Indian aviation transformation: 49% foreign airline investment, lower airport charges, fuel taxes


India’s government is finally taking significant steps to overhaul the aviation sector. Following a particularly turbulent couple of years which has driven some airlines to the brink of bankruptcy (and sometimes beyond) and caused heartaches for airport operators, the new structural challenges are a last ditch response to restore the market’s strong growth trajectory.

The 16-Oct-2012 announcement by the Ministry of Civil Aviation that hefty airport development fees charged on passengers departing from Delhi and Mumbai will be abolished from 1-Jan-13, is a welcome development for India’s airlines. The resultant lower fares should stimulate traffic and enhance the overall viability of the sector. It does however raise a financing gap issue for the airports operators, which they will have to address through a combination of debt and equity.

This welcome development follows closely on from the decision in Sep-2012 to permit foreign airlines to invest up to 49% in Indian carriers. Although this is unlikely to result in an immediate rush of investors, it is a breath of fresh air that should drive long term benefits. The eventual entry of strategic capital and expertise will be important for establishing a more professional and corporatised sector.

The Ministry has directed the state-owned Airports Authority of India to contribute its share of any additional equity infusion at the two PPP airports that levy airport development fees (Mumbai and Delhi), and not to levy airport development fees at the two largest airports that it operates, Chennai and Kolkata. Meanwhile, greenfield airport projects such as Navi Mumbai, Goa Mopa and Kannur are being fast-tracked in order to meet the impending airport capacity crunch.

Aviation fuel taxes also to be reduced - if States can be convinced

The Aviation Minister, Mr Ajit Singh, is now turning his attention to fiscal reform in the sector. He has taken up the challenge to have aviation turbine fuel re-categorised as a declared good - which would reduce the sales tax from an average of 24% to 4% and have a substantial positive impact on airline financials.

This has been one of the most criticised features of India’s airline system, but there will be strong resistance from state governments to any sort of change. If successful Mr Singh will have addressed arguably the single most significant challenge in the Indian aviation sector.

The recent and planned initiatives in the civil aviation sector mirror the wider reformist agenda being adopted anew by the Central government which earlier appeared to have lost its way. Mr Singh looks to be encouragingly focussed on restoring the undoubted potential of the market.

CAPA's India Aviation Summit could not be more timely: Minister and all industry leaders will be there

With the Indian airline market at a turning point, global aviation businesses may find it hard to see what happens next and the implications for their businesses.

CAPA is therefore convening India’s leading aviation event in Mumbai on 30-31 October 2012. The CAPA India Aviation Summit will be a unique knowledge-building and networking forum, allowing participants to understand the real situation on the ground, and to meet the industry and government leaders that influence the market’s direction. Panel discussions will be supported by executive briefing papers, leveraging CAPA India’s research and data capabilities.

With an audience of 200+ critical decision-makers from one of the leading growth prospects in global aviation, any company with short or long term interests in Indian aviation needs to be part of the conversation that will take place at the CAPA India Aviation Summit.

The Summit will be inaugurated by Ajit Singh, India’s Minister of Civil Aviation, and will be attended by the CEOs of virtually every airline and airport operator in India, along with high level government and industry delegations from neighbouring countries including Sri Lanka, the Maldives and Nepal. Participants include the following with several more high profile confirmations expected in the coming days:

▪   India Ministry of Civil Aviation: Ajit Singh, Minister of Civil Aviation

▪   India Ministry of Civil Aviation: K.N.Shrivastava, Secretary Civil Aviation

▪   Sri Lanka Ministry of Civil Aviation: Dr. R. Ruberu, Secretary Civil Aviation

▪   Maldives Ministry of Transport: Mohammed Latheef, Secretary Transport

▪   Afghanistan Ministry of Transport: Dr. Daoud Najafi, Minister of Transport (tbc)

▪   Air Arabia: Adel Ali, CEO

▪   Air India: Rohit Nandan, Chairman & Managing Director

▪   Air India: Deepak Brara, Director Commercial

▪   Airports Authority of India: V.P.Agrawal, Chairman

▪   BOC Aviation: Tony Ramage, Head of Structured Finance

▪   Fraport: Christoph Nanke, VP Global Investments & Management

▪   GMR Airports: P.S.Nair, CEO

▪   Hogan Lovells: Jeff Shane, Partner; Former Under-Secretary for Policy, US DoT

▪   ICICI Venture: Manikkan Sangameshwaram, President - Infrastructure

▪   IndiGo Airlines: Aditya Ghosh, President

▪   Indigo Partners: Bill Franke, Managing Partner

▪   Irelandia Aviation: James Muldowney, Partner

▪   Jet Airways: Nikos Kardassis, CEO (tbc)

▪   Jet Airways: Sudheer Raghavan, Chief Commercial Officer

▪   Mumbai International Airport: Rajeev Jain, CEO

▪   Nik Gowing: International Journalist & Broadcaster

▪   SBI Macquarie Infrastructure Management: Suresh Goyal, CEO

▪   SpiceJet: Neil Mills, CEO

▪   Zurich International Airport: Christian Sigg, VP International Business Development

For more information about registration or remaining sponsorship opportunities visit www.capaindiasummit.com or contact Tarika Wadhwa on capaindia@centreforaviation.com or +91 11 4692 1036.

CAPA AeroPark Aviation Executive Education, Mumbai, 1-3 Nov-2012

Directly after the Summit, CAPA is proud to bring a series of world class aviation executive programs to the region for the very first time. These include:

Aviation Leadership Development: in conjunction with Embry-Riddle Aeronautical University. This unique course is based on a groundbreaking management and leadership model which was first presented in the Harvard Business Review, considered particularly useful for developing decision-making frameworks for organisations operating in complex and challenging environments. Leading international faculty have specially adapted this model for use in a workshop for aviation professionals taking into account operational challenges in South Asia.

International Aviation Law & Policy: in conjunction with the International Aviation Law Institute and the International Institute of Air & Space Law. We are honoured to have three of the leading global experts in international aviation law presenting this course, which will provide a strong foundation for any official or executive that needs to understand the frameworks under which global aviation operates.

Airport Management, Development and Finance: in conjunction with HAS Development Corporation.A unique combination of faculty with experience in airport operations; masterplanning, engineering and design; and investment banking, will present an in-depth program on international best practices to optimise the efficiency of airport assets and maximise value.

Communications, Navigation & Surveillance (LIMITED PLACES REMAINING): in conjunction with Airways International one of the world’s leading air navigation service providers. This is a practical case-study based course on the implementation of CNS and Air Traffic Management through planning and working with stakeholders to effect change, the use of technology innovations, understanding resources required for optimal route performance and the costs and financial issues associated with implementation

Download the Executive Education brochure or contact Tarika Wadhwa on capaindia@centreforaviation.com or +91 11 4692 1036 for more information.

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