate of airworthiness in the normal passenger category. The existing Aircraft Rules (#60 of 1937) require that all registered aircraft be in possession of a Certificate of Airworthiness. Therefore, it is mandatory to have approved maintenance schedules. Maintenance and repair can be accomplished by reputable organizations, but operators are encouraged to establish their own facilities within the country. A sufficient number of flights and cabin crews are required, depending upon the size of the aircraft. The flight crew must possess current licenses issued by DGCA. For meeting operations and maintenance requirements, the operators are required to prepare the following manuals [see for detailed directives]: Operations manual in accordance with CAR Section 2, Series O, Part X. The manual should contain the operations procedures and policies to be adopted during operations. Maintenance Control (Quality Control) manual in accordance with CAR Section 2, Series E, part I. This manual will describe the operator s quality control and maintenance policies. Training manual for flight crew and cabin crew. There are numerous other requirements that an operator must follow. Among them: Fares charged by the airlines have to be submitted at least 90 days before the proposed implementation date. However, this can be shortened by the DGCA. The airlines are also required to submit their proposed flight schedules (i.e., types of services, frequency,

29 types of aircraft, and flight itineraries) with the DGCA for approval at least 30 days prior to the planned commencement of services. Operators are required to pay aeronautical charges and non-aeronautical charges. Aeronautical charges include landing and parking charges and route navigation facilitation charges. Non-aeronautical charges include fees to be paid by the airlines toward security requirements and facilities leased in the terminal building and operational areas. The operator is required to submit information relating to operational, engineering, and commercial and financial performance to the DGCA. The operator is required to submit statistical data on operations (i.e., capacity, passengers carried, number of aircraft flown, cargo carried) to the DGCA before the 10th day of every month. The scheduled operators shall issue passenger tickets in accordance with the provisions of the Carriage by Air Act, The tickets shall stipulate the conditions of carriage, including the liability of the operator. The operator is required to maintain current insurance for an amount adequate to cover its liability towards passengers and their baggage, as well as crew, cargo, hull loss, and third party risks in compliance with the requirements of the Carriage by Air Act, 1972, or any other applicable law. India s regulatory environment [see for more details] is fairly similar to that of other countries. 19 However, two regulatory requirements unique to India are worth mentioning: social routing and aviation turbine fuel (ATF) tax. The route dispersion guidelines are guided by the Route Dispersal Guidelines of March 1, 1994, issued by the DGCA. In accordance with these guidelines, all routes are divided into Categories (CAT) I, II, IIA, and III. CAT I routes link the most profitable 12 trunk routes that link the major metropolitan cities directly. These include: Mumbai- Bangalore, Mumbai-Chennai, Mumbai-Delhi, Mumbai-Hyderabad, Mumbai-Kolkata, Mumbai- Trivandrum, Delhi-Bangalore, Delhi-Chennai, Delhi-Hyderabad, Kolkata-Bangalore, Kolkata- Chennai, and Kolkata-Delhi. CAT II routes consist of stations in Jammu and Kashmir, north-east region, Andaman and Nicobar and Lakshadweep Islands. CAT IIA involves routes that are exclusively within destinations in Jammu and Kashmir, the northeast region, Andaman and Nicobar and Lakshadweep islands. Finally, CAT III consists of routes other than those included in CAT I and II. Under the present route guidelines, scheduled carriers are required to deploy a specified percentage of capacity deployed (i.e., social routing) in CAT I routes in CAT II, IIA, and III routes as per the following specifications: CAT II will have at least 10 percent of capacity deployed on routes in CAT I; CAT IIA will have at least 10 percent of capacity deployed on routes in CAT II; 19 These are laid out in Federal Aviation Rules (FAR) 49 of the U.S. Code of Federal Regulations (CFR) for the U.S. carriers. See for more details

30 and CAT III will have at least 50 percent of capacity deployed on routes in CAT I. Clearly, these social route allocations are restrictive and may obstruct carriers natural development of networks based on economic forces and operational considerations (e.g., maintenance and crew, overnight positioning). Airlines are required to pay passenger-related charges on the airside (i.e., aeronautical fees) and ATF tax. These fuel taxes are charged on all turboprop and turbofan aircraft operated by scheduled air carriers. The present tax regime does not provide any incentive for air carriers to operate smaller aircraft to secondary or smaller airports (i.e., Tier II and III airports). If some tax incentives for smaller aircraft with less than 100 seats were introduced, 20 for example, regional jets (RJs) may be induced to fly to smaller cities. These incentives may induce RJ expansion in India by encouraging a point-to-point network. The load of congestion on major metro airports may also lessen once the secondary cities develop air traffic. A number of concessions to the small aircraft operations, such as the waiver of aeronautical charges, are already in place. Regulatory reform in civil aviation is relatively new in India. The past decade has seen significant development in the aviation sector, a part of which is clearly driven by sustained overall economic growth. Factors such as enhanced competition, increased efficiency, and growing access to markets in such a short period of time are facilitated by gradual liberalization of the sector, which is expected to continue with the budget for the next fiscal year and with the pending aviation bill. 20 Smaller aircraft have been given ATF tax benefit in the latest budget that was submitted on February

31 SECTION 4. SECTOR OPPORTUNITIES India is in the middle of a transition in its civil aviation sector. A large part of how the sector will develop and its success depends on how quickly the infrastructure bottlenecks are removed to accommodate the growing demand. This process took a concrete step forward with MOCA/AAI s decision to put two Greenfield airports at Bangalore and Hyderabad under PPP. The first private airport was Cochin International Airport Limited (CIAL), which began operations in June The liberalization process continued with the decision to put the two most important operational airports, Mumbai and Delhi, under PPP in May Similar plans are in the early stages of development for other airports. With these developments, however, comes the need for associated improvements in overall ATM. Although AAI has already undertaken some improvements, private stakeholders may also be involved in the decision process. However, numerous new opportunities will only become visible as the sector grows and the needs of different stakeholders are met. U.S.-India Aviation Cooperation Program The U.S.-India Aviation Cooperation Program was established in 2007 as a PPP between the U.S. FAA, USTDA, U.S. aviation sector companies, and the GOI. The ACP supports the growth of Indian civil aerospace sectors and joint development projects with collaborative cooperation among U.S. and Indian stakeholders. ACP objectives include: Advance cooperation and activities among U.S. Government Agencies and industry. Enhance awareness in India to facilitate access to U.S. aviation expertise, technologies, and best practices. Promote cooperation between U.S. and India for aviation safety airport/airspace security, regulatory oversight, and ATM. Provide training and technical guidance for performance based operations. ACP focus areas include: ATM modernization. Airport/airspace capacity analysis, planning, and development. Aviation human resource development. Aviation support industry development. Aviation safety, efficiency, and security enhancements. The panorama of the infrastructural opportunities ranges from advanced projects, such as Kulkada, Chennai, and 35 non-metro airports, to those that are now being expanded, such as Mumbai and Delhi. Due to the nature of the partnerships at Mumbai and Delhi, these projects may provide open competitive business opportunities to U.S. firms. These and many other projects will continue to be detailed and developed in the coming years. Accordingly, it is imperative that companies seeking involvement in the growing Indian market engage at the earliest possible stage with a keen understanding of the need of the stakeholders owner

32 operators at the airports, AAI, and others thus yielding fruitful commercial positioning in the years to come. Section 4A. Airports: Selected Opportunities This section provides a broad overview of airports, locations, trends, the challenges faced, and the types of business opportunities offered. Some opportunities are already well defined and in progress, while others continue to be developed. 1. Opportunity for Airport Modernization and Expansion (a) Delhi and Mumbai Airport Modernization and Expansion Two of the first four airports that transformed through a PPP are the DIAL and MIAL. On May 3, 2006, the airports at Delhi and Mumbai were handed over to PPP joint venture groups. The other two airports that are under PPPs are BIAL and Hyderabad International Airport Limited (HIAL). Figure 12 shows the DIAL, a consortium of partners. Figure 11. Consortium of Partners The private consortium (GMR, Fraport, ERAMAN, and IDFC) 21 holds 74 percent of equity, while the public/aai holds the remaining 26 percent [see for more details]. MIAL is a consortium led by the GVK group with Airports Company of South Africa (ACSA) and Bidvest holding 74 percent equity while AAI holds the remaining 26 percent [see for more details]. Delhi and Mumbai are the two major gateway airports in the country. Together, they still account for over 50 percent of total passenger traffic. Under the arrangement of the PPP, both airports submitted their master plans in December 2006 to AAI for review and acceptance. DIAL s master plan foresees the construction of a new integrated passenger terminal (No. 3) that will serve both domestic and international traffic. Terminal 3, according to the master plan, will be ready before the Commonwealth Games in Delhi in In the first phase, the airport will be able to handle 34 million passengers a year [ Ultimately, the master plan envisages a capacity of 100 million passengers per year. Figure 13 highlights a percentage share of passenger traffic at six major airports. 21 GMR Group of India is a private business group focused on developing infrastructure in India; Fraport is the owner-operator of the Frankfort International Airport; Eraman is a wholly-owned retail subsidiary of the Malaysia Airport Holding. Infrastructure Development Finance Corporation is a private equity firm set up following the GOI Infrastructure panel s recommendation

33 Figure 11. Share of Passenger Traffic at India s Top Six Airports 22 Source: The Mumbai airport modernization and expansion program is ongoing with an estimated cost of $1.96 billion. The airport enhancements include construction of a new integrated Terminal 2 at Sahar for 24-hour domestic and international operations, a new parallel taxiway with a new Air Traffic Control (ATC) tower, construction of a modern cargo complex, and construction of Terminal 1C. When the airport modernization and expansion is complete, the airport will be able to handle 40 million passengers and one million tons of cargo per year. There will be 66 passenger boarding bridges and 106 aircraft parking spaces. Under the PPP arrangement, Delhi airport as a whole, and Terminal 3 in particular, will deliver world-class services. For example, Terminal 3 would have 55 contact stands (i.e., aerobridges) and 30 remote parking bays for passenger embarkation and disembarkation. It is projected that over 90 percent of the passenger traffic at Terminal 3 would be handled by aerobridges by Furthermore, six of these 55 aerobridges will be Airbus A compatible. Under the proposed Master Plan, runways would be made A380 compatible as well. In preparation for the A380, a new runway Code F measuring 4,439 meters is now operational. The proposed runway will require that two instrument landing systems (ILS) (one CAT IIIB and the other CAT I) and one Doppler Very High Frequency Omnidirectional Range/Distance Measuring Equipment (DVOR/DME) are equipped. A new domestic terminal with annual capacity of 10 million passengers would also be operational before the Commonwealth Games of The existing international terminal (Terminal 2) is also modernized and upgraded. Finally, cargo 22 Indian Sub-Continent Airports Capital Investment Programmes, Brooks Market Intelligence report, Mack Brooks Exhibition Limited, Airbus A380 will be the largest wide-body aircraft in history. With seating capacity ranging between 550 and 800, the A380 as of October 2007 is now in service

34 operations would remain in its present location until further expansion requires that they move to a new location [See for more details]. While the Delhi airport has considerable advantage of future expansion (with almost 4,500 acres) and scope for redesigning, Mumbai airport is severely land-constrained with a total of 930 acres. Additionally, nearby residential neighbors severely encroach upon many areas. Clearly, this makes Mumbai s expansion very difficult, calling for innovative ATM solutions for both runways and airspaces. Given this constraint, MOCA/AAI has recently decided to undertake construction of a new Greenfield airport outside the city. In addition to these difficulties, another concern facing Indian airports (Delhi in particular) is the lack of visibility during the winter months. On average, Delhi has days of dense fog that severely delay air traffic movements. Due to Delhi s connections to international and domestic destinations, these delays can affect the entire country. In order to mitigate this persistent problem, Delhi s ILS serving runway 28 has been upgraded to CAT IIIB. To facilitate the runway movements, Advanced-Surface Movement Guidance and Control System (A-SMGCS) Level 2 has been procured from the Sensis Corporation and implemented at Delhi. Similarly, ILS at Kolkata has been upgraded to CAT II level. ILSs at other major airports in the northern region, including Lucknow and Jaipur, have been proposed for upgrade to CAT II as well. In order to fully utilize the benefit of ILS runway equipment, particularly in CAT IIIB, pilots are required to be trained in avionics-compatible aircraft. While many new aircraft are appropriately equipped, many of the present air carriers have not trained their non-indian pilots on CAT IIIB equipment due to cost restrictions. 24 In the mid- to long-term, AAI would like to implement Differential Global Positioning Systems (DGPS) at the stations where ILS is either not convenient or not feasible. Air ground digital communication will be implemented when technology matures. Surveillance coverage will be enhanced over the northeastern part of the country, one of the priority areas for AAI. As the Automatic Dependent Surveillance-Broadcast (ADS-B) technology becomes mature in the country, it will help provide backup en route surveillance aid. Finally, AAI plans to integrate air traffic services (ATS) and meteorological (MET) information for smooth and efficient ATM operations. With gradual implementation of master plan activities, many of these difficulties, particularly those related to the infrastructure of Delhi airport, may slowly be resolved. The construction of new terminals, a new runway, and reconfiguration of the existing taxiways (e.g., rapid exit taxiways) will likely remove many of the operational difficulties faced by the airport terminal, ATC, and the airlines. 24 At the end of 2006, ILS-compliance training cost was estimated to be, on average, US $4,600 for each pilot. For many Indian air carriers that are running substantial operational losses, this is an expensive undertaking

35 Salient features of Delhi Airport s Master Plan include: State-of-the-art integrated terminal to be ready in 2010, New domestic terminal, Third runway, among the longest in Asia, will be capable of handling A380 sized aircraft, Airport to have an ultimate design capacity of 100 million passengers per annum, and High-speed metro connectivity with city-center, six-lane access road to airport from National Highway No. 8 (NH8). The entire modernization in Phases I and II is estimated to cost around $3.6 billion. Numerous business opportunities, including terminal services (i.e., site preparation, passenger terminal, airside and landside works, and boundary wall) will likely open up in the near future. 25 Additionally, the following items are likely to be procured at the Delhi airport: Heating, ventilation, and air conditioning system, Lighting system, Building automation, Hydro services, Elevators and escalators, Water treatment plant, and Baggage handling. (b) Modernization of Airports at Chennai and Kolkata After completing PPP arrangements at four metro airports (including Delhi, Mumbai and two greenfield airports at Bangalore and Hyderabad), AAI plans to undertake similar reforms at Chennai (formerly Madras) and Kolkata (formerly Calcutta) airports. The Chennai Airport has been experiencing mostly steady growth over the last nine years. The airport director expressed confidence that double-digit growth in domestic air transportation is likely to continue for international passengers at an average growth rate of 8 to 9 percent per annum over the next five years. With Lufthansa operating a direct service from Frankfurt, the airport should be poised to attain significant growth. In addition to Chennai s role as a base for automobile manufacturing and accessories, it has been receiving spillover Information Technology (IT) investments from Bangalore. Chennai sits at a triangle between Bangalore and Hyderabad and holds huge promise in terms of traffic development. The corridor between Chennai and Madurai is also developing as the new hub for IT activities, giving Chennai a unique advantage. 25 The GMR consortium signed on L&T, India, in February, 2007 to undertake these construction activities. It is important to note here that L&T is a key private sector partner in BIAL as well

36 Planning for new airport and/or reforms and modernization at Chennai has already begun. The Government of India approved a plan for modernization and expansion in August The modernization efforts include construction of the Domestic Terminal, extension of the existing Anna International Terminal, extension of a secondary runway across Adyar River by 830 meters, construction of parallel taxi tracks, and ten parking bays. The construction is expected to be completed by After completion of the work, Chennai airport will be able to handle 24 million passengers annually. The modernization and reform programs at the Chennai airport can be summarized as follows: Work is in progress for: Construction of 10 parking bays, Expansion of international terminal and construction of a domestic terminal, Construction of warehouse, Tenders issued for building integrated cargo complex Phase-II with an estimated cost of about $26 million, and Extension of secondary runway by 830 meters. Construction is planned for: Domestic terminal Phase-II; Competition finalizing international architectural design consultant has been recently completed, Construction of a parallel runway, and Next-level development of the integrated cargo complex: Phase-III and IV costing $139.5 million. Policy discussion involving land acquisition (10 km away from the old airport) at Sriperumbudur and limited processing has begun with the goal of establishing a new airport. The budget for the new Chennai airport is $430 million. The Government of India approved construction of an Integrated Passenger Terminal Building at Kolkata Airport to handle 20 million passengers annually. The contract for construction was awarded in October 2008 and the building construction will take about 30 months. In addition, the Kolkata airport will have an extension of its secondary runway by 400 meters and construction of associated taxi tracks, apron, parking bays, and two rapid exit taxiways. This work is in progress and expected to be completed by Work is in progress for: Construction of 21 additional bays, and Extension of domestic security-hold area with three aerobridges costing $23.3 million. Construction is planned for: Development of a modern integrated cargo complex with state-of-the-art technology, An international terminal with aprons for 10 aircraft, A third runway, and

37 A new maintenance hangar. An International architectural design competition was held for international departure building, and terminal design has been selected. The tentative cost of Phase-I is $52.3 million. An international architectural design competition for domestic terminal building is also planned; the short-listing of consultants for this purpose has been completed. The sponsors for the modernization of Chennai and Kolkata airports are AAI and the state governments of Tamil Nadu (for Chennai) and West Bengal (for Kolkata). Source: India Ministry of Civil Aviation Annual Report (c) Modernization Programs at 35 Non-Metro Airports Under the directives from MOCA, AAI plans to modernize and develop 35 second-tier, non-metro airports. A list of these airports is given in Table 3. Table 3. Non-Metro Airport Development Selected 10 Non-Metro Airports Ahmedabad Amritsar Guwahati Jaipur Udaipur Thiruvananthapuram Lucknow Goa Madurai Mangalore Source: AAI 25 Non-Metro Airports Agati; Aurangabad; Khajuraho; Rajkot; Vadodara; Bhopal; Indore; Nagpur; Vishakapattanam; Tiruchi; Bhubaneswar; Coimbatore; Patna; Port Blair; Varanasi; Agartala; Dehradun; Imphal; Ranchi; Raipur; Agra; Chandigarh; Dimapur; Jammu; Pune. Out of these top 35 airports, 10 have been selected to focus on first, with the remaining 25 chosen in five packages of five airports for modernization and perhaps reforms, possibly through PPP. 26 Procedures for developing the airport projects usually involve preparing justification and feasibility reports. AAI was supposed to select a global technical assistance (TA) consultant to undertake the technical feasibility of development of the top 10 non-metro airports. The outcome of the TA-prepared feasibility analysis will prepare the Scope of Work (SOW) documents, which 26 AAI has developed a strategy to attract private investment for non-metro airport modernization program. MOCA has indicated that it may offer PPP instrument in packages of 5 non-metro airports rather than allowing PPP in individual non-metro airports

38 will include the technical requirements (i.e., engineering, IT, system integration). 27 Companies who are interested in participating in these projects are encouraged to receive a copy of the feasibility analysis. In addition, new terminal building construction is in progress or planned at the following airports: Agatti, Ahmedabad, Aurangabad, Jaipur, Mangalore, Raipur, Trivandrum, Udaipur, and Visakhapatnam. Expansion of terminal buildings is under way at Amritsar and Nagpur. Parking stands and taxiways are being constructed at Agartala, Bhubaneswar, Coimbatore, Guwahati, Jaipur, Khajuraho, Madurai, Mangalore, Trichy, Udaipur, and Visakhapatnam. Finally, expansion of apron and runways has been undertaken at Bhubaneswar, Dehradun, Madurai, Raipur, Trichy, and Visakhapatnam. The development of these airports will cost US$1.6 billion. The AAI will sponsor development with participation from the respective state Governments where the airports are located as well as the PPP. (d) Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN) The Indian government has formed a Maharashtra Airport Development Company (MADC) for the development of MIHAN at a cost of about $90 million. The airport master plan includes: Extending runway by 400 meters, Provision for an additional runway of 4,000x60 meters, Airport terminal building, 50 aircraft parking spaces, Maintenance, Repair and Overhaul (MRO) provision and Exclusive cargo complex. These airport upgrades will be able to support 14 million passengers and 0.87 million tons of cargo annually. 27 AAI has opted for putting most of these works under global tender. These and numerous other procurements are done routinely through the global tendering; information is available at the

39 (e) Completion of Greenfield Airports at Bangalore and Hyderabad Under the PPP arrangement, the completion and operation of Greenfield airports at Hyderabad (located at Shamsabad) and Bangalore (located at Devanhalli) is most notable. For both BIAL and HIAL: Joint Venture Companies (JVCs) have been set up with an equity distribution of 74 percent with private partners and 26 percent with AAI and state governments (Karnataka for BIAL and Andhra Pradesh for HIAL). JVCs are responsible for overall development and management of airport infrastructure at these airports, and ATS will be provided by AAI. These airports are already in operation. In addition to these two relatively large projects, three more Greenfield airports are being planned in the northeast region of the country: Pakyong Airport Gangtok, Sikkim (to accommodate Avions de Transport Regional (ATR)72 Aircraft): A detailed project report (DPR) has been prepared and forwarded to the Planning Commission for further deliberations. Estimated cost is Rs. 340 Crores (US $79.07 million including land cost). The work for Pakyoung Airport has been awarded. 28 Cheithu Airport Kohima, Nagaland (to accommodate ATR 72 aircraft): A consultant has been appointed for a techno-economic feasibility study. Survey is in progress. Itanagar Airport Meghalaya (to accommodate ATR 72 aircraft): The Banderdeva site appears to be technically feasible. At present, consultants are being appointed for a techno-economic feasibility study. The development of these three airports from the Northeast region is at an early stage. Therefore, procurement opportunities at different stages should be available to U.S. businesses. Proposals for development of some Greenfield airports have been received from state governments and are at various stages of examination: Mopa Goa Navi Mumbai State of Maharashtra Chakan/Rajguru Nagar, Pune State of Maharashtra

40 Kannur State of Kerala Hassan and Gulbarga State of Karnataka Halwara State of Punjab According to federal policy, state governments are the primary promoters of the greenfield airports. In order to promote such developments, they may consider joint ventures with private investors through the existing PPP vehicle using transparent tender and a competitive bidding process. FDI is permitted at 100 percent under the automatic route for Greenfield projects consideration. 2. Procurement of Materials for Airside and Landside Modernization AAI is required to procure equipment and systems to facilitate airside and landside modernization at different airports at a cost of US$0.7 billion. Some of these include: Procurement of landing lighting systems at all airports and visual docking guidance systems. Procurement and installation of conveyor belts for smooth cargo handling at all major airports. Procurement of technical services ensuring integrated Flight Data Processing System (FDPS). FDPS has been developed internally by Electronics Corporation of India Limited with the sponsorship of AAI. The essential architecture of FDPS consists of: Links of time server via a Global Positioning System (GPS). Societe Internationale de Telecommunication Aeronautiques (SITA) modem; Aeronautical Mobile Support System (AMSS). Aeronautical Fixed Telecommunication Network (AFTN). Position stations. A monitoring system. At present, FDPS is operational at Chennai and works in a modular format in which data is fed through AFTN and radar. AAI would like to integrate FDPS with radar (R-FDPS) and Automatic Dependent Surveillance-Contract (ADS-C) 29 data. 29 Ground- to- air communication is performed via CPDLC with SITA providing FANS-compatibility. Although there appears to be a great deal of enthusiasm among AAI professionals regarding ADS-C, and overall ADS-B implementation (through FAA s sharing trial data), India faces the same challenge as in the U.S. and Europe: namely too few aircraft (around 20 percent) presently are equipped with ADS-B

41 Developing Standard Instrument Departures/Standard Terminal Arrival R Routes (SID/STAR), Required Navigation Performance/Required Area Navigation (RNP/RNAV) procedures to increase efficiencies at terminals. The airport and other ground support equipment segment offered market opportunities worth $359 million in 2008 and are expected to exceed $400 million in

42 Section 4B. Air Transportation Management: Selected Opportunities India s complex airspace provides considerable challenges. Accommodating growing traffic demand requires efficient airspace usage. Efficient allocation of resources, including airspace, requires better planning and management. These may provide opportunities for U.S. firms specializing in these services. Given the priorities of AAI and its favorable fiscal condition, many of these opportunities given their capacity-enhancing impact, especially on airspaces closer to terminals are expected to be undertaken soon 1. Opportunities for CNS/ATM Modernization (a) Future Indian Air Navigation System (FIANS) Master Plan Based on the forecasted growth in traffic, India has developed an ATM master plan (FIANS) to meet future aviation industry demand consistent with the ICAO Global harmonization approach, guiding principles, and strategic vision. In order to achieve seamless use of airspace for worldwide operations, the Plan supports meeting the interoperability requirements and standards, as well as performance based operations. The CNS/ATM enhancements include: Communication: Satellite-based digital communication transitioning from voice data with voice as back up. Navigation: Satellite-based navigation supplemented by GPS Aided Geo Augmented Navigation (GAGAN). Surveillance: Secondary surveillance radars (SSR) in high density airspace and terminal areas, and ADS-B as well as wide area multilateration elsewhere. ATM Automation: Networking of radars and consolidation of 11 Area Control Centers (ACCs) into four Centers initially and two Centers in the long term. Meteorological Facilities: New integrated weather information system for current and forecasted weather data, real time satellite weather picture and turbulence warnings. (b) Current Airspace and Operations The Indian airspace consists of almost three million square meters, of which one-third is over land and the rest is over oceanic control. 30 Currently, the entire continental airspace is covered fairly well under radar at higher airspaces. Some 14 monopulse secondary surveillance radars (MSSRs) (10 MSSR co-located with Primary Surveillance Radars [PSRs]) provide en route coverage at Delhi (2), Mumbai (2), Kolkata, Chennai, Hyderabad, Ahmedabad, Trivandrum, Mangalore, Varanasi, Nagpur, Guwahati, and Berhampur airports. There are eight Terminal Area Radars (TARs), which are located at Mumbai, Delhi, Chennai, Kolkata, Guwahati, Ahmedabad, Hyderabad, and Trivandrum airports for approach control service. There are 11 ACCs, which are 30 Source: CNS/ATM-Current Status and Future Plans, Presentation by Mr. Srikrishan, Executive Director, ATM, at the Aerodrome India Conference, New Delhi, December

43 established to service airports at Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Ahmedabad, Nagpur, Mangalore, Thiruvananthapuram, Guwahati, and Varanasi. These are equipped with en route radar for provision of area control services. There have been discussions regarding consolidation of these 11 centers into two by splitting the country s ACCs into Northwest and Southwest centers. The entire airspace is divided into five flight information regions (FIRs): Mumbai, Kolkata, Delhi, Chennai, and Guwahati (a sub-fir). There are 12 neighboring FIRs that share common Indian FIRs: Pakistan, Oman, Yemen, Mogadishu, Seychelles, Mauritius, Male, Sri Lanka, Malaysia, Myanmar, Bangladesh, and Nepal. There are 79 international and 99 domestic ATS routes in and out of the country. Most of the international routes are aligned in East-West direction. At present, vertical separation of the airspace (common in other parts of the world) does not exist in India. Terminal, approach control, and en route airspaces can be segmented into lower, middle, upper, and super-high sectors in the airspace for efficient management and safe operations that are practiced in the U.S. and Europe [see Figure 14 for an example]. These segmentations do not currently exist in India. Figure 12. Vertical Segmentation of Typical Airspace: An Example In terms of airspace infrastructure, AAI has implemented the Europe, Middle-East, Asia Route Structure of Himalayas (EMARSH), which was commissioned on November 12, 2002, together with twelve Bay of Bengal routes. Reduced vertical separation minimum (RVSM) which increased airspace capacity by reducing vertical separation between aircraft to 1,000 feet from 2,000 feet above certain altitudes was introduced on November 27,

44 AAI was able to relieve delays at major airports by implementing RNP/RNAV at busy airports, particularly in Mumbai, Delhi, Ahmabadad, and Chennai. Further refinement of airspace management would prepare India for the necessary handling capacity. Given that almost 35 percent of the total Indian airspace is classified as reserved for military activities, civil-military airspace coordination and operations (i.e., flexible use of airspace) is also critical for growing civil flight operations. Airspace redesigning and sectorization will be undertaken as part of the Master Plan. (c) CNS/ATM Master Plan Update Currently, the CNS infrastructure can be described as such [Srikrishan (2006)]: Very High Frequency (VHF) at all the airports. Radio Controlled Augmentation (RCAG) stations at seven places. High frequency at Delhi, Mumbai, Kolkata, and Chennai airports. ILS at 38 airports. VHF Omnidirectional Range (VOR)/DME at 78 stations and Non-directional Beacon (NDB) at 82 places. ADS-C/Controller Pilot Data Link Communications (CPDLC) compatible with the ICAO Future Air Navigation System (FANS available at Delhi airport for surveillance in the mountainous terrain in North India and at Mumbai, Kolkata and Chennai airports for surveillance over the Arabian Sea and Bay of Bengal. Radar coverage (around 80 percent of the country is covered): MSSR 14 PSR S Band 8 PSR L Band 2 An Advanced Surface Movement Guidance and Control System has been installed at Indira Gandhi International Airport in Delhi, supplied by Sensis Corporation of the U.S. This system provides support for CAT IIIB ILS operations. A comprehensive master plan, integrating aviation infrastructure modernization with operations benefits, is essential. Without such a plan, CNS infrastructure improvement might not produce the optimum operational benefits that India needs. India faces challenges due to its immediate traffic growth projection and its immediate infrastructure needs. World aviation is experiencing a technology revolution led by the U.S. NextGen programs and Europe s Single European Sky ATM Research (SESAR) programs. These NextGen and SESAR programs will significantly change aviation operations and infrastructure requirements. During the fall of 2008, a U.S. company, ISI, was awarded a USTDA contract to update the earlier version of the CNS/ATM master plan, which also was developed by ISI before India s significant traffic growth. In early 2008, the Indian Government developed the FIANS Master Plan under the leadership of the Ajay Prasad Committee. This master plan provided recommendations to the Minister of Civil Aviation in the

45 areas of Airport Infrastructure, ICAO Global Plan Initiatives in CNS/ATM, and Global Harmonization. (d) CNS Upgrades On the CNS side, AAI plans to extend VHF coverage over the entire Indian landmass with twelve additional RCAG stations. AAI also plans to replace NDBs with six additional DVOR/four Very High Frequency Omnidirectional Range (VOR). The six additional DMEs will be collocated with DVORs. There are 43 ILS already installed at 37 airports, out of which Delhi has CAT IIIB. Kolkata as well as Lucknow have CAT II ILS. AAI plans to install seven CAT I ILS, three CAT II ILS, and two CAT III ILS at Amritsar, Jaipur, Jammu airports, and at the new runway in Delhi. An enhancement of surveillance coverage is planned, including nine MSSRs for complete radar coverage over terrestrial airspace and two PSR-S bands for coverage over the terminal areas. In addition, there is a plan for three new primary and seven secondary surveillance radars. In summary, the following is a list of planned procurement in near term: Nine additional MSSR Radars and two PSR-S Band Radars. Twelve additional RCAG (communications systems). Ten additional DVOR/VOR systems. Six additional DME systems. Four additional ILS systems. Replace NDBs (Currently AAI has 82 NDBs). DGPS landing system. India has conducted ADS-B trials. However, since only 10 percent of aircraft that use India s airspace are equipped with ADS-B transponders, wide-ranging benefits from an ADS-B deployment will not be realized until the aircraft equipage rate increases. Initially, ADS-B and wide area multilateration systems will augment radars for surveillance in low density airspace, but they will be extended into all airspace as the ADS-B equipage grows. AAI is reviewing various business models of ADS-B implementation. ADS-B augmented by multilateration would provide a solid infrastructure for Indian airspace management to handle growing traffic. (e) GAGAN Certification and Implementation India is developing a GAGAN system [see Figure 15 for a broad overview], which is a Satellite Based Augmentation System (SBAS). AAI developed this technology together with the Indian Space Research Organization (ISRO) and Raytheon Corporation. GAGAN s mission control center and ground uplink station will be located in Bangalore. The current INRES centers are in Delhi, Ahmedabad, Bangalore, Thiruvananthapuram, Kolkata, Guwahati, Port Blair, and Jammu. The future INRES centers will be in Indore, Bhuj, Amritsar, Chennai, Nagpur, and Lucknow. GAGAN is in a trial phase now, and AAI is in the process of

46 establishing TA with the FAA for its validation, verification, and eventual certification. In November 2006 during the visit of Ms. Marion Blakey (the FAA Administrator at that time), the Administrator and the Indian Minister of Civil Aviation agreed to pursue the option of technical assistance in this field. Implementation of GAGAN is planned in two phases: For the first phase, GAGAN Technology Demonstration System (TDS) has successfully demonstrated the proof of concept of SBAS and is completed. GAGAN Final Operational Phase (FOP) has the following implementation schedule: GAGAN ground segment installation and integration August 2010 GAGAN System Integration with both Geostationary Earth Orbiting Satellite Systems GEOs January 2012 GAGAN navigation performance demonstration June 2012 GAGAN system certification July

47 Figure 13. GAGAN Network in India Source: AAI Beyond GAGAN, the ISRO is implementing an Indian Navigation Regional Satellite System (INRSS), an independent, seven satellite constellation built and operated by India. These satellite systems will maintain interoperability between other regional augmentations to GPS for global navigation. (f) ATM Enhancements AAI will need to develop functional capabilities for ATS in order to provide conflict prediction, detection, and resolution. AAI has started to develop Air Traffic Flow Management (AFTM) functionality with support from the FAA. 2. Weather System Enhancements The Indian Meteorological Department (IMD), under the Ministry of Earth Sciences, is modernizing aviation meteorological services at airports. Integrated Automatic Aviation Meteorological Systems (IAAMS), for automatic acquisition, processing, dissemination, and display of meteorological information in real time. The IAAMS have been installed at Delhi, Mumbai and Hyderabad airports. These systems are also being installed at 20 non-metro airports. The IMD plans to provide IAAMS at all 50 airports where the ILS have been planned by AAI. The IMD also plans to install Terminal Doppler Weather Radar (TDWR), wind profilers, and anemometer arrays for wind shear detection and alerting at a few selected airports