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Aviation Industry in India

A presentation by Adroit Professionals

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Contents

Background and history of Aviation in India of Low cost carriers aviation administration and Airport infrastructure Airline operating matrix turnarounds in Aviation industry Policy Changes

Rise Civil

Domestic Recent

Suggested

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Background and history

Upto 1986

The first commercial flight in India was made on Feb 18,1911 Birth of Air India International Ltd There were 8 companies operating within and outside the country at the time of independence Nationalisation of airlines via the Air Corporations Act 1953, which gave birth to Indian Airlines and Air India

Indian Airline Industry from 1986 2003

Entry of private sector players Air Corporation Act was repealed and in 1995 and

Background and history

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Indian Airline Industry from 2003 2006

Duopoly of Jet and Sahara as private carriers Entry of Air deccan and concept of low cost carriers (LCC) Entry of new LCC players

LCC Market share

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Industry evolution- Major milestones

Rise of Low cost carriers

International

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origin of LCC : US Airline deregulation Act 1978 in Indian context : Air Deccan in 2003 and later subsequent players like spicejet, Indigo, Go Air, jet airways, kingfisher airlines following table shows some of the LCC strategies

Entry

The

Civil Aviation administration and Airport infrastructure

The

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Ministry of Civil Aviation of the Government of India regulates aviation in India. General of Civil Aviation investigates aviation accidents and incidents. Authority of India manages most of the airports in India. The AAI manages and operates 126 airports and 329 airstrips including 16 international airports,89 domestic airports and 26 civil enclaves.

Directorate

Airports

Domestic Airline operating matrix revenues

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Domestic Airline operating matrix Costs and Ebit

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Recent Turnarounds in Aviation industry

Cost Increasing factors
v v v v v

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Rising Fuel(ATF) costs Rupee depreciation High interest costs on increased debts High Airport (Aeronautical) charges Poor infrastructure Pax growth moderation Diminishing margins

Revenue
v v

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Rising costs
Fuel

Cost

The impact of rising fuel cost can be seen from the following exhibit which is fuel cost as a % of Gross sale for domestic airlines.

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Rising costs
ATF

price trend (Mumbai, Rs/Klitre)

Rupee

Depreciation

Moderating revenues
Domestic

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Airlines- Gross sales growth(% YOY)

Reported

PAT(% of Gross sale)

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Falling EBITDAR
If

we take example of a major domestic carrier Jet Airways the trend in EBITDAR is as follows

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Suggested policy changes

HOW or WHY ???

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Suggested policy changes

Direct

ATF Import :

Benefit of tax differential

ATF tax structure in India

Difficulties in importing ,storing and transporting ATF Stress on working capital of carriers.

FDI in Aviation
Factors

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that support investment in Indian Aviation sector

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FDI in Aviation
Factors

sector

against investment in Indian Aviation

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FDI in Aviation Current regulations

FDI Risk of promoter stake dilution

As

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airline stock have corrected significantly over last two years ,fresh equity at current valuations will dilute promoters stake following graph shows the erosion in market capitalization of major domestic airlines (Rs. crs)

The

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FDI Risk of promoter stake dilution

Hypothetical

post FDI

projections of promoter stake

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Other proposals
Lifting

freeze on international expansion of private airlines assistance to the national carrier

Financial

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Thank You