Civil Aviation Sector investment opportunities – A changing scenario
India-An Economic Overview • 7 th largest country in the world in terms of area • 4th largest economy in the world in terms of purchasing power parity • A middle class customer base of over 300 million people • Macroeconomic parameters for 2003-04 –GDP growth rate :8% + –Industry :6.5% –Services :8.4% –Inflation :5-6% –Foreign Exchange Reserves :118billion US$
Civil Aviation & Airports Airports – Current Status : – 450 airports/airstrips in the country including those managed by Defence Services, State Governments and Private Parties – Airports Authority of India(AAI) manages 124 of them • 11 International Airports & 76 Civil Domestic Airports • 9 Custom Airports (Non Scheduled/Charter Flights) • 28 Civil enclaves at defence airfields – AAI operates most aspects of the airport incl.Air Traffic Control – Traffic in 2003-04 – International Passengers : 16.5mn – Domestic Passengers : 29mn • Total - : 45.5 mn – AAI spent US $ 375 mn in 1997-2002 towards capital expenditure – AAI plans to spend US $ 1.17 billion. during 2002-2007
Civil Aviation & Airports - Status Airlines – Current Status • 8 scheduled domestic private airlines and 1 State Owned domestic Scheduled Airlines • 37 non-scheduled /domestic operators • 1 state owned International flag Carrier (Air India) • Total Traffic grew by 13.6% during the period April 2003-March 2004 as compared to April 2002-March 2003 – International 14 % – Domestic 13.5 % • Total Traffic grew by 16.2 % during the quarter April -May 2004 as compared to April –May 2003 – International 20.9% – Domestic 15 % • Private Sector accounts for 70% of the domestic air traffic
Civil Aviation & Airports Traffic projections Passenger • By 2010: 105-115 million (69 million domestic passengers & 40 million intl. Passengers) Cargo • By 2010: 3360 thousand tonnes
Civil Aviation & Airports Recent initiatives • Private investment encouraged – both in Airlines as well as Airports • Airport Infrastructure Policy,1997 permits private equity participation for development of airports to bridge resource gap and to bring efficiency • Foreign Direct Investment has been allowed upto 100% in airports, beyond 74% requiring Government approval • Foreign equity upto 40% and NRI/OCB investment upto 100% is permissible in the domestic air transport services with prior GOI approval • Domestic Carriers permitted to operate international flights to SAARC countries • Open Sky policy for cargo flights • Attractive fiscal incentives/concessions, moderate tax rates & Tax holidays • Public-Private Partnership encouraged • Liberal Equipment Import regime • Comprehensive Civil Aviation Policy to be finalised very shortly
Civil Aviation & Airports Legal framework for investment Airports Authority of India Act 1994 was amended by Indian Parliament in the year 2003 to facilitate private sector participation in development of Greenfield Airports. Government will have no direct role in the management private sector Greenfield airports except for provision of security, air traffic services and other regulatory activities. The amendment, inter alia, provides the following : •Defines Private Airports, •Leasing of the premises to carry out some of the airport functions in the public interest or better management of airports, •Provisioning of Air Traffic Services and Security shall remain with AAI, •Levying ‘Advance Development Fee’ on embarking passengers at existing airport to finance new airports in lieu of the existing one or for financing the existing airport, •Effective mechanism for removal of encroachment on airport land including land owned by private airport.
Civil Aviation & Airports • Setting up of an independent Airport Economic Regulatory Authority is under consideration – Regulatory principles to: • provide a fair return on investments • transparent and well documented • incentive based to reduce cost and increase efficiency • Independent and consistent related to quality standards – Scope of Regulation • Setting aeronautical price cap • Monitoring and assessing service quality performance while setting price cap • Review and assess aeronautical, operating and capital expenditure
Civil Aviation & Airports Airports – Investment Opportunities • AAI has currently embarked on a plan to restructure & modernize both Mumbai and Delhi Airports through Public Private Partnership (Joint Venture route) with 74 % equity stake to be held by Private Parties • Foreign Direct Investment has been allowed up to 49% at these airports • AAI will hold only 26% equity in the Joint Venture Company
Civil Aviation & Airports Delhi Airport • Capital city of India with population over 13 Million • Spread across an area of 22 sq Km • Two Runways and separate International and domestic terminals • 10.4 Million Pax handled in FY 2004 (21% of total) • 296,000 MT of cargo handled in FY 2004 (28% of total) • Aircraft Movements – 31474 International, 74075 Domestic (03-04) • Pax Growth – 3.1 CAGR (1998-2003) • Cargo Growth – 6.4% CAGR (1998-2003) • Revenue – US$ 80.2 mn (FY 2003) • EBIDTA – US$ 48 mn • Revenue Composition (Aero – 42%, Cargo – 27%, Commercial – 31%)
Civil Aviation & Airports Mumbai Airport • Commercial Capital of India with population over 17 Million • Spread across an area of 7.6 sq Km • Two Runways and separate International and domestic terminals • 13.3 Million Pax handled in FY 2004 (28% of India) • 326,000 MT of cargo handled in FY 2004 (31% of India) • Aircraft Movements – 37,560 International, 99,646 Domestic (03- 04) • Pax Growth – 2.2 CAGR (1998-2003) • Cargo Growth – 3.9% CAGR (1998-2003) • Revenue – US$ 91 mn (FY 2003) • EBIDTA – US$ 49.3 mn • Revenue Composition (Aero – 50%, Cargo – 18%, Commercial – 32%)
Civil Aviation & Airports Investment Opportunities – A Committee set up by Government of India • For development of smaller airports with tourist potential through Public Private Partnership route • to evolve mechanism for financing of development activities etc. • Review and monitor the progress of the project • Appointment of a Financial Consultant and a Global Technical Advisor for the same is under consideration
Civil Aviation & Airports Investment Opportunities ….cont. 23 such airports have been identified •Ahmedabad •Goa •Patna •Trivandrum •Amritsar •Port Blair •Jaipur •Bhopal •Pune •Udaipur •Indore •Coimbatore •Mangalore •Agatti •Nagpur •Guwahati •Aurangabad •Vadodara •Madurai •Vizag •Rajkot •Lucknow •Bhubaneshwar
Civil Aviation & Airports Investment Opportunities – Two Greenfield Airports being developed by Private Sector • Currently Bangalore International Airport is being developed through Private Public Partnership (PPP). New Airport targeted to be opened in 2007. Tentative Project Cost US $ 1100 mn with cost of initial phase as US $ 280 mn. • Siemens –Zurich airport and Larsen & Toubro(L&T) consortium selected after an international competitive bidding process • Karnataka State Industrial and Investment Corporation(KSIIDC) and AAI are the state promoters • Equity Participation • AAI & KSIIDC : 26 % • Siemens, Zurich airport & L&T : 74 % • Concession Agreement already signed – first ever in India for the airport sector • Shareholding agreement also signed and other agreements to be signed shortly
Civil Aviation & Airports Investment Opportunities ….contd. • Hyderabad International Airport is also being developed through PPP. New Airport targeted to be opened by 2007. Tentative Project Cost US$ 1100 mn. Cost for Phase-I US$ 280 mn. • GMR –Malaysian Airports Holdings Berhad (MAHB) awarded Hyderabad International Airport Project after an international competitive bidding process • Equity Participation in HIAL • AAI & Government of Andhra Pradesh : 26% • GMR & MAHB Consortium : 74% • Key Agreements (State Support Agreement, Shareholders Agreement and Land Lease Agreement signed) • State Government to provide grant of US $ 23 mn. and Interest Free Loan of US $ 68 mn. • Concession Agreement for this airport expected to be signed shortly
Civil Aviation & Airports Proposals of other Greenfield airports under consideration: • MOPA – GOA • Navi Mumbai, Maharashtra • Chakan, Pune, Maharashtra • Kannur, Kerala • Multi Model International Hub – Nagpur
Civil Aviation & Airports Investment Requirements for next 10 years – Indian airlines – US$ 24 bn – Air India – US$ 24 bn – Airports Authority of India • Delhi and Mumbai airports – US$ 22 bn. • Non Metro airports – US$ 9 bn • Greenfield airports – US$ 13 bn • Others – US$ 12 bn Total – US$ 104 bn
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