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1 1 For updated information, please visit www.ibef.org

Airports MARCH

2013

2 2

Contents

Advantage India

Market overview and trends

Growth drivers

Success stories: Delhi, Mumbai

Opportunities

Useful information

For updated information, please visit www.ibef.org

Airports MARCH

2013

3 3

Airports

For updated information, please visit www.ibef.org ADVANTAGE INDIA

Advantage India

MARCH

2013

Advantage India

• 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

• Growth in aviation accentuating demand for MRO facilities

• Bright prospects due to location advantage; there is no MRO facility within a five - hour fly zone of the country

• By 2020, MRO industry is likely

to touch USD1.5 billion

• USD11.4 billion worth of investments in airports infrastructure likely under the Twelfth Five Year Plan (2012-17)

• Growing private sector participation through the Public-Private Partnership (PPP) route

• The government has been encouraging private sector participation

• Tax incentives for developers; liberalisation of the aviation sector - Open Sky Policy

• Government has allowed 49 per cent FDI in aviation for foreign carriers

No of operational airports: 125

2012

No of operational airports: 50

2000

Source: Ministry of Civil Aviation, Aranca Research Notes: FDI - Foreign direct investment,

MRO - Maintenance, repair and overhaul

Growing demand Opportunities in MRO

Increasing investments Policy support

4 4

Contents

Advantage India


Growth drivers


Opportunities

Useful information


Airports MARCH

2013

5 5 For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS

Evolution of the Indian aviation sector

Source: Airports Authority of India, Planning Commission, 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

Airports

→ India is the 9th largest civil aviation market in the world → India is ranked 4th in domestic passenger volumes (45.3 million*) → India’s civil aviation market is set to become the world’s 3rd largest by 2020

Scheduled airlines: distance flown (mn km)

Non-scheduled airlines in operation

Number of aircraft

Passenger handling capacity at airports

Number of operational airports

50

66 million

225

39

199**

125

233 million

1188

136

762

2000

2011-12

(2011)

(2011)

(2012)

(2012)

(2012)

MARCH

2013


India has 136 airports, 128 of which are owned by AAI

Source: Airports Authority of India - 2011, Aranca Research Note: AAI - Airports Authority of India, JV - Joint venture

MARKET OVERVIEW AND TRENDS

Airports

Airports in India (136)

AAI managed (128)

Non-AAI (8)

International, including JVs

(14)

Others

Civil enclaves (25)

Customs airports (8)

Domestic airports (81)

• Airports Authority of India (AAI) was -

• Established in 1994 under the Airports Authority Act

• Responsible for developing, financing, operating, and maintaining all government airports

• The Aircraft Act (1934) governs remaining airports

Activity in AAI airports-shares (%)

Basic Facts 84%

96%

79%

16%

4%

21%

Passenger traffic

Freight traffic

Aircraft movement

International airports Others

MARCH

2013


Six major airlines operate in the country

Note: All statistics are for the month of September 2012 as published by Directorate General of Civil Aviation


Airports

Market Share (%) Flight Occupancy Rate (%)

23.8 (combined) 63.5 (Jet)

66.1 (Jet Lite)

27.2 69.0

19.3 65.2

18.5 64.4

7.6 67.7

3.5 58.4

MARCH

2013


Airports

Source: AAI, Aranca Research Note: FY - Indian financial year (April - March); FY12* - April 2011 - February 2012

Mumbai Passenger traffic

handled in FY12*: 28.2 million

Kolkata Passenger traffic handled

in FY12*: 9.5 million

Chennai Passenger traffic handled


Delhi

Passenger traffic handled in FY12*: 32.8

million

Bengaluru Passenger traffic

handled in FY12*: 11.8 million

Hyderabad Passenger traffic handled


MARCH

2013

The six major airports in the country


Passenger traffic has experienced healthy growth … (1/2)


→ Total passenger traffic stood at a record 162.6 million (provisional) in FY12

→ FY12 has recorded 13.4 per cent growth in passenger traffic, outpacing other segments

→ Growth in passenger traffic has been strong since the new millennium, especially with rising incomes and low-cost aviation; over FY06-12, passenger traffic expanded at a CAGR of 14.2 per cent

Notes: CAGR - Compound Annual Growth Rate FY - Indian financial year (April - March)

Airports

Passenger traffic moves up to 162.6 million in FY12

Source: Ministry of Civil Aviation, Aranca Research, Note: * - Provisional data for FY12

73.3

96.4

116.9 108.9

123.7 143.4

162.6

-10

0

10

20

30

40

0

40

80

120

160

200

FY06 FY07 FY08 FY09 FY10 FY11 FY12*

Passenger traffic (in millions) Growth (%) - right axis

MARCH

2013


Passenger traffic has experienced healthy growth … (2/2)


Growth in domestic passenger traffic has been robust

Source: Airports Authority of India, Ministry of Civil Aviation, Aranca Research

Notes: * - FY12 data is provisional YoY - Year on Year

Airports

Growth in passenger traffic set to remain strong in future

26 71

122

209

14 26

41

60

0

50

100

150

200

250

300

FY02 FY07 FY12 FY17EInternational Passenger Throughput International (million)

Domestic Passenger Throughput Domestic (million)

10th Plan Period

11th Plan Period

12th Plan Period

MARCH

2013

→ Domestic passenger traffic expanded at a CAGR of 15.7 per cent over FY06-12; by FY17 domestic passenger traffic is expected to touch 209 million

→ International passenger traffic posted a CAGR of 10.5 per cent over FY06-12 and is set to touch 60 million by FY17

→ During FY12, domestic passenger traffic grew 15.7 per cent, while international passenger traffic expanded 7.2 per cent

51.0 70.6

87.1 77.3 89.4 105.5

122.0 22.3

25.8 29.8

31.6 34.4

37.9 40.6

-20

-10

0

10

20

30

40

50

0

50

100

150

200


International (million, left axis) Domestic (million, left axis)

Growth - domestic (%) Growth - international (%)


Freight traffic has also logged steady growth … (1/2)


Airports

→ Total freight traffic registered a CAGR of 8.3 per cent over FY06-12; it stood at 2.26 million tonnes in FY12

→ Freight traffic is expected to be 5 times the current level by the end of the next two decades

Freight traffic (million tonnes)

Source: Airports Authority of India, Aranca Research Notes: * - Data for FY12 is provisional

Source: Planning Commission Notes: CAGR - Compound annual growth Rate,

FY - Indian financial year (April - March),

1.40 1.55 1.72 1.70

1.96

2.34 2.26

-12

-7

-2

3

8

13

18

23

0

1

2

3


Freight traffic handled (million tonnes)

Growth (%) - right axis

MARCH

2013


Freight traffic has also logged steady growth … (2/2)


Airports

→ Domestic freight traffic increased at a CAGR of 8.8 per cent over FY06-12

→ International freight traffic rose 8.5 per cent over the same period

→ In FY12, domestic freight traffic was 0.804 million tonnes, while international freight traffic was at 1.494 million tonnes

International freight traffic was 65% of the total in FY12*

Source: Airports Authority of India, Aranca Research Notes: * - FY12 data is provisional

920

1,023 1,147

1,149

1,271 1,496

1,494 484

530 568 552

689

852 804

-15

-10

-5

0

5

10

15

20

25

0

500

1,000

1,500

2,000

2,500


Domestic ('000 tonnes) International ('000 tonnes)

Growth - domestic (%, right axis) Growth - international (%, right axis)

MARCH

2013


Growth in aviation has also led to higher aircraft movement … (1/2)


→ Total aircraft movement recorded a CAGR of 10.7 per cent over FY06-12*

→ Both international and domestic aircraft movement have nearly doubled over this period

→ In FY12, total aircraft movement increased by 10.9 per cent

Total aircraft movement was 1.54 million in FY12*

Notes: CAGR - Compound annual growth rate FY - Indian financial year (April - March)

Airports

Source: Airports Authority of India, Aranca Research Notes: * - Data for FY12 data is provisional

838

1,078

1,308 1,307 1,331 1,394 1,546

-5

0

5

10

15

20

25

30

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800


Aircraft movement ('000) Growth (%) - RHS

MARCH

2013


Growth in aviation has also led to higher aircraft movement … (2/2)


→ Domestic aircraft movement increased at a CAGR of 11.4 per cent over FY06-12

→ International aircraft movement expanded 8.4 per cent (CAGR) over the same period

→ In FY12, domestic aircraft movement increased 13.1 per cent, while international aircraft movement expanded 2.9 per cent

Aircraft movement growth was sharpest over FY06-07

Airports

Source: Airports Authority of India, Aranca Research Notes: * - Data for FY12 is provisional

YoY - Year on Year

647 862

1,059

1,036 1,048 1,094 1,237

191

216

249 270 282 300 309

-6

0

6

12

18

24

30

36

0

500

1,000

1,500

2,000


International ('000, left axis) Domestic ('000, left axis)

Growth - domestic (%) Growth - international (%)

MARCH

2013


AAI dominates, but private sector participation is rising

Airports

→ 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

Major private sector players

Development of Hyderabad International Airport; modernisation of Delhi International Airport

Modernisation of Mumbai International Airport

Development of Bengaluru International Airport



Development of Simoga and Gulbarga airports in Karnataka

Note: AAI - Airports Authority of India

MARCH

2013


Notable trends in the airports sector

Airports

Note: FY - Indian financial year (April - March)

Increasing private sector participation

• Government policy to increase private sector participation

• Currently, there are 6 major private sector players

Greater use of non-scheduled airlines

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

• 121 operators with combined fleet of 360 aircrafts in FY10

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 non-aeronautical revenue

• Indian airports are emulating the 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

MARCH

2013

17 17

Contents

Advantage India


Growth drivers


Opportunities

Useful information


Airports MARCH

2013

18 18 For updated information, please visit www.ibef.org GROWTH DRIVERS

Strong demand and policy support driving investments

Airports

Strong

government

support

Growing demand

Inviting Resulting

in

Growing demand Increasing investments Policy support

More people travelling by air

Rise in business and tourist travellers

Strong growth in external

trade

Greater government focus on infrastructure

Increasing liberalisation,

Open Sky Policy

Policy sops, FDI encouragement

AAI driving large modernisation, development

projects

Increasing private sector

participation

Strong projected demand making returns attractive

MARCH

2013


Passenger traffic spikes up as demand for air travel soars

GROWTH DRIVERS

Airports

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), Bengaluru (IT), Chennai (IT), Delhi (Manufacturing, IT)

Travel and tourism spending (USD billion)

Source: IMF, Aranca Research

Source: WTTC, Aranca Research

Notes: IT - Information technology, E - estimate

GDP growth and per capita income

42 46 47

58 65

22

25

18 22

26

2007 2008 2009 2010 2011

Leisure travel and tourism spending

Business travel and tourism spending

CAGR 11.5 %

CAGR 4.0 %

2,724 2,916 3,098

3,419 3,662

5

7

9

11

0

1,000

2,000

3,000

4,000

2007 2008 2009 2010 2011

Per-capita GDP (PPP, current USD)

Real GDP growth (%) - right axis

MARCH

2013


More passengers and rising trade aiding higher aircraft movement

GROWTH DRIVERS

Rising exports and imports (USD billion)

Source: Ministry of Commerce, Aranca Research Notes: CAGR - Compound annual growth rate

Airports

Growing trade benefits freight movement

• Over FY07-12,

• India’s exports expanded at a CAGR of 20.6 per cent

• Imports registered a 22.8 per cent CAGR

• Growing trade augurs well for airports as they handle about 30 per cent of India’s total trade (by value)

Higher aircraft movement

Increasing airline operators

Rise in freight traffic

Growth in passenger traffic

FDI in aviation and liberalised aviation

policy

119 137

175 176

251 304

175 211

286 284

370

489

FY07 FY08 FY09 FY10 FY11 FY12

Exports Imports

MARCH

2013


Airports

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

Greater focus on infrastructure

• Infrastructure investment is a major focus area for the government

• Government of India (GOI) envisions airport infrastructure investment of USD11.4 billion under the Twelfth Five Year Plan (2012-17)

• It plans to invest USD30.0 billion in the next ten years with more existing airports being opened up for modernisation

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

• Approval of 49 per cent FDI in aviation for foreign carriers

MARCH

2013

Policy support aiding growth in the airports sector … (1/2)


Airports

FY13 budgetary support

• In the Union Budget for FY13, the Finance Minister has proposed budgetary support worth USD58.3 million to AAI to develop airport infrastructure in the northeastern states of India

• At the same time, the aviation regulator DGCA has been allocated USD12.5 million for its development plan

Note: AAI - Airports Authority of India

DGCA - Directorate General of Civil Aviation

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

MARCH

2013

Policy support aiding growth in the airports sector … (2/2)


Airports

Metro airports

• Work involves modernising and expansion; these include

• Chennai airport at a cost of USD227.3 million

• Kolkata airport at a cost of USD217.3 million

Non-metro airports

• Work covers upgrading and modernising; estimated cost is USD1.5 billion

• 35 airports including Ahmedabad, Amritsar, Bhopal, Jaipur, Pune and Goa

• 26 have been already completed and these airports were put on ‘operation’ by end - FY11

Northeast India

• Developing airports in Sikkim, Arunachal Pradesh and Nagaland

• Pakyong Airport (Sikkim) to be completed by 2012 at a cost of USD64.4 million

• Cheitu Airport (Nagaland), Itanagar Airport (Arunachal) in approval stage

MARCH

2013

AAI leads the way in airports infrastructure investment


→ 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

Airports

• 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)

MARCH

2013

Private sector investment in airports rising … (1/2)


Airports

Participation in international

airport projects

Terminal 3 construction in Delhi completed in 2010

Total cost

USD8 billion

Greenfield projects with private sector participation

PPP format likely to continue

USD5.8 billion of investments likely

Delhi (Modernisation,

Terminal 3)

Mumbai (Modernisation)

Hyderabad

Bengaluru

Bijapur Airport

Shimoga Airport

Hassan Airport

Gulbarga Airport

MARCH

2013

Private sector investment in airports rising … (2/2)


Airports

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 nine 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, and aviation ground handling

Malaysia Airports Holdings Berhad

Delhi International Airport Pvt Ltd 10 Operates and manages 38 commercial airports in Malaysia Hyderabad International Airport Pvt

Ltd 11

MARCH

2013

Foreign players are showing increasing interest in the sector

27 27

Contents

Advantage India


Growth drivers


Opportunities

Useful information


Airports MARCH

2013

28 28 For updated information, please visit www.ibef.org SUCCESS STORIES: DELHI, MUMBAI

IGI International Airport, Delhi - a compelling success story

→ Ranked second in the world at the ACI Annual Service Quality Awards in 2011 (category: handling 25-40 million passengers)

→ In 2010, IGI was conferred the fourth best airport in the world, handling 15-25 million passengers → New Terminal 3 won the British Construction Industry Award for the best international project in 2010

Source: Delhi International Airport Ltd, Aranca Research Notes: ACI - Airports Council International, FY - Indian financial year (April - March)

Airports

PHASE I

Operational status Completed on Mar-2010 Ongoing 20-year project

Area (acres) 1907 5106

Passenger handling capacity per annum

34 million 100 million

FINAL FACTS AND FEATURES (FY11)

Passenger Traffic: 29.9 mn

Aircraft movement: 0.3 mn

Cargo: 0.6 mn tonnes

Retail space: 0.2 mn sq feet

Apron area: 6.7 mn sq feet

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)

MARCH

2013


CSI International Airport - harnessing the power of PPP

Airports

→ Ranked third in the world at the ACI Annual Service Quality Awards in 2011 (category: handling 25-40 million passengers)

→ Also ranked as the second best airport in India

→ 23rd across all categories among a survey of 146 international airports in 2010

Passenger handling capacity per annum

Cargo handling capacity per annum

1 million tonnes

40 million

• 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

MARCH

2013

FACTS AND FEATURES

In FY11, CSI handled -

• Passenger traffic: 29.1 million

• Cargo movement: 0.7 million tonnes

30 30

Contents

Advantage India


Growth drivers


Opportunities

Useful information


Airports MARCH

2013

31 31 For updated information, please visit www.ibef.org OPPORTUNITIES

Opportunities

Airports

• Indian aviation sector likely to see investments totalling USD150 billion

• GOI expects 75 per cent (of USD14.6 billion) investments in airports during 2012-17 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

Policy support and demand growth unlocking large investment potential

Huge potential to develop India as an MRO hub

Leverage on non -aeronautical revenues, improved technology

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

MARCH

2013

32 32

Contents

Advantage India


Growth drivers


Opportunities

Useful information


Airports MARCH

2013

33 33 For updated information, please visit www.ibef.org USEFUL INFORMATION

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: [email protected], [email protected]

Airports MARCH

2013


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

Airports MARCH

2013

35

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Airports MARCH

2013

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