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CIVIL AVIATION
Submitted By
Anshika Srivastava(07) Aviral Pundir(15) Chetna Yadav(18) Kartik Menon(32) Rohit Menon(53)
Why Aviation: The Indian scenario
• ‘Indian Civil Aviation’ completes 100 years in the year 2011. On February 18, 1911, the first commercial plane flew in India between Allahabad and Naini carrying mails. To commemorate this milestone, ‘the year 2011-12’ is being declared and celebrated as the “Civil Aviation Centenary Year”.
• With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers.
• With high growth and stability, India is having high trade and commerce activities the air traffic has increased by almost 20%.
• Aviation Industry in India has the highest requirement of aircrafts globally.
• Thought current contribution of aviation to GDP is less than 1%, it is expected to double within next 5 years.
• Airlines have proved to be one of the most reactive industries and percussions of any event that happens in a country are instantaneously reflected in the airlines
History
Timeline1912: Indian
State Air service and
Imperial Airways, UK collaborate
to ply on first
domestic route,
between Delhi and Karachi.
1915: Tata Sons start
airmail service
between Delhi and Madras.
1932: Tata Aviations
established. It goes to
Colombo in 1938.
1948: Designated
as flag carrier
under the name Air
India International
with 49% govt.
control.
1953: Indian Airlines
Corporation formed
through Air Corporation Act, 1953,
by nationalizing
Air India and Indian National Airways.
1994: Air Corporation Act. 1953 repealed and thus allowed private
players to come.
2003: Entry of low cost
carriers. Air Deccan, Spice Jet,
Go Air, Indigo.
• At the time of independence, nine air transport companies were carrying both air cargo and passengers. These were Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways, Orient Airways and Mistry Airways. After partition Orient Airways shifted to Pakistan.
• The inaugural flight of Air India International Ltd took off on June 8, 1948 on the Mumbai-London air route
• The Government nationalized nine airline companies vide the Air Corporations Act, 1953. Accordingly it established the Indian Airlines Corporation (IAC) to cater to domestic air travel passengers and Air India International (AI) for international air travel passengers. A third government-owned airline, Vayudoot, which provided feeder services between smaller cities, was merged with IAC in 1994.
• In April 1990, the Government adopted open-sky policy and allowed air taxi- operators to operate flights from any airport, both on a charter and a non charter basis and to decide their own flight schedules, cargo and passenger fares
• To support the growth of the airline industry the Government in 1994-95 permitted direct import of aviation turbine fuel (ATF) under the special import license
scheme.
• In 1994, the Indian Government, as part of its open sky policy, ended the monopoly of IA and AI
in the air transport services by repealing the Air Corporations Act of 1953 and replacing it with the
Air Corporations (Transfer of Undertaking and Repeal) Act, 1994.
• Private operators were allowed to provide air transport services. Foreign direct investment (FDI)
of up to 49 percent equity stake and NRI (Non Resident Indian) investment of up to 100 percent
equity stake were permitted through the automatic FDI route in the domestic air transport services
sector.
• By 1995, several private airlines had ventured into the aviation business and accounted for more
than 10 percent of the domestic air traffic. These included Jet Airways Sahara, NEPC Airlines,
East West Airlines, ModiLuft Airlines, Jagsons Airlines, Continental Aviation, and Damania
Airways
• Today, Indian aviation industry is dominated by private airlines and these include low cost carriers
such as GoAir, SpiceJet etc, who have made air travel affordable.
Industry Overview and Competitors
Industry Statistics• Total Fleet size of commercial airlines india is more than 500• Fleet size of major domestic airlines in india are as below:
• Passengers carried by domestic airlines during Jan-Mar 2011 were 143.31 lakhs as against 118.54 lakhs during the corresponding period of previous year thereby registering a growth of + 20.9%.
Airline Fleet Size
Jet Airways 97
Jet Lite 110
Kingfisher 66
Air India 48
Spice Jet 22
Indigo Air 39
Go Air 10
Growth of Indian Passenger Traffic
• The air passengers have been growing at a constant rate.
• Indian aviation industry ranks 4th in the world after USA, China, and Japan in
terms of domestic passenger volume
• The civil aviation sector witnessed a slowdown in passenger traffic during 2008
due to a sharp rise in fuel prices coupled with global economic slowdown.
• India’s domestic passenger growth is expected to grow at the rate of 9%-10% to
reach a level of 150-180 million passengers by 2020.
• It is also estimated that travel of international passenger to and from India
would go to 50 million by the year 2015.
Operational Airlines
Airline Commenced Operations
Air India October 1932Air India Express April 2005
Air India Regional1996(as Alliance Air)
GoAir June 2004IndiGo August 2006
Jet Airways May 1993
JetLite1991(as Air Sahara)
Kingfisher Airlines May 2005SpiceJet May 2005
Market DistributionAir
India (Dom)15%
Jet Airways18%
JetLite8%
Kingfisher 20%
Spicejet14%
Go Air7%
IndiGo20%
• Since the beginning of 2010, the Indian aviation industry has been on a revival path,
with passenger numbers growing by 18 per cent against the previous year. And for
2011, the growth is forecast to be around 20 per cent, backed by a possible 9 per
cent growth in the Indian economy.
• Jet Airways and Kingfisher Airlines recently increased their fuel surcharge by up to
Rs 200 to recover the extra outgo, as public oil marketing companies promptly
increased aviation turbine fuel (ATF) prices to minimise their under-recoveries due
to subsidies given on other fuels.
• According to estimates by global aviation consulting firm Centre for Asia Pacific
Aviation (CAPA), airlines could end the financial year 2010-11 with a combined net
profit of $300 million. However, this calculation was made when oil prices were
under control.
• Jet Airways, for the first six months of the current financial year, reported a net profit
of Rs 16 crore compared with a net loss of Rs 468 crore in the previous fiscal.
SpiceJet, during the same period, reported a net profit of Rs 65 crore against a full-
year net profit of Rs 61 crore in 2009-10.
• Similarly, Kingfisher Airlines and Air India drastically cut down their losses due to better
cost management and improvements in yield. Kingfisher, during April-September 2010,
reported a net loss of Rs 418 crore versus a full-year net loss of Rs 1,647 crore in
2009-10.
• Though the profit and loss figures for Air India are not available, the national carrier
during April-November 2010 recorded revenue of Rs 7,250 crore compared with a
revenue of Rs 5,911 crore during the same period of the previous year, an increase of
22.6 per cent. And notwithstanding its huge debt burden, Air India in November 2010
reported perhaps for the first time in recent times a cash profit of Rs 21.66 crore due to
significant improvement in efficiency.
Competition Analysis
Top 5 Airlines according to Market Share
Kingfisher Airlines
Indigo
Jet Airways
Air India
SpiceJet
Fleet Share and Passenger Share of
Airlines
• Air India has the largest share of the fleet as expected.
• Jet Airways has the second largest fleet share but Kingfisher manages to catch up with it in terms of passenger share
• The success of low cost strategy of Indigo Air can be seen in its passenger share which matches upto Kingfisher and Jet despite having a much smaller fleet
Passenger Occupancy Distribution
Air India Jet Airways JetLite Kingfisher Spicejet Go Air IndiGo0
10
20
30
40
50
60
70
80
90
6876.5
80.2 83.6 8187.1 87.6
61.169.2
76.780.4
75.482.1 81.2
Feb-11Mar-11
% S
eat F
acto
r
Again we can see that Indigo has the highest Seat Occupation ratio
GoAir comes a close second in terms of seat occupation mainly because of low cost strategy
Performance of Aviation Industry
• Only five airline services companies are listed on the stock exchanges in India and hence only their quarterly financial information is available.
• Top three of the five companies in the aviation sector reported a robust sales growth of over 20% each during the December 2010 quarter. Higher passenger volumes coupled with improved realisations enabled the industry post healthy sales growth.
• Jet Airways, India’s largest airline by sales, was the only company to register higher net profit. Net profit margin (net profit to sales ratio) dipped marginally to 3.3% in December 2010 quarter due to a more than proportionate increase in net sales vis-à-vis profit. Profits were lower due to deferred tax adjustment made by the company.
• Although sales of Kingfisher Airlines surged by 28.1%, it continued to record a loss at the net level during October-December 2010 compared to a year-ago. Appreciation of Indian Rupee vis-à-vis $ enabled Kingfisher register a decline in rent and lease rent.
Financial Performance of Listed Airline Companies in December 2010 Quarter (% y-o-y growth)
Net sales
Power & fuel
Salaries & wages
Rent & lease rent
Interest
Depreciation
Net profit
Net Profit Margin Dec 09
Net Profit Margin Dec 10
Jet Airways 19.9 23.5 15.6 6.1 1.0 -5.4 11.7 3.6 3.3
Kingfisher Airlines
28.1 21.5 -1.2 -7.0 23.6 13.9 Lower Loss -31.7 -15.1
Spicejet 27.9 49.9 23.6 9.8 -33.1 18.0 -13.3 16.54 11.28
Global Vectra Helicorp
1.1 Na -2.3 Na -8.5 -16.3 Profit to Loss 8.37 -16.13
Jagson Airlines
-70.9 Na Na Na -16.2 7.7 Profit to Loss 2.22 -93.8
Average of the above
22.8 26.5 10.5 0.6 12.4 -2.2 -73.6
Government Regulations
The air transportation operations in India are
governed under
• The Aircraft Act, 1934
• The Aircraft Rules, 1937
• The Air Corporation Act, 1953
• The Air Corporation Act, 1953,
• The International Airports Authority Act, 1971,
• The Carriage by Air Act, 1972,
• The Tokyo Convention Act, 1975,
• The Anti-Hijacking Act, 1982,
• The National Airports Authority Act, 1985,
• The Airports Authority of India Act,1994
• The Air Corporations (Transfer of Undertakings and Repeal) Act, 1994.
Ministry Of Civil Aviation
• Ministry of Civil Aviation is responsible for formulation and implementation of national policies and programmes in the civil aviation sector. The Ministry also oversees the development and regulation of civil aviation in the country. Functions relating to Railway Safety, including enquiries into serious railway accidents are also performed by this Ministry.
• Ministry of Civil Aviation has following separate organizations for monitoring and regulating the civil aviation sector:-
– i) Directorate General of Civil Aviation; and
– ii) Bureau of Civil Aviation Security
Functions of Ministry of Civil Aviation
a) To ensure aviation safety, security
b) Effective regulation of air transport in the country in the liberalized environment
c) Safe, efficient, reliable and widespread quality air transport services are
provided at reasonable prices
d) Flexibility to adapt to changing needs and circumstances
e) To provide all players a level-playing field
f) Encourage Private participation
g) Encourage Trade, tourism and overall economic activity and growth
h) Security of civil aviation operations is ensured through appropriate systems,
policies, and practices
The Ministry of Civil Aviation has the following public sector undertakings/companies/autonomous bodies under its
administrative control:-
• National Aviation Company of India Limited (NACIL)
• Airports Authority of India (AAI)
• Pawan Hans Helicopters Limited (PHHL)
• Indira Gandhi Rashtriya Uran Akademi (IGRUA)
• National Aviation Company of India Limited (NACIL) :- is a company incorporated under
the Companies Act, 1956 and has the functions and responsibilities of providing safe, efficient,
adequate, economical and properly coordinated international air transport services. It has been set
up after the merger of Air India and Indian Airlines in 2007. This merger aims to create the largest
airline in India. The name of the new airline is Air India and its logo is Maharaja. NACIL is carrying its
operations under two operating permits, viz., NACIL-A and NACIL-I. It has following wholly owned
subsidiaries, namely, Hotel Corporation of India Limited, Air India Charters Limited (AICL), Air India
Engineering Services Ltd (AIESL); Air India Air Transport Services Limited (AIATSL); and Alliance Air.
• Airports Authority of India (AAI) :- was constituted in 1995 for creating,
upgrading, maintaining and managing civil aviation infrastructure, both on the
ground and air space of the country. It aims at providing world class airport
services for efficient operation of air transport in the country. It manages 127
airports, which include 16 international airports, 8 customs and
79 domestic airports and 24 civil enclaves at defence airfields. It controls the
entire Indian airspace of 2.8 million square nautical miles.
• Pawan Hans Helicopters Limited (PHHL) :- was established in 1985 as the country's
national helicopter company for providing helicopter support services to the Oil Sector;
operate scheduled/non-scheduled helicopter services in inaccessible areas and difficult
terrains; as well as provide charters for promotion of travel and tourism. It has a well
balanced fleet of 35 helicopters consisting of Bell 206L4, Bell 407, Dauphin SA 365N &
AS 365N3 and Mi-172, which are most appropriate for multi-farious jobs. It is the only
aviation company in India being awarded ISO 9001:2000 certification for its entire gamut
of activities.
• Indira Gandhi Rashtriya Uran Akademi (IGRUA) :- was established by the
Government with the objective of improving the flying training standards in civil aviation
and to impart line oriented flying training of international standards. It has been set up at
Fursatganj in Rai Bareilly District of Uttar Pradesh. It is equipped with modern and
sophisticated trainer aircraft, flight simulators, computer based training system, runway
with modern navigational and landing aids and its own airspace. It is manned by highly
qualified flying and ground instructors, with long experience in the field of aviation and
flying training.
Directorate General of Civil Aviation
• Directorate General of Civil Aviation (DGCA) is the regulatory body responsible for regulation of air transport services to/from/within India and for the enforcement of civil air regulations, air safety and airworthiness standards. The regulations are in the form of the Aircraft Act,1934; the Aircraft Rules,1937; the Civil Aviation Requirements; and the Aeronautical Information Circulars.
• The DGCA is headed by the Director General of Civil Aviation. It has its headquarters in New Delhi. Following Directorates exist under DGCA:-
i) Directorate of Regulations and Information
ii) Directorate of Air Transport
iii) Directorate of Airworthiness
iv) Directorate of Air Safety
v) Directorate of Training and Licensing
vi) Directorate of Aerodrome Standards
vii) Directorate of Flying Training
viii) Directorate of Flight Inspection
ix) Directorate of Research & Development
x) Directorate of Administration
Functions of DGCA
• Registration of civil aircraft;• Formulation of standards of airworthiness for civil aircraft registered in India and
grant of certificates to such aircrafts;• Licensing of pilots, aircraft maintenance engineers; flight engineers; and air traffic
controllers;• Maintaining a check on the proficiency of flight crew, and also of other operational
personnel such as flight dispatchers and cabin crew;• Conducting investigation into accidents/incidents and taking accident prevention
measures;• Carrying out amendments to the Aircraft Act, the Aircraft rules and the Civil
Aviation requirements for complying with the requirements of International Civil Aviation Organisation (ICAO);
• Granting approval to aircraft maintenance, repair and manufacturing organizations;
• Rendering advice to the Government on matters relating to air transport including bilateral air services agreements; on ICAO matters and on all technical matters relating to civil aviation;
DGCA and AirlinesDGCA, under the provisions of Rule 134 of the Aircraft Rules, 1937 grants permission to persons to operate an air transport service to, within and from India.
The air transport services offered are the:• Scheduled Air Transport Services (Passenger)
(Civil Aviation Requirements Section 3 Series 'C' Part II)• Non- Scheduled Air Transport Services (Passenger)
(Civil Aviation Requirements Section 3 Series 'C' Part III)• Air Transport Services (Cargo) (Civil Aviation Requirements Section 3 Series 'C' Part IV)• Non-Scheduled Air Transport Services (Charter Operation)
(Civil Aviation Requirements Section 3 Series 'C' Part V)
These permits are equivalent to the Air Operator's Certificate required to be granted by ICAO member States in accordance with the provisions of Annex 6. Permits for any other special type of operation can be granted subject to the applicant showing satisfactory capability to undertake the type of operations.
Guidelines for Obtaining a Permit
• Air Transport Circular 1 of 1997 gives the procedure to be followed for grant of the permits and the various requirements which an applicant has to fulfill for obtaining the permit.
• The issuance of a permit is dependent upon the applicant demonstrating an adequate Organisation, method of control and supervision of flight operations, training programme and maintenance arrangements consistent with the nature and extent of the operations specified.
MINIMUM REQUIREMENTS FOR GRANT OF PERMIT TO OPERATE SCHEDULED PASSENGER AIR TRANSPORT SERVICES.
• A Scheduled Operator's Permit can be granted only to:
a) a citizen of India; or
b) a company or a body corporate provided that:
i) it is registered and has its principal place of business within
India;
ii) its chairman and at least two-thirds of its directors are
citizens of India; and
iii) its substantial ownership and effective control is vested in
Indian nationals.
Commencement of Scheduled International Air Services by a Foreign Airline
• The airline shall, in accordance with the provisions of the air services agreement, be formally designated either through diplomatic channels or by the aeronautical authorities of the country whose Government have concluded the Agreement with the Government of India. A copy of the letter designating the airline shall be submitted to the office of the Director General of Civil Aviation (DGCA).
• The designated airline shall, in accordance with the provisions of the bilateral air services agreement, obtain the approval of the competent authorities for the tariffs to be charged on the agreed services operated on the specified route(s)
• The designated airline shall file their proposed flight schedule with the office of the DGCA for approval, at least 30 days prior to the commencement of the agreed services. The flight schedule should contain information relating to the type of service and its frequency, the type of aircraft to be used and the flight timings. The flights shall be operated only after the schedule has been approved by DGCA.
Bureau of Civil Aviation Security
• BCAS is an attached office of the Ministry. It is a regulatory body and is responsible for
laying down the standards of pre- embarkation security and anti-sabotage measures in
respect of civil flights in India. The Bureau keeps a constant vigil and monitors the
enforcement of the security measures. BCAS has four Regional Offices in Delhi,
Kolkata, Mumbai and Chennai.
• The Following Acts provide power and authority to the BCAS
– AIRCRAFT ACT- 1934
– AIRCRAFT RULES-1937
– Tokyo Convention 1975 Act
– Anti-Hijacking Act 1982
– Anti Hijacking Act 1994 (Amendments 1994)
– The Suppression of Unlawfull Acts Against Safety of Civil Aviation Act 1982
– The Suppression of Unlawfull Acts Against Safety of Civil Aviation Act 1994
– INTERNATIONAL CONVENTIONS
Open Air Policy
• Need for Open Skies Policy– A recurring demand often voiced by interested parties is that, in order to promote
Travel & Tourism, India should adopt an Open Skies policy. It is argued that the current policy restricts the access of foreign airlines. As a result potential tourists are not offered a choice of airlines or seats when travelling to India. This problem is exacerbated during the holiday season when it is difficult, if not impossible, to get a seat either into the country or out of it. It is argued, therefore, that India should adopt an Open Skies approach to any foreign carrier wanting to fly into India, which literally means allowing them unlimited service, capacity and points of call
• Meaning of ‘Open Skies’– Strictly speaking Open Skies means unrestricted access by any carrier into the
sovereign territory of a country without any written agreement specifying capacity, ports of call or schedule of services. In other words an Open Skies policy would allow the foreign airline of any country or ownership to land at any port on any number of occasions and with unlimited seat capacity. There would be no restriction on the type of aircraft used, no demand for certification, no regularity of service and no need to specify at which airports they would land.
Indian Bilateral Treaties• Almost 99 per cent of Members of the International Civil Aviation Organization (ICAO)
follow the system of negotiated bilateral treaties determining the aviation relations between two sovereign Contracting parties.
• The Bilateral Agreements also protect the different kinds of aviation Freedoms granted to contracting parties by specifying the reciprocal rights to be enjoyed by each.
• To increase connectivity between India and other countries and facilitate travel for passengers, India has entered into Air Service Agreements (ASA) with 100 countries till date.
• These bilateral Agreements provide the basic legal framework for operation of air services between the two contracting parties.
• The number of flights each country can operate and the destinations that could be served are also specified in these Agreements.
• The Open Skies agreement provides for open routes, capacity, frequencies, designations, and pricing, as well as opportunities for cooperative marketing arrangements, including bilateral codesharing with domestic Indian carriers
Government Initiatives on Promotion of Aviation
Industry(i) The Foreign Direct Investment limit in Air Transport
Services (Domestic Airlines) has been increased from 40% to 49% and is soon expected
to be increased further. However, the NRI`s and Persons of Indian Origin (PIO) have
been allowed 100% FDI;
(ii) Private scheduled carriers with five years experience in
domestic sector and having fleet size of twenty aircraft permitted to operate on
international routes;
(iii) Liberal policy in the exchange of capacity entitlement /
traffic rights paved the way for more foreign airlines to operate to / from India;
(iv)Amendment of the various outdated provisions of Aircraft Rules to keep the
provisions abreast with the international standards and developments in the civil
aviation sector;
(v) Tourist charter guidelines liberalized;
(vi) Fleet expansion plans of Air India/Indian Airlines approved;
(vii) Restructuring of Delhi and Mumbai airport and
work on development of Greenfield airports at Bangalore and Hyderabad undertaken25;
(vii) Up gradation/ expansion/ development of airports undertaken depending upon traffic potential, requirement of airline operators and need of air passengers.
Government Initiatives on Promotion of Aviation
Industry(Contd)
Legal Aspects
Legal Aspects• In India, the Industrial Disputes Act, 1947 is the main legislation for investigation and settlement of all
industrial disputes. The Act enumerates the contingencies when a strike or lock-out can be lawfully
resorted to, when they can be declared illegal or unlawful, conditions for laying off, retrenching,
discharging or dismissing a workman, circumstances under which an industrial unit can be closed
down and several other matters related to industrial employees and employers.
• The Act is administered by the Ministry of Labour through its Industrial Relations Division. The Division
is concerned with improving the institutional framework for dispute settlement and amending labour
laws relating to industrial relations. It works in close co-ordination with the
Central Industrial Relations Machinery (CIRM) in an effort to ensure that the country gets a stable,
dignified and efficient workforce, free from exploitation and capable of generating higher levels of
output.
• Under the Industrial Disputes Act, 1947, the Central Government is the appropriate Government for
investigation and settlement of industrial disputes in regard to, the Indian Airlines, Air India, the Airport
Authority of India and all air transport services..
Taxation
Taxation
• Domestic Airline Income Taxes Rates:– For Domestic Airlines the effective tax rate is 30% and the tax rate with
surcharge is 30% Attention must be given on the factor that if the taxable income is more than ` 1 million then a surcharge of 10% of the tax on income is levied
– Attention must also be given on the fact that all of the companies formed in India are regarded as Indian domestic companies, even in the case of ancillary units with mother companies in foreign countries
Foreign players income tax rates:
• For dividends 20% in case of non-treaty foreign companies and 15% for companies under the treaty based in United States
• For interest gains 20% in case of non-treaty foreign companies and 15% for companies under the treaty based in United States
• For royalties 30% in case of non-treaty foreign companies and 20% for companies under the treaty based in United States
• For technology based services in case of non-treaty foreign companies and 20% for companies under the treaty based in United States
• For other kinds of income and gains 55% in case of non-treaty foreign companies and 55% for companies under the treaty based in United States
• Attention must be given on levying inter corporate rates in case the holding is minimum
• Attention must be given on the fact that the sanctions of the tax authorities on tax withholding
• Attention must be given on the several of the tax treaties India signed with the other countries and also the various encouraging tax rates
Union Budget 2011• Increase in MAT rate from 18% to18.5%. Since most airline companies are
reeling under huge accumulated losses, there should not be any immediate additional cash outflow on account of this change
• Reduction in surcharge from 7.5% to 5%. The reduction in effective corporate tax rate will not have an immediate impact on account of accumulated losses.
• Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn
• A basic custom duty of 2.5% is being imposed on import of aircrafts for non scheduled operations. The exemptions from addiditional duty of customs(CVD) and special additional duty of customs (SAD) would continue
• The rate of service tax on travel by air are being
SL Travel Type Present Rate
ProposedRate
1 Domestic Travel (Economy Class) 100 150
2 International Travel (Economy Class) 500 750
3 Domestic Travel( Other than Economy) 100 10%
Foreign Investment
Current Foreign Policy
• FDI up to 100 per cent is allowed under the automatic route for greenfield
projects.
• For existing projects, FDI up to 100 per cent is allowed; while investment
up to 74 per cent under the automatic route and beyond 74 per cent
under the government route.
• FDI up to 49 per cent is allowed in the domestic airlines sector under the
automatic route, but not by of foreign airline companies.
FDI in Civil AviationAirports
(a) Greenfield projects - 100%, Automatic
(b) Existing projects- 100% ,Automatic up to 74%, Government route beyond 74%
Air Transport Services
(a) Air Transport Services would include Domestic Scheduled PassengerAirlines; Non-Scheduled Air Transport Services, helicopter andseaplane services.
(b) No foreign airlines would be allowed to participate directly or indirectlyin the equity of an Air Transport Undertaking engaged in operatingScheduled and Non-Scheduled Air Transport Services except Cargoairlines.
(c) Foreign airlines are allowed to participate in the equity of companiesoperating Cargo airlines, helicopter and seaplane services.
Scheduled Air Transport Service/Domestic Scheduled Passenger Airline
49% FDI (100% for NRIs) Automatic
Non-Scheduled Air Transport Service 74% FDI (100% for NRIs),
Automatic up to 49% Government route beyond 49%
Helicopter services/seaplane services requiring DGCA approval 100%
Automatic
Other services under Civil Aviation sector
Ground Handling Services(subject to sectoral regulations and
security clearance) -74% FDI, (100% for NRIs), Automatic up to 49%,
Government route beyond 49% and up to 74 %
Maintenance and Repair organizations; flying training institutes; and
technical training institutions 100% Automatic
Asset Reconstruction Companies
Asset Reconstruction Company’ (ARC) means a company registered with
the Reserve Bank of India under Section 3 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act,2002 (SARFAESI Act).
FDI limit 49% of paid-up capital of ARC, Government
Other conditions:
(i) Persons resident outside India, other than Foreign Institutional Investors
(FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs)
registered with Reserve Bank only under the Government Route. Such
investments have to be strictly in the nature of FDI. Investments by FIIs are
not permitted in the equity capital of ARCs.
(ii) However, FIIs registered with SEBI can invest in the Security Receipts
(SRs) issued by ARCs registered with Reserve Bank. FIIs can invest upto 49
per cent of each tranche of scheme of SRs, subject to the condition that
investment by a single FII in each tranche of SRs shall not exceed 10 per cent
of the issue.
(iii)Any individual investment of more than 10% would be subject to
provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
Conclusion
Future Trends• Consolidation in aviation sector
– The rise in the number of alliances in aviation industry will help in further growth of aviation sector in India.
• Number of passengers is on the rise– With passenger boardings expected to double by 2025, and
aircraft operations expected to triple by the same time
• Price is paramount in selecting carrier:– Due to the Internet and round-the-clock search capability,
airfares are fully transparent to the public and travelers are choosing the lowest price option. Air travel is now a commodity business, and legacy carriers will have to adapt further to a low-cost/low-fare environment in order to survive
• Growing Capacity:– Indian carriers are placing orders for new aircraft for delivery in the
coming period, without clear plans to retire older planes. They are also adding significant numbers of regional jets. The air taxi fleet is also expanding rapidly
• Oil prices are not expected to fall:– The public sector oil marketing companies (OMCs) have raised the
prices of Aviation Turbine Fuel (ATF) by 3.5 per cent, in line with the rise in international oil prices. This is likely to trigger a marginal increase in airfares.
• Outsourcing:– Private airlines are known to hire foreign pilots, get expatriates or
retired personnel from the Air Force or PSU airlines, in senior management positions. Further, they outsource such functions as ground handling, check-in, reservation, aircraft maintenance, catering, training, revenue accounting, IT infrastructure, loyalty and programme management. Airlines are known to take on contract employees such as cabin crew, ticketing and check-in agents.
THANK YOU
References
• http://india.gov.in (Government of India)• http://www.bcasindia.nic.in/ (beaureau of
Civil aviation security)• http://dgca.nic.in/ (Directorate General of
Civil Aviation)• Wikipedia• Ministry of Civil Aviation• Various Journals