Airports NOVEMBER 1
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 2
Airports NOVEMBER Advantage India 2000 No of operational airports: 50 Growing demand Growth in passenger traffic likely to go up as incomes rise and more tourists flow in Freight traffic also likely to go up as trade with the rest of the world increases Increasing investments USD7.5 billion worth of investments in airports infrastructure likely under the Eleventh Five Year Plan (2007-12) Growing private sector participation through public private partnership Advantage India Opportunities in MRO Aviation sector growth accentuating need for maintenance, repair and overhaul Bright prospects due to location advantage and demand for new facilities Policy support Encouragement to private sector participation; relaxation of FDI norms Tax incentives for developers; liberalisation of the aviation sector Open Sky Policy 2010 No of operational airports: 82 Notes: FDI Foreign direct investment, MRO Maintenance, repair and overhaul ADVANTAGE INDIA 3
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 4
Evolution of the Indian aviation sector India is the 9th largest civil aviation market in the world India is ranked 4th in domestic passenger volumes (45.3 million*) Scheduled airlines: distance flown (mn km) 199** 710** Non-scheduled airlines in operation 39 2010 123 Number of aircraft 225 735 Passenger handling capacity at airports 66 million 235 million Number of operational airports 50 2000 82 Source: Airports Authority of India, Ministry of Statistics and Programme Implementation, Aranca Research Notes: * data for FY10(P), ** data for financial year and not calendar year; FY Indian financial year (April March), mn km million kilometers MARKET OVERVIEW AND TRENDS 5
India has 136 airports, 128 of which are owned by AAI AAI managed (128) International, including JVs (14) Domestic airports (81) Airports in India (136) Non-AAI (8) Others Customs airports (8) Civil enclaves (25) Aircraft movement Freight traffic 80% 97% 20% 3% Activity in AAI airports - shares (%) Airports Authority of India (AAI) was Established in 1994 under the Airports Authority Act Passenger traffic 87% 13% Basic Facts Responsible for developing, financing, operating, and maintaining all government airports The Aircraft Act (1934) governs remaining airports International airports Others Source: Airports Authority of India, Aranca Research Note: JV Joint venture MARKET OVERVIEW AND TRENDS 6
Six major airlines operate in the country Market Share (%) Flight Occupancy Rate (%) 26.3 (combined) 72.1 (Jet) 73.9 (Jet Lite) 18.8 75.9 18.7 73.2 17.4 72.8 13.4 66 5.3 65 Note: All statistics are for the month of August as published by Directorate General of Civil Aviation MARKET OVERVIEW AND TRENDS 7
Passenger traffic has experienced healthy growth (1/2) Passenger traffic growth moved back to double digits in FY11, clocking 15.9 per cent Over FY05-11, passenger traffic increased at a CAGR of 15.9 per cent Notes: CAGR Compound annual growth rate FY Indian financial year (April March) Passenger traffic stood at 143.4 million in FY11 160 143.4 140 116.9 123.7 120 108.9 96.4 100 80 73.3 59.3 60 32 24 16 8 40 20 0 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11-8 Passenger traffic (in millions) Growth (%) - right axis Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 8
Passenger traffic has experienced healthy growth (2/2) Domestic passenger traffic expanded at 17.6 per cent CAGR over FY05 11 160 Growth in domestic passenger traffic has been robust 42 International passenger traffic rose 11.8 per cent over the same period 140 120 100 80 60 40 20 19.4 39.9 22.3 51.0 25.8 70.6 29.8 87.1 31.6 77.3 34.4 89.4 37.9 105.5 36 30 24 18 12 6 0-6 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11-12 Domestic (million,left axis) International (million,left axis) Growth - domestic (%) Growth - international (%) Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 9
Freight traffic has also logged steady growth (1/2) Total freight traffic registered a CAGR of 10.6 per cent over FY05-11 Annual growth in FY11 accelerated to 20.0 per cent Notes: CAGR Compound annual growth Rate, FY Indian financial year (April March), Total freight traffic touched 2.3 million tonnes in FY11 3 25 2.3 20 2.0 2 1.7 15 1.6 1.7 1.3 1.4 10 1 5 0 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11-5 Freight traffic handled (million tonnes) Growth (%) - right axis Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 10
Freight traffic has also logged steady growth (2/2) Domestic freight traffic increased at 10.9 per cent CAGR over FY05-11 International freight traffic was 64% of the total in FY11 International freight traffic rose 10.4 per cent over the same period 2500 2000 1500 1000 824 920 1,023 1,147 1,149 1,271 1,493 25 20 15 10 5 500 0 457 484 530 568 552 689 852 FY05 FY06 FY07 FY08 FY09 FY10 FY11 0-5 International ('000 tonnes) Domestic ('000 tonnes) Growth - domestic (%, right axis) Growth - international (%, right axis) Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 11
Growth in aviation has also led to higher aircraft movement (1/2) Total aircraft movement recorded a CAGR of 11.7 per cent over FY05-11 Total aircraft movement was 1.4 million in FY11 Both international and domestic aircraft movement have nearly doubled over this period Notes: CAGR Compound annual growth rate FY Indian financial year (April March) 1600 1400 1200 1000 800 600 400 718 838 1,078 1,308 1,307 1,331 1,394 30 25 20 15 10 5 200 0 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11-5 Aircraft movement ('000) Growth (%) - right axis Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 12
Growth in aviation has also led to higher aircraft movement (2/2) Domestic aircraft movement increased at 12.0 per cent CAGR over FY05-11 1600 Aircraft movement growth was sharpest over FY06 07 36 International aircraft movement expanded by 10.7 per cent over the same period 1400 1200 1000 800 600 400 200 191 163 554 647 216 862 249 270 282 300 1036 1059 1048 1093 30 24 18 12 6 0 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11-6 Domestic ('000, left axis) International ('000, left axis) Growth - domestic (%) Growth - international (%) Source: Airports Authority of India, Aranca Research MARKET OVERVIEW AND TRENDS 13
AAI dominates, but private sector participation is rising Until recently, AAI was the only major player involved in developing and upgrading airports in India Post liberalisation, private sector participation in the sector has been increasing Development of Hyderabad International Airport; modernisation of Delhi International Airport Modernisation of Mumbai International Airport Major private sector players Development of Bengaluru International Airport Development of Bengaluru International Airport Development of Bengaluru International Airport Development of Simoga and Gulbarga airports in Karnataka Note: AAI Airports Authority of India MARKET OVERVIEW AND TRENDS 14
Notable trends in the airports sector Increasing private sector participation Government policy to increase private sector participation Currently, there are 6 major private sector players Greater use of nonscheduled airlines Rising business activity leading to higher demand for non-scheduled airlines 99 operators with combined fleet of 241 aircrafts in FY09 User development fees Increasing use of development fees by airport developers and operators Airport Development Fee: Delhi, Mumbai airports to fund expansion User Development Fee: Hyderabad, Bengaluru airports for maintenance Focus on nonaeronautical revenue Indian airports emulating SEZ-aerotropolis model to enhance revenues; focus on revenues from retail, advertising, vehicle parking, etc. Absence of complementary meals in low-cost airlines have boosted the food and beverages retail segment at airports Note: FY Indian financial year (April March) MARKET OVERVIEW AND TRENDS 15
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 16
Strong demand and policy support driving investments Growing demand Policy Strong support government support Increasing investments More people travelling by air Inviting Greater government focus on infrastructure Resulting in AAI driving large modernisation, development projects Rise in business and tourist travellers Increasing liberalisation, Open Sky Policy Increasing private sector participation Strong growth in external trade Policy sops, FDI encouragement Strong projected demand making returns attractive GROWTH DRIVERS 17
Passenger traffic spikes up as demand for air travel soars More Indians travelling by air Rise in per-capita income and a growing middle class Introduction of low cost airlines Rising domestic and foreign tourists Improving tourism infrastructure Successful ad campaigns abroad More business travellers as well India is one of the fastest growing economies Emergence of business hubs like Mumbai (Finance), Bangalore (IT), Chennai (IT), Delhi (Manufacturing, IT) Notes: IT Information technology, E- estimate 3000 2000 1000 0 34 GDP growth and per capita income 2,441 2,724 2,916 3,104 3,408 2006 2007 2008 2009 2010E Per-capita GDP (PPP, current USD) Real GDP growth (%) - right axis Travel and Tourism spending (USD billion) CAGR 14.6 % 17 42 46 47 22 25 11 Source: IMF, Aranca Research 58 18 22 9 7 5 CAGR 6.6 % 2006 2007 2008 2009 2010 Leisure travel and tourism spending Business travel and tourism spending Source: WTTC, Aranca Research GROWTH DRIVERS 18
More passengers and rising trade aiding higher aircraft movement Over FY06-11, Growing trade benefits freight movement India s exports expanded at a CAGR of 13.3 per cent Imports registered a 14.2 per cent CAGR Growing trade augurs well for airports as they handle about 30 per cent of India s total trade (by value) Increasing airline operators Liberalised aviation policy Growth of exports and imports (USD billion) Higher aircraft movement 286 284 95 138 119 175 137 211 175 176 157 235 FY06 FY07 FY08 FY09 FY10 FY11 Growth in passenger traffic Rise in freight traffic Exports Imports Source: Ministry of Commerce, Aranca Research Notes: CAGR Compound annual growth rate, FY11 data is for April-December GROWTH DRIVERS 19
Policy support aiding growth in the airports sector Greater focus on infrastructure Infrastructure investment is a major focus area for the government Government of India (GOI) envisions airport infrastructure investment of USD7.5 billion under the Eleventh Five Year Plan (2007-12) Liberalisation, Open Sky Policy GOI approved establishment of Greenfield airports under PPP mode in 2008 New regulatory body (Airport Economic Regulatory Authority) set up in 2009 Increased traffic rights under bilateral agreements with foreign countries Encouragement to FDI 100 per cent FDI under automatic route for Greenfield projects 100 per cent FDI for existing airports is also possible with an approval from FIPB Taxes and other sops 100 per cent tax exemption for airport projects for a period of 10 years Airport developers allowed to charge passengers development fees Notes: India currently has bilateral air service agreements with 104 countries. These include Brazil, 27 members of the EU, and China. In 2008 traffic rights were been enhanced with Mexico, Saudi Arabia, Netherlands, Qatar, Iran, Japan and Turkey FDI Foreign direct investment, FIPB Foreign Investment Promotion Board GROWTH DRIVERS 20
AAI leads the way in airports infrastructure investment Metro airports Work involves modernising and expansion; these include Chennai airport at a cost of USD376.7 million Kolkata airport at a cost of USD404.6 million Non-metro airports Work covers upgrading and modernising; estimated cost is USD1 billion 35 airports including Ahmedabad, Amritsar, Bhopal, Jaipur, Pune and Goa 9 have already been completed North East India Developing airports in Sikkim, Arunachal Pradesh and Nagaland Pakyong Airport (Sikkim) costing USD64.5 million to be completed by 2012 Cheitu Airport (Nagaland), Itanagar Airport (Arunachal) in approval stage GROWTH DRIVERS 21
Private sector investment in airports rising (1/2) Recourse to the Public Private Partnership (PPP) model has boosted private sector investments in airports PPP route for five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) most noteworthy Increasing share of private sector in equity component of major airports 74 per cent share in IGI Airport (Delhi); GMR is the largest shareholder (54 per cent) 74 per cent share in CSI Airport (Mumbai); GVK is the largest shareholder (50.5 per cent) 74 per cent share in RGI Airport (Hyderabad); GMR is the largest shareholder (63 per cent) GROWTH DRIVERS 22
Private sector investment in airports rising (2/2) Participation in international airport projects Delhi (Modernisation, Terminal 3) Mumbai (Modernisation) Hyderabad Terminal 3 construction in Delhi completed in 2010 Total cost PPP format likely to continue Greenfield projects with private sector participation Bijapur Airport Shimoga Airport Hassan Airport Bengaluru USD8 billion USD2.6 billion of investments likely Gulbarga Airport GROWTH DRIVERS 23
Foreign players are showing increasing interest in the sector Major Foreign Players Airport Stake Description Bid Services Division (Mauritius) Limited Mumbai International Airport Pvt Ltd 13.5 International service, trading and distribution company based in South Africa. Airports Company South Africa Global Mumbai International Airport Pvt Ltd 10 Operates and owns ten airports in South Africa. Frankfurt Airport Services Worldwide Delhi International Airport Pvt Ltd 10 Global airport operator that offers airport management services including terminal and traffic management, baggage and cargo handling, aviation ground handling Malaysia Airports Holdings Berhad Delhi International Airport Pvt Ltd 10 Hyderabad International Airport Pvt Ltd 11 Operates and manages 38 commercial airports in Malaysia GROWTH DRIVERS 24
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 25
IGI International Airport, Delhi a compelling success story 4th in the world at the ACI Annual Service Quality Awards (category: handling 15-25 million passengers) Also declared the most improved airport in the Asia Pacific region New Terminal 3 won the British Construction Industry Award for the best international project in 2010 FACTS AND FEATURES (FY10) PHASE I FINAL Passenger Traffic : 25 mn Aircraft movement: 0.2 mn Passenger handling capacity per annum 34 million 100 million Cargo : 0.4 mn tonnes Retail space: 0.2 mn sq feet Apron area: 6.7 mn sq feet Area (acres) 1907 5106 Operational status Completed on Mar-2010 Ongoing 20-year project Multi level car park: 4300/day (mn: million; sq: square) Phase 1 of modernisation of IGI International Airport (at a cost of INR86 billion) involved renovation of terminals 1A, 1B, 1C and Terminal 2. It also included construction of a new domestic terminal along with an integrated passenger terminal (Terminal 3) Source: Delhi International Airport Ltd, Aranca Research Notes: ACI Airports Council International FY Indian financial year (April March) SUCCESS STORIES: DELHI, MUMBAI 26
CSI International Airport harnessing the power of PPP 1st in India for 2Q10 at the ACI Annual Service Quality Awards (category: handling > 15 million passengers) Also ranked 4th in the world for 2Q10 in the 15-25 million passenger category 23rd across all categories among a survey of 146 international airports in 2Q10 FACTS AND FEATURES In FY10, CSI handled - Passenger traffic: 25.6 million Cargo movement: 0.5 million tonnes Passenger handling capacity per annum Cargo handling capacity per annum 40 million 1 million tonnes Modernisation of the Mumbai International Airport will entail investments worth INR70 billion over a period of 20 years Government of India to provide INR58 billion Parts of the project completed till now: Phase I (2008): New airport lounges, retail outlets, duty-free shops, temporary cargo facilities, and multilevel car parks Phase II (2010): Involved construction of a new terminal at Sahar, a parallel runway, and new cargo facilities Source: Mumbai International Airport Ltd, Aranca Research Notes: ACI Airports Council International 2Q10 Second quarter of 2010 SUCCESS STORIES: DELHI, MUMBAI 27
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 28
Opportunities Policy support and demand growth unlocking large investment potential Huge potential to develop India as an MRO hub Leverage on nonaeronautical revenues, improved technology Indian aviation sector likely to see investments totalling USD150 billion GOI expects 64 per cent (of USD7.5 billion) investments in airports during 2007-12 to come from the private sector Success of PPP formats will raise investment in existing and greenfield airports Growing air traffic and fleet expansion accentuating the need for MRO facilities India has only one established third-party MRO currently Location advantage - No MRO facility within a 5-hour fly zone of India (nearest ones West: Dubai; East: Singapore) Airport developers can now draw on wider revenue opportunities such as retail, advertising and vehicle parking Future operators will benefit from greater operational efficiency due to satellite based navigation systems like Project Gagan which is in development phase Notes: Project Gagan is directed towards transitioning from a ground-based navigation system to a satellite-based one. AAI and ISRO are jointly working on this. A Space Based Augmentation System (SABS) will be operational by 2013 MRO Maintenance, repair and overhaul GOI Government of India PPP Public Private Partnership OPPORTUNITIES 29
Contents Advantage India Market overview and trends Growth drivers Success stories: Delhi, Mumbai Opportunities Useful information 30
Industry Associations Airports Authority of India (AAI) Rajiv Gandhi Bhawan, Safdarjung Airport, New Delhi 110 003 Phone: 91 11 24632950 Directorate General of Civil Aviation (DGCA) Aurbindo Marg, Opp. Safdarjung Airport, New Delhi 110 003 Phone: 91 11 24622495 Fax: 91 11 24629221 E-mail: dri@dgca.nic.in, dfa@dgca.nic.in USEFUL INFORMATION 31
Glossary AAI: Airports Authority of India ACI: Airport Council International CAGR: Compound Annual Growth Rate FDI: Foreign Direct Investment FY: Indian Financial Year (April to March) So FY10 implies April 2009 to March 2010 GOI: Government of India INR: Indian Rupee MRO: Maintenance, repair and overhaul PPP: It could denote two things (mentioned in the presentation accordingly) Purchasing Power Parity (used in calculating per-capita GDP slide 12, GROWTH DRIVERS) Public Private Partnership (a type of joint venture between the public and private sectors) USD: US Dollar Conversion rate used: USD1= INR 48 Wherever applicable, numbers have been rounded off to the nearest whole number USEFUL INFORMATION 32
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