Investment Opportunity in Civil Aviation

Investment Opportunity in Civil Aviation

Civil aviation sector is one of the fastest growing sectors in India. Government is planning to upgrade and starting new ones. Government in its major policy has decided to invest billions of dollars to improve the civil aviation services and upgrade the airports to the international level.

Facts and Figure

• Out of 125 airports India has 11 international airports
• As per government report in the year 2004-05, nearly 60 million passengers and 1.3 million tonnes of cargo were handled by the airports.
• In 2004-05, Passenger traffic grew at over 22% over 2003-04 whereas, Cargo grew at 21.6% over the previous year
  
  

Airport Controlling Authority and Structure

• Airports Authority of India (AAI) owns and operates all the 125 airports in India.
• The Government is planning to attract private investment in aviation infrastructure
• Government has decided to privatize the Delhi and Mumbai airports. Bidders have submitted final bids. Total expected investment in these two airports is about $3.5 billion
• In Bangalore and Hyderabad new international airports are being built by private consortia with a total investment of about $600 million
• Private investment is also to be made in 25 other city airports
• Indian Airlines and Air India are the domestic and the Government owned international flag carriers respectively.
• The private airlines of India such as Jet, Sahara, Kingfisher, and Deccan - account for around 60% of the domestic passenger traffic.
  

Government’s Policy

• For existing airports, 100% FDI is permissible. For FDI beyond 74%,
• FIPB approval is required
• For Greenfield airports, 100% FDI under automatic route is permissible
  49% FDI is allowed in domestic airlines under the automatic route, but not by foreign airline companies
• 100% equity ownership by Non Resident Indians (NRIs) is allowed
• For airport privatization AAI Act has been amended to provide legal framework
  Government has also decided to give 100% tax exemption for airport projects for a period of 10 years
• Government’s ‘Open Sky’ Policy and rapid growth of air traffic have resulted in the entry of several new privately owned airlines and increased frequency/flights for international airlines.
  

Investment Opportunity and Business Potential

• Civil aviation sector has huge business and investment potential. Government of India also has decided to develop airport infrastructure. Both the domestic and thee international air travel is increasing year after year.
• It is projected that in the next five years, the passenger traffic would grow at a CAGR of over 15%.
• It has also been projected that by 2010 total number of passengers would cross 100 million p.a. Cargo traffic will also do better. It would grow at over 20% p.a. over the next five years and cross 3.3 million tonnes by 2010
• Government is planning major investments in new airports and upgrade existing airports
• Rapid economic growth would enable a continued boom in domestic passenger traffic and international outbound traffic
• Due to increasing trade and investment actrivity in India and the growth of India as a hot tourist spot, will also help in the growth of International inbound traffic
• There is a high demand for investments in aviation infrastructure Government is trying hard to increase participation by private industry
  

Investment opportunities Area

• Investment opportunities lie in following areas:
• Upgradation and Modernization Metro airports – induction of partners for Chennai, Kolkata expected subsequently
• Opportunities also lie in the development of Greenfield airport projects planned in resort destinations and emerging metros such as Goa, Pune, Navi Mumbai, Ludhiana, etc.
• Over $15 billion to be invested for airport development over the next 5 years