Study of the Indian Aviation Industry

1.1 Air Traffic: The Airport Authority of India (AAI) manages total 122 Airports in the
country, which include 11 International Airports, 94 domestic airports and 28 civil
enclaves.  Top 5 airports in the country handle 70% of the passenger traffic of which
Delhi and Mumbai together alone account for 50%.  Passenger and cargo traffic has
growth at an average of about 9% over the last 10 years.

1.2 Growth: Estimated domestic passenger segment growth is at 12% per annum. 
Anticipated growth for International passenger segment is 7% while the growth for
International Cargo is likely to grow at a healthy rate of 12%.

1.3 Privatization: Privatization of International Airports is in offing through Joint Venture

route.  Three Greenfield airports are getting developed at Kochi, Hyderabad and
Bangalore with major shareholding of private sector. The work on Bangalore airport is
likely to commence shortly.  Few selected non-metro airports are likely to be
privatized.100% foreign equity has also been allowed in construction and maintenance of
airports with selective approval from Foreign Investment Promotion Board.

1.4 Air movements: The total aircraft movements handled in October 2003 has shown an
increase of 15.4 percent as compared to the aircraft movement handled in October
2002. The international and domestic aircraft movements increased by 15.4 percent each
during the period under review.  The reason for increase in aircraft movements is due to
increase of operation of smaller aircraft by airlines and the introduction of new airlines
viz., Air Deccan in southern region and international airlines (Air Canada, Polar Air
Cargo, Qatar Airways (Freighter), Turkish Airways, Air Slovakia at IGI Airport with
effect from October 2003.

 
1.5 Passenger Traffic:  International and Domestic passenger traffic handled in October
2003 has increased by 15.4 percent and 6.7 percent over the period of October 2002
leading to an overall increase of 9.4 percent.  The total passenger increased by 9.2
percent, 7.6 percent, 8.9 percent and 17.0 percent respectively at five international
airports six developing international airports, eight custom airports and 26 Domestic
airports.

1.6 Cargo Traffic:  The total cargo traffic handled in October 2003 has shown an increase of
3.5 percent as compared to the cargo handled in October 202.  The international and
domestic cargo traffic increased by 4.3 percent and 2.1 percent respectively during the
period.

During the month of October 2003, 5346 thousand aircraft movements (excludes defence &
other non-commercial movements), 40.33 lakh passengers and 88.59 thousand tones of cargo
were handled at all the airports taken together.
2. History

The first commercial flight in India was made on February 18, 1911, when a French pilot
Monseigneur Piguet flew airmails from Allahabad to Naini, covering a distance of about 10
km in as many minutes.

Tata Services became Tata Airlines and then Air-India and spread its wings as Air-India
International. The domestic aviation scene, however, was chaotic. When the American Tenth
Air Force in India disposed of its planes at throwaway prices, 11 domestic airlines sprang up,
scrambling for traffic that could sustain only two or three. In 1953, the government
nationalized the airlines, merged them, and created Indian Airlines. For the next 25 years
JRD Tata remained the chairman of Air-India and a director on the board of Indian Airlines.
After JRD left, voracious unions mushroomed, spawned on the pork barrel jobs created by
politicians. In 1999, A-I had 700 employees per plane; today it has 474 whereas other airlines
have 350.

For many years in India air travel was perceived to be an elitist activity. This view arose from
the “Maharajah” syndrome where, due to the prohibitive cost of air travel, the only people
who could afford it were the rich and powerful.

In recent years, however, this image of Civil Aviation has undergone a change and aviation is
now viewed in a different light - as an essential link not only for international travel and trade
but also for providing connectivity to different parts of the country. Aviation is, by its very
nature, a critical part of the infrastructure of the country and has important ramifications for
the development of tourism and trade, the opening up of inaccessible areas of the country and
for providing stimulus to business activity and economic growth.

 
Until less than a decade ago, all aspects of aviation were firmly controlled by the
Government. In the early fifties, all airlines operating in the country were merged into either
Indian Airlines or Air India and, by virtue of the Air Corporations Act, 1953; this monopoly
was perpetuated for the next forty years. The Directorate General of Civil Aviation controlled
every aspect of flying including granting flying licenses, pilots, certifying aircrafts for flight
and issuing all rules and procedures governing Indian airports and airspace. Finally, the
Airports Authority of India was entrusted with the responsibility of managing all national and
international air ports and administering every aspect of air transport operation through the
Air Traffic Control. With the opening up of the Indian economy in the early Nineties,
aviation saw some important changes. Most importantly, the Air Corporation Act was
repealed to end the monopoly of the public sector and private airlines were reintroduced.

 
3. Open skies policy

3.1 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.

 
3.2 Meaning of ‘Open Skies’

 
At the outset we must point out that the concept of 'Open Skies' is much misunderstood in its
meaning and implications. 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. Defined in this manner, it is not surprising that Open Skies
policies are adopted only by a handful of countries, most commonly those that have no
national carriers of their own and that have only one or two airports. No sovereign country of
any eminence practices Open Skies least of all the European Union, UK, USA, Japan,
Australia or countries in South East Asia.

 
3.3 Bilateral Treaties
 
However, 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. In fact, the bilateral aviation regime is considered
the fundamental basis for a disciplined and regulated aviation system between the nations of
the world. It provides not only regularity of operations through scheduled services but also
stipulates the basis of ownership, number of seats to be utilized, type and certification of
aircraft and visiting ports of call. 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.

3.4 Indian Bilateral Treaties

 
India has signed over 180 Bilateral Agreements with different countries. In 2002 the total
number of seats available was 38.09 million. Of this, the capacity operated was
approximately 19.174 million seats. Since the average size of traffic to and from the country
is slightly in excess of approximately 14 million passengers, normally the contracted rights
should suffice the traffic demand.

 
3.5 Utilization of Bilateral Treaty Contracts

 
It is in the actual utilization of the contracted seats that the problem arises. Of the contracted
amount, 50 per cent are to be utilized by the national carrier and 50 per cent by the airline
owned by the contracting country. However, whilst the foreign carriers are in a position to
use over 70 per cent of their entitlement, the national carrier is only able to utilize 29.4 per
cent of their share. It is this shortfall that creates pressure on seats, particularly during peak
tourism national carriers do not have sufficient aircrafts to be able to utilize the bilateral
rights available to the country and enter into commercial and code sharing arrangements to
maximize revenue. Whilst this does improve their profitability in the short run, it has a long-
term adverse effect in that it deprives the country of much needed air bridges to bring in
tourists and carry trade.

 
Under the present bilateral system, the utilization of the traffic rights on international routes
to and from India, as negotiated by the Government of India, is restricted to the two
Government owned 'national' carriers - namely Air India and Indian Airlines and either or
both these carriers are the Indian designated carriers under the various Air services
Agreements. The Operating Permits restrict the privately owned carriers, such as Jet Airways
and Air Sahara, to operate only domestic routes within India.

4. Civil Aviation Policy in India

 
In the context of a multiplicity of airlines, airport operators (including private sector), and the
possibility of oligopolistic practices, there is a need for an autonomous regulatory authority
which could work as a watchdog, as well as a facilitator for the sector, prescribe and enforce
minimum standards for all agencies, settle disputes with regard to abuse of monopoly and
ensure level playing field for all agencies. The CAA was commissioned to maintain a
competitive civil aviation environment which ensures safety and security in accordance with
international standards, promotes efficient, cost-effective and orderly growth of air transport
and contributes to social and economic development of the country.
 
4.1 Objectives of Civil Aviation Ministry
 
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 
 
4.2 Private Sector Participation and the Civil Aviation Policy
 
        Private sector participation will be a major thrust area in the civil aviation sector
for promoting investment, improving quality and efficiency and increasing
competition.
        Competitive regulatory framework with minimal controls encourages entry and
operation of private airlines/ airports.
        Encouragement of private sector investment in the construction, upgradation and
operation of new and existing airports including cargo related infrastructure.
        Rationalization of various charges and price of ATF/AVGas will be undertaken to
render operation of smaller aircraft viable so as to encourage major investment in
feeder and regional air services by the private sector.
        Training Institutes for pilots, flight engineers, maintenance personnel, air-traffic
controller, and security will be encouraged in private sector.
        Private sector investment in non-aeronautical activities like shopping complex,
golf course, Entertainment Park, aero-sports etc. near airports will be encouraged to
increase revenue, improve viability of airports and to promote tourism.  CAA will
ensure that this is not at the cost of primary aeronautical functions, and is consistent
with the security requirements.
        Government will gradually reduce its equity in PSUs in the sector.
        Government will encourage employee participation through issue of shares and
ESOP 

4.3 Security

 
Strict national civil aviation security programme to safeguard civil aviation operations against
acts of unlawful interference have to be established through regulations, practices and
procedures, which take account of the safety, regularity and efficiency of flights. A good
safety record is a judgment of past performance but does not guarantee the future, although it
is a useful indicator. While pilot error is said to be on the decline, factors of fatigue, weather,
congestion and automated systems have complicated safety. Airline operators, pilots,
mechanics, flight attendants, government regulators and makers all have a stake in making
aviation as safe as possible. The International Air Transport Association (IATA), the
International Civil Aviation Organization (ICAO), manufacturers and others bodies cooperate
in this aim. As world air traffic is expected to double or more by 2020, the accident rate must
be reduced in order to avoid major accidents occurring more frequently around the globe.

 
4.4 Maintenance

 
Private sector participation is encouraged in existing maintenance infrastructure of Indian
Airlines and Air India like Jet Engine Overhaul Complex (JEOC) and new maintenance
facilities including engine overhaul and repairs with up to 100 % foreign equity.

Indian Airlines has major maintenance facilities for all the types of aircraft in IAL fleet i.e.
Airbus-300, Airbus-320, Boeing-737 and Dornier-228. The Engineering Department is
responsible for maintenance of aircraft and is answerable to Director General of
Civil Aviation (DGCA) in maintaining the Quality Control.  The Maintenance of the aircraft
is carried out at four major bases located at Delhi, Mumbai, Calcutta and Hyderabad.

Sahara also has its own NDT Shops, wheels and brake assembly shop, battery charging shop,
avionics shop and seat repair shop. It is the only private domestic airline to have its own
hangar for aircraft maintenance. It is also the only private domestic airline to have self
maintenance capability.

Air Deccan, Bangalore-based airline, has decided to set up its engineering and maintenance
facility for Airbus-320 operations, basing two of a fleet of 11 Airbus jets here.  They have
also sought land from the Airports Authority of India to build an exclusive hangar to carry
out 300 and 500-hour checks, apart from C-Checks and line maintenance.
5. Airport infrastructure

In India, airports were totally owned and managed by central government or the armed
forces. The Airport Authority of India (AAI), a body functioning under the Ministry of Civil
Aviation was responsible for managing the airports in India. It owns 122 airports, 61 of
which are operational. The breakdown is as follows:

 11 international
 94 civil and
 27 civil enclaves at defence airfields.

 
The AAI operate most aspects of the airport (including air traffic control) and procure most
of their equipment directly (via global/local tenders). India’s airports handle 42 million
passengers, of which the four Metro gateway airports (Delhi, Mumbai, Kolkata and Chennai)
account for 47% of revenue and 66% of the passengers.

 
Until 2000, there were five major international airports, - Mumbai, Kolkata, Delhi, Chennai
and Trivandrum. But the GoI announced a further six airports including Amritsar, Bangalore,
Hyderabad, Cochin during the course of 2002.

 
According to projections, Indian air passenger traffic was estimated to grow to 100 million
passengers by 2012 from 36.98 million in 1998-99. Growth projections in the cargo front
were also promising. Airport infrastructure is linked to development of India's international
competitiveness and her ability to attract foreign investments. The policy opened the doors of
private investment in this sector, including investments from foreign airport authorities.

6. Passenger airlines – The players

 
6.1 Indian Airlines

 
Indian Airlines was founded in 1953. Today, together with its fully owned subsidiary
Alliance Air, it is one of the largest regional airline systems in Asia with a fleet of 62
aircraft(4 wide bodied Airbus A300s, 41 fly-by-wire Airbus A320s, 11 Boeing 737s, 2
Dornier D-228 aircraft and 4 ATR-42).

It has many firsts to its credit, including introduction of the wide-bodied A300 aircraft on the
domestic network, the fly-by-wire A320, Domestic Shuttle Service, Walk-in Flights and
Flexi-fares.

The airlines network spans from Kuwait in the west to Singapore in the East and covers 75
destinations - 57 within India and 20 abroad. The Indian Airlines international network
covers Kuwait, Oman, UAE, Qatar and Bahrain in West Asia, Thailand, Singapore, Yangon
and Malaysia in South East Asia and Pakistan, Nepal, Bangladesh, Myanmar, Sri Lanka and
Maldives in the South Asian sub-continent.

Indian Airlines is presently fully owned by the Government of India and has total staff
strength of around 18562 employees. Its annual turnover, together with that of its subsidiary
Alliance Air, is well over Rs.4000 crores (around US$ 1 billion).

Indian Airlines flight operations centre around its four main hubs- the main metro cities of
Delhi, Mumbai, Calcutta and Chennai. Together with its subsidiary Alliance Air, Indian
Airlines carries a total of over 7.5 million passengers annually.

6.2 Air Sahara

Air Sahara has established itself as one of the leading players in the Indian Aviation industry.
Air Sahara is part of the multi-crore Sahara India Pariwar. Sahara India Pariwar has interests
in Public Deposit Mobilization, Media & Entertainment, Housing & Infrastructure, Tourism,
Consumer Products and Information Technology. Starting on a modest scale and a capital of
only Rs.2000 in 1978, Sahara India Pariwar has traversed a long way to become an icon in
Indian entrepreneurship.

Air Sahara began operations on December 3, 1993 following the Indian government's
decision to open the skies to the private sector. It operated with a fleet of only two Boeing
737-200s. Today, its fleet includes advanced aviation technology New Generation Boeings
737-700s and 737-800s and Classics 737-400s and a fleet of 7 Canadair Regional Jets. The
fleet also includes four highly advanced Helicopters (Dauphin and Ecureuil), which provide
efficient charter services. Offering 119 flights with 11800 seats on a daily basis, Air Sahara
flies to various destinations in India, which include important cities like Delhi, Bangalore,
Mumbai, Kolkata, Lucknow, Hyderabad, Pune, Chennai and others. The airline has recently
added Colombo, Srinagar, Coimbatore, Ahmedabad, Jaipur, Gorakhpur, Allahabad,
Bhubaneshwar, Ranchi and Kochi to its route network. Air Sahara also operates flights to
Dibrugarh, Guwahati, Varanasi, Patna and Goa.

The airline is currently undergoing a complete overhaul and restructuring exercise. Air
Sahara has redefined itself in terms of an efficient and punctual airline with a high record of
on-time-performance and dispatch reliability. Efforts are being made to increase connectivity
and offer convenient timings.

A major investment programme has been launched for the modernization and enhancement of
its fleet. Fleet review and route rationalization have become the focus points of Air Sahara's
strategy. Five new Boeings have been added to the fleet in the last one year. These were used
to add new destinations and increase frequency on existing routes. In the second phase of its
expansion four Canadair Regional Jets have been added to the fleet this year serve on
regional routes.

Air Sahara has introduced initiatives such as Steal-a-seat flexi fare options, Sixer/Super Sixer
and Square Drive/Super Four. The Sixer initiative recently won the 'The Pacific Asia Travel
Association' (PATA) award for the year 2003, at Bali, Indonesia.

Air Sahara's frequent flyer programme called Cosmos offers faster accruals, lower
redemption bars and requires no minimum balance for redemption.
6.3 Jet Airways

 
In May 1974, Naresh Goyal founded Jetair (Private) Limited with the objective of providing
Sales and Marketing representation to foreign airlines in India.

In 1991, as part of the ongoing diversification programme of his business activities, Naresh
Goyal took advantage of the opening of the Indian economy and the enunciation of the Open
Skies Policy by the Government of India, to set up Jet Airways (India) Private Limited, for
the operation of scheduled air services on domestic sectors in India.

Jet Airways has emerged as India's largest private domestic airline and has been acclaimed by
frequent travellers as the most preferred carrier offering the highest quality of comfort,
courtesy and standards of in flight and ground service and reliability of operations. It
currently has a market share of 46.7% per cent and operates a fleet of Boeing and ATR72-
500 turbo-prop aircraft.

Jet Airways has been voted India's 'Best Domestic Airline' consecutively and won several
national and international awards, including the 'Market Development Award' for 2001
awarded by Air Transport World.

6.4 Air Deccan

Air Deccan is a unit of Deccan Aviation Private Limited, India's largest private heli-charter
company. Formed in 1995, Deccan Aviation Private Limited has carved a niche for itself in
the Indian aviation scene with its reputation for providing speedy and reliable heli-services
for company charters, tourism, medical evacuation, off-shore logistics and a host of other
services.

The company has a modern fleet of ATR-42-320 aircraft, one of the finest and most efficient
Turbo-Prop aircraft flying. ATR is a European joint venture between Alenia Aeronautica and
EADS. The ATR 42 has become a reference aircraft amongst airlines around the world, by
offering a safe, easy to maintain and comfortable aircraft operating on the regional market
with the best economics on short haul sectors. To date, ATR has sold over 650 aircraft to
more than 100 operators in 73 countries all around the world.
The company has adopted a 'lean-and-mean' approach to staffing and aims at maintaining a
low aircraft-to-employee ratio. A good work culture coupled with a skilled workforce is the
backbone of the company.

6.5 Investors

While most information about the Indian Carriers, other than the Government owned, is not
in public domain, the available information does not tell us much. The Promoters and Key
Management persons are not listed nor is their equity ownership pattern provided. Jet
Airways' ownership is apparently fully foreign giving rise to the phrase: India based airlines
in place of home country airlines. There is a large variation in the financial base of these
airlines. While Jet Airways has an equity base of 141.92 crores, Deccan Airways has an
equity base of a mere 30 crores.

6.6 Fleet Size

Fleet-wise also Indian carriers

are quite small. Air India has a
total fleet size of 33 aircraft;
Indian Airlines is somewhat
larger, being the size of
Singapore Airlines with 62
aircraft. Alliance Air, a wholly
owned subsidiary of Indian
Airlines has 14 aircraft.
Among the private airlines Jet
Airways has 41 aircraft,
Sahara 19 and Deccan Air 5.

This is minimal when compared with American Airlines, one of the world's largest airlines
with almost 1000 aircraft and carrying over 80,000,000 passengers and 650,000 Tonnes of
freight a year. Even Singapore Airlines, a small Nation airline that operates only
internationally, has almost twice the number of aircraft than its parallel Air India. This when
India is lulled with the images of being a part of the bricks economy, the so-called economies
of the future. This makes Indian carriers a small player in the passenger aviation world in
general and International travels in particular.
7. Foreign equity participation

The three-member enquiry committee, led by former petroleum secretary T S

Vijayaraghavan, has suggested that 100 per cent foreign investment, including by foreign
airlines, should be allowed in non-scheduled services such as chartered aircraft and helicopter
operations.

As of now, foreign airlines are not permitted to pick up equity directly or indirectly in
domestic air companies. Foreign equity upto 40% and NRI/OCB investment upto 100% is
permissible in the domestic air transport services.

Under the current policy, if a foreign airline operates in India the responsibility to ensure
safety of the aircraft vests with the country in which it is registered and is outside the purview
of the Director General of Civil Aviation (DGCA). "Such an operation is termed `cabotage'
and is not permitted anywhere," the report said.

Indian operators can, however, lease aircraft from foreign companies, but the government
only permits "dry-lease," which requires the aircraft to be registered in India and certified by
the DGCA as airworthy. Wet lease with foreign registration and crew is only allowed in
exceptional circumstances.

The US National Commission to Ensure a Strong and Competitive Airline Industry (1993)
envisaged the long-term development of more liberal cross border airlines investment.
However, as a short-term measure it advocated ‘expanded access to international capital
markets by allowing larger investments from foreign investors under the current bilateral
system’. It also proposed that foreign investors be able to hold up to 49 per cent of the voting
equity in US airlines, up from the then (and still current) limit of 25 per cent.

Any increase in the cost of equity capital flows through to the choice of debt versus equity
and thereby distorts capital structures. Airlines should have flexibility in financing their
operations and developing their corporate structures. The existence of a cap on foreign
ownership limits this flexibility.

8. Factor Inputs
  

           

Source - Business World, July 2004

 
Airfares in India are among the highest in the world. For instance, a typical Delhi-Bangalore
round trip costs Rs 18,000 - the same as it would from Delhi to Singapore.

 
8.1 Labour

If regulations or industry policy provide protection to an industry, the value of protection may
be dissipated in poor productivity and higher-than-normal returns to labour and capital. Entry
limitations and capacity constraints have the potential to allow airlines to earn above normal
returns, which may be appropriated by shareholders or paid out in higher than normal costs
(including wages, salaries and working conditions).

Given the valuable contribution that aviation and tourism make to national welfare, it is
essential that the aviation market is globally competitive and functions in the most efficient
way. This means that the inputs that the industry depends on, such as labour and capital, must
also be available on an internationally competitive basis.
8.2 Fuel Prices
 

ATF is the major cost for domestic carriers accounting for 30% of the total operating costs in
India, which is much higher than around 10-15% for airlines worldwide. The exorbitant sales
tax on the ATF, which increases the price of ATF, is the major reason for this higher share in
operating cost. The Jet fuel price has increased by 13.1 % to USD 424.64/ KL in New Delhi
during the period May-Aug ’04. The rise in the first seven months of 2004 stands at 21.5%.
 

8.3 Capital
 

The relatively capital-intensive nature of the airline industry, combined with the fact that
airlines are generally regarded as being inherently risky investments, means that access to
large, well-functioning capital markets is an important issue for all airlines. The effects of
these restrictions may vary from country to country, but are likely to be greater for countries
with small domestic capital markets.

8.4 Operating Costs

 

The regulatory system affects

where, how and when airlines can
fly. Thus it affects airlines’ ability
to operate efficient networks and
their revenue. To the extent that
airlines cannot use the least cost
combinations of aircraft types to
carry passengers and freight, the
costs of operating existing
networks are higher than they
otherwise might be (technical inefficiency). Further, they may be prevented from flying the
optimum sized and configured network (allocative inefficiency). Thus, costs may be reduced
as airlines are able to operate the right aircraft at the right frequencies on an existing route.

Airlines, by changing the design of a network and increasing its size, may also be able to
decrease costs through economies of scale and scope.

 
8.5 Ownership and control

As airlines strive for greater efficiencies, they consider the benefits of consolidation.
However, the normal commercial process of acquisition and/or merger is not available due to
restrictions contained in bilateral agreements that are designed to ensure that ownership and
control of airlines remain with nationals of the countries where they are based.

Growth through merger or acquisition enables airlines to achieve economies scale and scope
by consolidating airline functions. The merger of two airlines, for example, may allow them
to consolidate their ground handling, maintenance, information technology and various
managerial functions.

8.6 Airline Acquisition/Leasing Cost

Taking aircraft on lease is one of the preferred modes among the Indian carriers. However,
this has suddenly become costlier affair due to changes proposed in Union Budget 2004-05.
The budget proposes withdrawal of tax exemption granted to acquire aircraft or an aircraft
engine on lease prospectively from September 1, 2004. This has resulted in imposition of
withholding tax of 42% on leasing of aircraft. Impediment of this kind at a juncture when
almost all, Indian carriers are firming up their expansion plans especially through leasing of
aircraft is a setback. But after hard lobbying by the industry the deadline was deferred until
April 1, 2005, and would now be withdrawn for lease agreements entered into after April 1,
2004.

All carriers barring Jet Airways will feel the heat of the sudden withdrawal of exemption for
taking aircraft for lease as they have significant plan to expand the fleet capacity by leasing
route. This includes both state carriers like Air India (AI), Indian Airlines (IA), Alliance Air
and private carriers like Air Sahara, Air Deccan. As Jet Airways that has predominantly
prefers owning aircraft rather than going for leasing.
 

As tax exemption will not be available for lease agreements entered on or after April 1, 2005
the Indian carriers who have plans to take aircraft on lease have to sign agreement either on
or before the expiry date or they will have to bear additional cost burden. Alternatively,
taking aircraft on lease from a country with which India has double taxation treaty or getting
lease agreement signed in a third country could help avoid the tax on lease rental. This may
not be much helpful to state carriers and to some extent the private players also due to
auditing/ accounting procedures.

As leasing route is the most preferred one for a new entrant, the Budget initiatives will prove
be a heavy deterrent as they will escalate the effective lease rental cost by almost 42%.

9. Market Structure and Implications

The aviation industry in India, especially with regard to passenger airlines, follows a strictly
oligopoly-type structure with the characteristics. (1) an industry dominated by a small
number of large firms (see market shares, below) (2) firms sell either identical or
differentiated products (the only differentiation here being in service quality and frills
offered) , and (3) the industry has significant barriers to entry (which holds true both with
respect to regulations and huge capital investment required).

One sees the following characteristics with respect to the Indian passenger airlines market –

1.      Few number of firms contributing to majority of the market share

2.      Products are differentiated in terms of service quality and offerings

3.      MR=MC

4.      p>MC
5.      Entry Barriers

6.      Firm is a price-setter

7.      Long run profit >= 0

8.      Strategy dependent on individual rival firm’s behaviour

 

9.1 Market share concentration

According to the figures on market share of various scheduled airlines in the same year,
Jet Airways topped the list with 46.7 % in 2003-04, followed by Indian Airlines (IA) and
its subsidiary Alliance Air together at 39.3%, Air Sahara at 13% and Air Deccan 1 %.
9.2 Indian Aviation Market – A differentiated Oligopoly

Each
seller
in an

imperfectly competitive market faces a negatively sloped demand curve for his product,
permitting him some control of the price of his product. In an oligopoly, a few firms
produce the same product, while in monopolistic competition, many firms produce
differentiated but similar products. In a differentiated oligopoly, a few firms produce
products different enough for each firm to have its own downward sloping demand curve.
As with a perfectly competitive firm or a monopoly, the differentiated oligopoly firm
produces at a profit maximizing level of output where marginal cost equals marginal
revenue. The firm finds the price it will charge customers at the profit maximizing level
of output (Qm) from the demand curve, and sets price to Pm. As we can see, the firm is
earning economic profits since price exceeds average total cost at the profit maximizing
level of output.

 
9.3 Pricing Mechanisms

Price and quantity are

determined by the
interaction of demand and
supply in the market.
However, given the large
number of buyers, firms
can decide prices at
which they will sell
tickets. In fact, in the
airlines sector, firms go in
for third degree price
discrimination and segment the market, charging a higher price to the market with a
relatively inelastic demand (such as fares between business and economy class travellers,
or between emergency travel and leisure travel by providing apex fares). The low cost
airlines follow this different pricing strategy. Customers booking early with carriers such
as Air Deccan will normally find much lower prices if they are prepared to commit
themselves to a flight by booking early, on the justification that consumer’s demand for a
particular flight becomes more inelastic the nearer to the time of the service.

The term ‘‘revenue management’’ is commonly used to describe most aspects of airlines’
pricing and seat-inventory control decisions; but in reality, revenue managers primarily
practice seat-inventory control. Formally, revenue management describes a process of
setting fares for each route (origin and destination pair) and each set of restrictions
(nonstop, time-of-day, day-of-week, refundable, advance purchase, first class or coach,
and Saturday-night stayover) and limiting the number of seats available at each fare. In
the language of economics, revenue management increases airlines’ profits in three ways
–

        Implements peak-load pricing.

         Implements third-degree price discrimination. That is, fare restrictions screen
customers and segment them by their sensitivity to price and potentially by their
demand uncertainty.  For instance, Indian Airlines apex fares (for booking one
week or three weeks in advance).

        Implements an inventory control system for coping with uncertain demand.

9.4 Limited Entry

Virgin Group founder Richard Branson once famously said: "The safest way to become a
millionaire is to start as a billionaire and invest in the airline industry."

The mortality rate in the airline business is very high. That's equally true for any low-cost
airline model. It requires adequate staying power to buy aircraft and take losses in the
initial years. Experts say it takes nearly $60 million-70 million (Rs 270 crore-315 crore)
to float a full-service airline.

Entry costs are not recoverable and incumbents have the ability to respond quickly to
entry of a new competitor. Capacity constraints, absence of freedoms to compete on a
route, investment constraints, and restrictions on codesharing can all be important barriers
to entry.

9.5 Market Equilibrium through the Cournot Model

 

 The Cournot model assumes

that each firm takes the
output of the other firm as
given. If Indian Airlines
output is assumed to stay the
same, Jet will maximize
profits by setting MR=MC.
The result is shown. In the
Cournot framework the
equilibrium is at the intersection of the two reaction functions. These are just the profit-
maximizing conditions rearranged.

The revenue of both a competitive firm and of a monopolist depends only on the firm's
own output: for a competitive firm we assume that the firm's output does not affect the
price, and for a monopolist there are no other firms in the market. For a duopolist,
however, revenue depends on both its own output and the other firm's output.

We conclude that the firms' outputs and the price are different in Cournot-Nash
equilibrium than they are in a competitive equilibrium. As the demand curve slopes
down, price exceeds marginal cost, so that, as for a monopoly, the total output produced
by the firms is less than the competitive output. An implication is that, as for a monopoly,
the Nash equilibrium outcome in a Cournot duopoly is not Pareto efficient.

 
10. Trends in International and Domestic Civil Aviation and Projected Future Scenario

Trends & Alternatives

In 1998, approximately 500 alliances existed between airline companies. Some of these
alliances were to the point of a merger (Market Share of World Airlines Traffic, 2003). The
scene today is dominated by a few multilateral alliances. Top three, Star, Skyteam and
Oneworld together account for over 60% of the total international traffic.

Oneworld
American Airlines, British Airways, Aer Lingus, Cathay Pacific, Finnair, Iberia,
Lanchile, Quantas
Star
United Airlines, Lufthansa, Air Canada, Air New Zeland, ANA, Asiana, Austrian, bmi
British, midland, LOT Polish Airlines, Mexicana, SAS, Singapore, Spanair, Thai
Airways, Varig, US Airways, TAM
SkyTeam
Air France, Delta Airlines, Aeromexico, Alitalia, CSA Czech Airlines, Korean Air,
Northwest, Continental, KLM
While so far India has stayed out of these alliances, relying primarily on bilateral agreements,
it is merely a matter of time before Indian airlines are drawn in this web and the three blank
spots, Russia, China and India are filled in by the International Alliances ((in all three cases,
the leading carrier is a government owned/aligned entity which makes decision making a
complex politico-economic process). As it is, Nippon, Asiana, Thai and Singapore Airlines
are all working to develop an extensive network in China.

In any case India will sooner or later have to review even its bilateral agreements, as
currently they are more advantageous to the partners than to India. While bilateral are
supposed to be on equal basis, partners are utilizing almost 75% of seat share while India
uses, prima facie for lack of capacity, only 25% of seats. Obviously, this cannot be a
permanent solution to the capacity issue, dependent though India is on other nations and their
manufacturers for an increase in capacity.

Considering the fragmented nature of Indian Aviation Market, at the national level India will
require a mixed fleet of wide-bodied, narrow-bodied and small aircraft to be able to service
various market segments. Individual airlines, however, may choose a homogeneous fleet to
limit their maintenance costs.

11. Study of Consumer Demand in the industry

11.1 The Potential Market

While formulating the national strategy one must remember a few aspects of Indian
Passenger Aviation Market -

a. Potentially, India is a very large corporate and luxury travel market.

b. Potentially, it is also a very large low-fare market.

c. India also has largely blocked but significant markets in the north in China.

d. India, unlike other major travel hubs in the region, is an original market both for
originating and turnaround traffic.

e. India is also a potential transit hub in more than one direction.

In Aviation circles India has become Asia's hot growth market and in the words of SIA CEO
it is, along with China, one of the two "locomotives" for growth in the continent. Thus to
enter in to an open skies agreement when India has nothing more to offer than land for
airports and the so called cheap blue and white collar labour will tantamount to accepting a
second class economic citizenship in the comity of nations.

11.2 Growing the Market

Airbus Industries Research shows that there is a cut-off point beyond which the preferred
mode of travel changes. Thus small distance journeys are convenient by road while longer
journeys are preferred by rail and air. The data should actually be viewed in terms of time
involved rather than the distance since technological development in any field can impact the
time taken for same travel. As has already happened in Europe, high speed trains have
reduced the need for short haul services while the multi-lane smooth highways have similarly
increased the distance up to which one can comfortably travel by road.
While data for similar preference change in the mode of travel is not available for India, some
assumptions are possible. It can, for example, be safely assumed that in the current Indian
context bus journeys of say up to 4-5 hours duration are quite easeful even though often
stretched up to 10 hours and sometimes even overnight due to non-availability and/or
inadequacy of train services.

To a business traveller, overnight journeys by train are quite comfortable although given the
economic situation even 24 hour journeys are quite acceptable. Beyond that, given the
distances within the country any one would prefer to hop on a flight provided it is offered as
an alternate travel service and not something only for the corporate world. For this to
succeed, the low cost travel will have to be both with predictable pricing and longevity of
offer beyond the gimmickry of attention getting news. This is the only way to enlarge the pie
and aim at strata beneath the upper crust.

11.3 Other substitutes

The issue of affordability of domestic air travel has been well addressed in the Naresh
Chandra Committee Report on Aviation. While the goal of affordability is absolutely well
placed, the assumption that the lowering of tariffs, taxes and charges alone; for fuel, landing
or travel, is the answer that needs careful examination. Even if these charges constitute a
significant part of the fare, they need to be evaluated in the context of competition and
monopoly. At home, considering road and rail as the competition, the charges for fuel should
be viewed as a similar cost composition for all modes of travel. To reduce fuel charges for
any one sector while enhancing or retaining them at the same level for the others will distort
the field. This, particularly when airlines have, and can have, the freedom of picking up fuel
from other competing nations. Fuel charges at home, therefore, should be viewed as a part of
the overall petroleum pricing policy. This is important since petroleum, as fuel is common to
many industry groups apart from being a raw material for some. Incidentally, how much of
what product is extracted from the available crude is as much a matter of choice as is it a
matter of the quality of crude.

11.4 Low-fare Airlines

Despite reports of low budget airlines loosing their momentum due largely to the incumbent
firms’ crushing the competition with even lower fares whenever a low cost upstart invaded its
market, low-fare will always remain the basic market. This is amply proven by the success of
Southwest in the US and Ryanair and Easyjet in Europe. 

To any buyer of service or goods, price and quality are always two key considerations. No
doubt there is a class of air passengers who will only look at the bonuses, be that in the form
of Frequent Flyer Miles during peak season or extra cushioning of the seat. These are
generally the corporate travellers where someone else is footing the bill. There is also an
occasional traveller who, being in distress will not look at the price during emergency. While
the corporate travellers are a distinct segment and will be serviced fully, obviously civil
aviation will have to look beyond them if it hopes to expand the market. In the US, the low
fare airlines have almost a 30% share of the entire passenger aviation and in the recent past
Southwest, the leading Low-fare US airlines has outperformed even the largest US airlines in
passenger kilometres.

Latest news reports indicate that the low cost airlines are the price leaders now. Recently,
Southwest Airlines initiated a round of fare cuts and the bigger airlines had to respond.

11.5 Consumer Perception 

We conducted a survey in order to find the consumer perception about airlines. The following
results have been culled out from the survey of 116 individuals. The sampling method was a
mix of purposive and stratified random sampling and attempted to duplicate the general
consumer profiles of the population (as based on preliminary secondary data). The age group
of the sample was between 18 and 58, across gender, location, and socio-economic class
(mapped on education and occupation, with a majority of the sample in SEC A and B+).

The region-wise spilt up of the sample is as follows:

 
The areas covered in the survey are -

1. Brand Awareness
2. Airlines usage –
a. Frequency
b. Brands
c. Purpose
d. Circuits
e. Class
3. Factors affecting consumer perception
4. Promotional Scheme Preferences
5. Brand parameter preferences
6. Circuits flown

Brand Awareness Study

Indian Airlines ranks number one in brand awareness. This could be attributed to its long stay
in the market and continued support from the government. Today, Indian Airlines has
become synonymous with reliability and efficiency. Jet Airways is offering stiff competition
and ranks second in the list.  Sahara is providing value-add services and is following closely.
The concept of a low-cost, no-frills airline is being merged into having high quality, low-cost
carriers. Air Deccan, following the low-cost airlines model, being a relatively new entrant in
the market, comes in lowest currently on brand awareness.
 

Usage of Airlines

Indian Airlines, mostly used by government employees, recorded the highest usage followed
by Jet Airways. Although most consumers rated Jet Airways high on price, it still ranks
second in usage and this could be attributed to its excellent service and promotion schemes.
Similar data for the entire population reflects a higher usage of Jet Airways than IA, and a
lower usage of Sahara, which is a possible implication of the sample location being
concentrated in almost equal proportion in Lucknow (which has a higher price sensitive
population) as other major metros.

 
Frequency of Usage

As indicated in the graph below, a majority the population flies relatively infrequently (as
compared to the developed markets). Passengers travelling on business were found to be
more frequent users, while those flying on holidays and emergencies were those that tended
to make up the segment that flew less than once a year.

Note – As purposive sampling was undertaken at Lucknow Airport, the sample population of
‘never’ is not representative of the population, even in the given SECs).

Flight Class and Occasion of use

Although the occasion of use

indicates that maximum usage is
for business, the flight class graph
indicates that the proportion
travelled by business class is very
small in comparison to that
travelled by economy class. This
indicates that most business
travellers are flying Economy class
as well. Further, the second important occasion of usage is for emergencies and time-critical
travels.

Circuits Flown: The most frequently flown circuit is that between major metros, followed by
other state capitals and Delhi-Mumbai. Delhi and Mumbai airports accounts for roughly half
of passengers flown, and metro airports account for 66% of the passengers flown (and 47% of
revenues, as per secondary data).

Scheme Preference: With the entry of new players in the market, airlines are competing for
passengers on non-price parameters. This increases the product differentiation in order to
decrease elasticity of demand in the market. Given the key differentiators that substitute for
price, consumers have rated Apex fares as their most preferred scheme. Indian Airlines, Jet
and Air Sahara offer apex fares. Next most preferred to Apex fares is the frequent flyer
program, a trend noticed predictably in the high frequency repeat users and those travelling
on business.
 
Factors affecting consumer perception

We identified the following factors that make the demand function of consumers. Based on
our hypothesis, a choice parameter weight was arrived at by asking the sample to rank the
following parameters on a Likert scale -

a)     Price

b)     Service

c)      Promotional Schemes

d)     Loyalty programmes

e)     Flight Schedules

f)        Comfort with the brand

g)     Corporate tie-ups

Consumer Choice Parameters

Price appears to be most important factor for the consumer followed by service provided and
flight schedules.

Indian Airlines has been rated high on most parameters while Jet Airways, although rated low
on price, is rated highest in most other factors. Air Deccan, which has been ranked best on
prices, has succeeded in its mission to provide reliable low-cost air-travel to common man by
constantly driving down air-fares.

Air Sahara’s many services such as In-flight entertainment and Wings n' Wheels coach
service, exclusive business lounges being operated at departure halls at airports in a number
of cities, providing for business and refreshment services has made it second most popular
under services. It has taken the lead in introducing novel initiatives such as Steal-a-seat flexi
fare options, Sixer/Super Sixer and Square Drive/Super Four.

Air Sahara's frequent flyer program called Cosmos has also become a great hit with the
passengers, though it still ranks almost on par or lower on customer perception than the
schemes offered by Jet and IA (see promo schemes and loyalty programs), essentially due to
lower customer awareness levels.
Corporate tie-ups were a trend significant by their absence on the brand preference
parameters. While the only major tie-ups were by Indian Airlines with government agencies,
these were not perceived as strictly ‘corporate’ tie-ups. This segment is hence a possible
opportunity which can be explored as a non-price differentiator, given the large frequency of
use by business travellers.

12. Case Study - The No frills model

12.1 Analyzing Southwest Airlines and how, in India, Air Deccan is coping with the
competition

Southwest Airlines Co., incorporated in 1967, is a US domestic airline that provides

predominantly short haul, high-frequency, point-to-point, low-fare service in the United
States. The Company focuses principally on point-to-point, rather than hub-and-spoke,
service in markets with frequent, conveniently timed flights and low fares.

As of December 31, 2003, Southwest served 337 non-stop city pairs. Examples of markets
offering frequent daily flights are Dallas to Houston, 35 weekday roundtrips; Phoenix to Las
Vegas, 19 weekday roundtrips, and Los Angeles International to Oakland, 22 weekday
roundtrips. Southwest complements these high-frequency short haul routes with long haul
non-stop service between markets such as Baltimore and Los Angeles; Phoenix and Tampa
Bay; Seattle and Nashville, and Houston and Oakland.

Presently, Southwest is the third largest US airline in number of national passenger flights. Its
principal competitors are the so called legacy carriers – Delta, American Airlines, US
Airways, United, Continental and Northwest.  The company itself has been profitable for 24
consecutive years and is the only major airline in the US to realize a profit in 2001. It has had
a perfect safety record and lowest lost-baggage claims.

So what differentiates Southwest from the ‘legacies’?

        Southwest's average aircraft trip stage length in 2003 was 558 miles, with an average
duration of approximately 1.5 hours.

        The Company's point-to-point route system, as compared to hub-and-spoke, provides

for more direct non-stop routings for customers and, therefore, minimizes connections,
delays and total trip time.

        Southwest focuses on non-stop (not-connecting) traffic. As a result, approximately

79% of the Company's customers fly non-stop  

        In addition, Southwest serves many conveniently located satellite or downtown

airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-
Washington International, Burbank, Manchester, Oakland, San Jose, Providence, Ft.
Lauderdale/Hollywood and Long Island Islip airports, which are typically less congested
than other airlines' hub airports. This enhances the Company's ability to -

1.      sustain high employee productivity

2.      ensure reliable on time performance

3.      lower landing and parking fees

4.      achieve high asset utilization

        Aircraft are scheduled to minimize the amount of time the aircraft are at the gate
(approximately 25 minutes), thereby reducing the number of aircraft and gate facilities
that would otherwise be required.

        The Company operates only one aircraft type, the Boeing 737, which simplifies
scheduling, maintenance, flight operations and training activities.
        Southwest does not interline or offer joint fares with other airlines, nor does it have
any commuter feeder relationships.

        Southwest  offers a ticketless travel option, eliminating the need to print and process a
paper ticket altogether. In 2003, more than 85% of Southwest's customers chose the
ticketless travel option and approximately 54% of passenger revenues came through the
Internet.

For the past five years, low-cost airlines have been growing at more than 40 per cent a year,
while the full-service airlines are yet to recover from the crisis that hit them post 9/11. Taking
a cue, Capt. G R Gopinath launched Air Deccan in September 2003, India’s first no-frills
airline.

        Airbus 320 can accommodate 180 seats while IA has 145 seats including executive
class. The extra 35 seats are in Rs 500-Rs 2,500 bracket

        In contrast to the hub-and-spoke model, Air Deccan follows the point-to-point
concept, which removes hindrances like waiting for connecting flights and through
baggage check-in

        Result: greater flexibility. Each Airbus 320 flies for 10-11 hours compared to the 7-8
hours clocked by other airlines

        Air Deccan has just two air hostesses compared to six in other airlines. All this
reduces the cost on overheads

        The model is akin to any other low-cost carrier. Even the most expensive ticket on
offer is 35 per cent lower than usual fares on any sector. In the Delhi-Bangalore sector for
instance, the first 40 seats are available between Rs 500 - Rs 2,500, the next 110 seats up
to Rs 5,000 and the remaining don’t cross Rs 7,000.

        Unlike IA, Jet and Sahara who go in for acquisition of new aircraft, Air Deccan has
recently taken three Airbus 320 planes on lease from Singapore Aircraft Leasing
Enterprise (SALE) to complement its fleet of seven French-made ATR 48-seater aircraft.
This has enabled Air Deccan to minimize its debt-to-investment ratio.
But unlike low cost airlines in the US and Europe, Air Deccan and its followers face serious
hurdles in the form of abysmal infrastructure and government regulation on private airlines.

        Air Deccan cannot shave off costs by using secondary airports. The Naresh Chandra
Committee, however, has suggested a compromise – lower landing and parking charges
for low-cost airlines. Towards this, the new Hyderabad airport plans to keep aside some
space for low cost airlines to get them to fly more often to the airport.

        Plans to launch services on trunk routes have been delayed as it has not been allotted
parking bays and ticket counters in Mumbai and Delhi airports.

        The operations of Air Deccan to Guwahati and Dibrugarh are not by choice but are
part of the Category 2 and Category 2A routes which are compulsory for a private airline
operating on metro routes. This need for compliance though has bled full-service airlines
what with their larger capacity fleets.

13. Potential Market Entrants

Others are just as keen to get India's millions airborne. Liquor king Vijay Mallya in January
2005 plans to launch a low-cost carrier, named after his Kingfisher beer, with $20 million in
financing from GE Capital Aviation Services. Following closely will be Go, promoted by
textile scion Jehangir Wadia. And charter carrier Jagson Airlines plans to expand as a
regional discounter next year. Richard Branson's Virgin Atlantic and Britain's bmi are hungry
for more direct routes from London to major Indian cities, which are restricted under existing
agreements. Including these, the potential players in the market could be a double-digit
figure, most of them looking at setting-up a low-cost airline, namely - Air-India Express
(which will ply between India and the Middle East), AirOne and Visa (both floated by ex-
Indian Airlines people), Alliance Air, Go (from the Wadias), Kingfisher (Mallya), Royal
(ModiLuft's relaunched avatar), Skylark, Yamuna Air (Gill Brothers, UK-based NRIs),
hotelier Lalit Suri, and the Interglobe group (which runs the travel bookings firm, Galileo).

All this activity has spurred India's state-sector airlines to jump into the discount fray. Air-
India plans to launch Air-India Express, which will take over routes to the Middle East,
where some 4 million Indians hold service jobs. Indian Airlines, meanwhile, is planning to
turn money-losing affiliate Alliance Air into a cut-rate carrier.
The new players face some serious hurdles. The biggest is infrastructure. Indian airports are
dismal -- when cities are lucky enough to have one. Even cities with millions of inhabitants --
such as Dehra Dun, the capital of the new northern state of Uttaranchal -- have no
commercial airport.

High fuel costs and other operating fees such as landing and parking charges, which account
for up to 15 percent on an airline's expenditure, have kept air fares high and grounded most
carriers which have entered the domestic aviation sector when it opened up nearly a decade
ago.

Defining Low Cost Carriers

 

Simple Product

 No meals; drinks and snacks for free

 Narrow seating (greater capacity)
 No seat reservation; free-seating
 No frequent-flyer programs

Positioning

 Non-business passengers, leisure traffic, price-conscious business passengers

 Short-haul point-to-point traffic with high frequencies
 Aggressive marketing
 Secondary airports
 Competition with all transportation carriers

Low Operating Costs

 Low wages, low airport fees

 Low costs for maintenance, cockpit training and standby crews due to homogeneous
fleet
 High resource productivity: short ground waits due to simple boarding processes, no
air freight, no hub services, short cleaning times
  Lean sales (high percentage of online sales)

Attributes of Low-cost Carriers

        Narrower seating (higher capacity: 148 vs. 126)

        Higher plane utilization (10.7h vs. 8.4h) due to shorter turnaround times

        Lower staff costs due to greater productivity, generally lower wages and smaller staff
(no service)

        Lower airport fees at secondary airports and smaller cities

        No sales commissions due to web sales

         Low station costs due to simpler handling and more efficient processes

         High number of passengers per employee - 7250 for RyanAir vs 1290 for Lufthansa
(2002 data)

14. SWOT of legacy carriers

Strengths

        Passengers will continue to need connecting/network services

        Ensure a leisure travel, especially to the business traveller, like airport lounges

        Enhanced in-flight service and more comfortable seating

        In long-haul markets, where premium service is essential, through higher capacity and
long range Boeing 747s and Airbus 340s.

Weakness
        Excess capacity

        Complicated flight operations. Hub-and-spoke networks of legacy carriers were

profitable as long as LCCs had low service along heavily travelled routes.

        Mounting debt – Enormous debt to investment ratio (above  90% for most US legacy
carriers like US, DL, AA, UL, CO) compared to LCCs (25% for Southwest)

        Cost-to-revenues ratio per seat mile is very high (>13) compared to Southwest’s 7.67

Opportunities

        Maintain short-haul flights only to extent needed to feed the network

Threats

        Labour problems as “legacies” try to streamline in order to compete with LCCs

        Flood of new capacity into the region from LCCs may trigger a competitive bloodbath
among the legacies.

No-Frill Airlines Prices

This cut throat competition is at its peak in sector like Delhi-Mumbai where Jet Airways has
cut its Apex air fare to Rs 2500 for passengers booking ticket 30 days in advance. This was in
response to Indian Airlines concessional fare of Rs 3500 if ticket is booked 21 days in
advance and Air Sahara’s special package offer of Rs 4444 for a return ticket basis. The no-
frills airline Air Deccan has announced fares as low as Rs 700 if booking is done 90 days
ahead. Jet airways has lowered its apex fares by 20% under ‘Monsoon Super Apex Fares’
scheme if the booking is done 30 days in advance in six busy sector including 4 metros.
15. Recommendations

15.1 Government Recommendations

Codesharing

Codesharing is an important tool for airlines to minimise the costs of operating services. By
selling seats on a flight operated by another carrier, codesharing enables an airline to make
direct cost savings by rationalising services or establishing market presence on a route
without actually operating on it. Thus, both airlines may be able to save on fuel, labour and
other variable costs, as well as making more effective use of aircraft and other overheads.

Cabotage

Restricting access by foreign carriers to the Indian domestic market gives the Indian carriers a
solid base from which to extend into international aviation. The same applies to most other
countries, with the exception of city economies such as Singapore and Hong Kong.
Restricting cabotage rights for the carriage of passengers and freight to domestic airlines
reduces competition on domestic routes. These restrictions help keep fares and freight rates
higher than they otherwise might be, boosting domestic airline revenue at the expense of
domestic consumers. Allowing foreign carriers some cabotage rights could improve
competition in the domestic market. Integrating domestic and international services allows
airlines to achieve:

        operational synergies and efficiencies by being able to switch capacity and aircraft
between the domestic and international sectors; and

        network advantages such as economies of scope and traffic density as well as the
marketing advantages of operating a combined domestic and international network.

The opposition to this recommendation is the view that It is most likely that foreign carriers
would engage in ‘cherry picking’ i.e. carry domestic traffic on the most profitable routes.
Incumbent airlines would need to counter any loss of profitability on routes affected by
cabotage and this could mean a reduction in the number of services provided on these routes,
or the reduction or withdrawal of services from less profitable routes, with consequential loss
of amenity to passengers, including those making connections to other parts of the domestic
network.

Eliminate Regulatory Structure

The regulatory structure inhibits competition in many ways. It can prevent or deter entry,
constrain capacity, and limit the potential for airlines to win market share. A problem in
assessing regulatory impacts is the structure of aviation markets. Economies of scope and
traffic density favour large airlines operating many services. On the demand side, a single
carrier operating a long thin route with multiple frequencies will attract better business than
multiple carriers who each operate one service per week. Thus markets tend to be
concentrated with a small numbers of carriers operating on most routes.

It cannot be presumed that these airlines respond to normal commercial incentives. Instead of
shareholder value, they may be managed for national prestige, employment enhancement,
technology transfer, or defence, which might require government subsidies. Continued use of
substantial government subsidies is an obstacle to efficient air services, and has important
implications for competition in a less regulated international environment.

Eliminate the fuel tax

A most regressive tax whose burden becomes larger as fuel costs increase (and airlines’
ability to pay diminishes). As an interim step – cap tax revenue and determine a better way of
obtaining (e.g., a per passenger levy).

Eliminate category III restrictions

Eliminate category III restrictions and provide essential air services subsidies where required
(with costs shared by national/state/local authorities). Category III mandates that an operator
deploy on routes in Category-II (North-Eastern region, Jammu & Kashmir, Andaman &
Nicobar and Lakshadweep) at least 10% of the capacity deployed on routes in Category-I and
of the capacity thus required to be deployed on Category-II routes, at least 10% would be
deployed on service or segments operated exclusively within the North-Eastern region,
Jammu & Kashmir, Andaman & Nicobar and Lakshadweep. In the interim, allow airlines to
transfer category III obligations to a competitor or third party operator – who could use a
standard, appropriate fleet and be paid by the majors to meet their category III requirements.

Improve quality of and access to airports and hangars

Privatize or municipalize. Develop a robust traffic management system that addresses

relevant technical issues and meets strategic objectives through rigorous systems engineering
and large-scale integration efforts such that rising air traffic demand is supported in a safe,
secure and efficient manner.

Today, Indian airlines have difficulty accessing hangars for maintenance. As a result, private
operators have to do some maintenance abroad. Airline maintenance and overhaul should be
an area where India could develop a major international business, leveraging its low labour
costs and world-class engineering to service aircraft for other countries as well as its own.

Tourism

An efficient aviation sector is essential to support the tourism industry, which has immense
employment opportunities and the tourism and airline industries with a joint proactive
approach can foster tourism development and promotion in a big way. One of the
prerequisites for developing tourism is 'easy access' to the tourist destinations, in terms of
international and domestic connectivity and easy movement within the destination. An
efficient aviation sector is essential to support tourism. Air connectivity is integral to the
growth of tourism. Airlines and tourism are self dependent. The tourism market grows by
itself with new connections and a popular destination attracts more flight operations. It is a
win-win situation.

Direct connections would also give further impetus to tourists’ arrival. Over 40 per cent of
the passenger traffic is concentrated in two main international airports namely New Delhi and
Mumbai. The increase in connectivity has contributed to domestic and international tourist
arrivals. The tourism and airline industries with a joint proactive approach can foster tourism
development and promotion in a big way.

15.2 Industry Recommendations

Reduce labour costs

All major carriers need to win significant concessions from their workers. Low labour outlays
would consist of a mix of reduced wages, more flexible work rules and trimmed benefits
including pension.

Simplify flight operations

Low-cost carriers use just a few types of aircraft, a strategy that cuts training and
maintenance expenses. Larger airlines who fly internationally, to more remote destinations
require varied fleets of large and small planes. However, they can and should work toward
streamlining the types of planes they fly.

Another way to simplify operations is modifying the hub-and-spoke model, which uses
designated headquarter airports for transfers. Traditionally, the big airlines have sent many of
their flights through hub airports at peak business-travel hours. That way, since carriers
typically charge heaps more for business fares, they can get more revenues per flight. But
many experts argue that it's time to give up on that model - especially as low-cost carriers
increase service along heavily travelled routes.

Experts like the idea of so-called rolling hub operations, where flights are scheduled
throughout the day so that an airline's assets - from employees to planes to hangars - can be
used more efficiently. In a traditional hub system, planes and workers spend more time
waiting for connecting flights to come in at peak operating times. With rolling hubs,
travellers may end up waiting a little longer to get a connecting flight, but planes end up in
the air for more hours of the day.

Offer more transparent pricing

The legacy carriers have long had an exotic, almost incomprehensible pricing system.
However, these days, with the Internet allowing travellers to shop for the cheapest tickets
easily, and low-cost airlines offering uncomplicated set prices, traditional carriers have to
follow suit or risk losing more and more passengers.

Get smart on fuel

With oil near $50 a barrel, airlines must be smarter about how they incorporate its price into
their costs. Discount carriers such as Southwest hedge as much as 80% of their jet-fuel costs.
Essentially, that means that they lock in prices on future fuel when the price drops. Small
wonder Southwest is one of the few success stories in the airline business.

Stop chasing market share

Airlines need to be savvier about capacity. At the start of 2004, many planned to add more
flights amid signs of an improved economy. When it became clear that demand wasn't as
strong as originally forecast, most carriers still wouldn't retrench from their plans for fear of
losing out if the market snapped back. Rather than scrambling to add seats in fear of missing
out on the party, airlines would do well to take a more cautious approach and focus on
efficiency and margins.

From bailouts to government partnership

Although the Indian airline industry was largely deregulated in 1990, plenty of lingering rules
and regulations have made it nearly impossible for carriers to be efficient. Many believe that
restrictions on foreign ownership and labour laws have kept the industry from innovating. So
instead of lobbying for protective measures like bailouts, airlines need to work with
government to tackle longer-term projects like building more runways, running airports more
efficiently, and reining in labour costs.

A new model for premium pricing

Most of the industry's improvement efforts have focused on whittling down costs. However,
boosting revenues also needs to be a priority. After all, people are willing to pay more if they
believe they're getting more value. Legacy carriers still offer certain advantages, especially to
the business traveller including airport lounges and more comfortable seating.

GOVERNMENT AVIATION

Policy on Airport Infrastructure

1. Preamble
2. Role of Airport Infrastructure in National Economy

3. Objectives of Policy

4. Existing Position

5. Future Trends

6. Proposed Classification of Airports

7. Modernisation and Upgradation of Airport Infrastructure

8. Greenfield Airports

9. Air Traffic Services

10. Ground Facilities

11. Cargo Handling

12. Commercial Activities

13. Airport Security

14. Financing of Airport Infrastructure

15. Ownership and Management

16. Private Sector Participation

17. Role of the Central and State Governments

 18. Civil-Military Cooperation

19. Human Resource Development

20. Environmental Issues

21. Regulatory Mechanisms

22. User and Community Participation

23. Legal Framework

Preamble

In our journey towards the twenty-first century when the Indian economy is all set to
integrate itself into the global economy, the upgradation and modernisation of infrastructure
and its efficient use have assumed critical importance. It is now increasingly recognised that
aviation, far from being a mere mode of transportation for an elite group, is crucial for
sustainable development of trade and tourism. In this context, it is vital that airport
infrastructure grows in anticipation of the escalating needs of the air transport industry. As
this is a capital-intensive sector, there is an obvious need for perspective planning with a
vision for the next twenty years and to muster the combined resources of the public and
private sectors, both domestic and foreign.

Top

Role of Airport Infrastructure in National Economy

Airports being nuclei of economic activity assume a significant role in the national economy.
The quality of airport infrastructure, which is a vital component of the overall transportation
network, contributes directly to a country's international competitiveness and the flow of
foreign investment. While cargo carried by air in India weighs less than 1% of the total cargo
exported, it accounts for 35% of the total value of exports. Better cargo handling facilities
lead to enhanced levels of importation, especially of capital goods and high-value items.
Likewise, 97% of the country's foreign tourists arrive by air and tourism is the nation's
second largest foreign exchange earner.

Airports also represent a country's window on the world. Passengers form their first
impressions about a nation from the state of its airports. They can be effectively used as
symbols of national pride, if we pay sufficient attention to their quality and maintenance.

In many remote, hilly and inaccessible areas of the country, air transport is the quickest and
sometimes the only mode of travel available. This is especially true of sensitive regions on
the borders with our neighbours in the west, north and north-east.

Airports need to be integrated with other modes of transport like Railways and Highways,
enabling seamless transportation to all parts of the country.

Top

Objectives of Policy

While the Government is separately developing a policy framework for the entire civil
aviation sector, this policy relates to use and development of airport infrastructure. The
Policy on Airport Infrastructure should always be read along with the National Policy on
Civil Aviation.

The objectives of the policy are :-

to provide a boost to international trade and tourism and enhance the country's image in the
comity of nations;

to provide airport capacity ahead of demand, in order to handle an increasing volume of air
traffic and to garner the maximum share of traffic in the region;

to enhance airport facilities to make the airport user friendly and achieve higher level of
customer satisfaction.

to ensure total safety and security of aircraft operations by the introduction of state-of-art air
traffic, security and related services;

to provide multi-modal linkages;

to provide a market orientation to the present structure, bridge the resource gap and
encourage greater efficiency and enterprise in the operation of airports, through the
introduction of private capital and management skills;

to foster the development of a strong airport infrastructure, maintaining a balance between the
need for economic viability and the objective of equitable regional dispersal of infrastructural
facilities;

in the achievement of the above objective, to lay special emphasis on the development of
infrastructure for remote and inaccessible areas, especially the North East, the hilly and island
regions; and

to encourage transparency and clarity in the decision-making processes of Government and

its public sector units.

Policy has necessarily to change in response to a rapidly transforming global scenario,

although the process of transformation has to be progressive, orderly and safeguarded.
Looking at what has been achieved in other countries, there is a wide gap which needs to be
bridged first.

Top

Existing Position

There are 449 airports/airstrips in the country. Among these, the AAI owns and manages 92
airports and 28 civil enclaves at defence airfields and provides air traffic services over the
entire Indian airspace and adjoining oceanic areas.

In 1996-97, these 120 airports/civil enclaves handled 3.96 lakh aircraft movements involving
243 lakh domestic and 122 lakh international passengers, and 2.0 lakh metric tonnes of
domestic and 4.8 lakh metric tonnes of international cargo. 52% of traffic was handled at the
international airports at Mumbai and Delhi. Presently, the various airlines are operating only
through 61 airports. The remaining are lying unutilised, at best handling occasional aircraft
operations.

Historically, air traffic at Indian airports has broadly followed a particular distribution
pattern, except that some airports have changed their inter-se positions vis--vis volume of
traffic. The airport-wise percentage share of total passenger traffic in the descending order of
magnitude is currently as under:-

Name
Sr Type of %age Cumulati
of
N Operati of total ve total
Operati
o. ons traffic %age
ons

1 Mumbai   I  

2 Delhi   I  

3 Chennai   I  

4 Calcutta   I  

Bangalo
5   I  
re

Hydera
6   LI  
bad

Thiruva
7 nanthap   I  
uram

Ahmeda
8   LI  
bad

9 Goa   LI  

10 Calicut   LI  

11 Cochin   D  

Guwaha
12   D  
ti

Coimba
13   D  
tore
 Mangal
14   D  
ore

Varanas
15   LI  
i

16 Pune   LI  

Vadoda
17   LI  
ra

18 Nagpur   D  

19 Srinagar   D  

Luckno
20   D  
w

21 Jammu   D  

Agartal
22   D  
a

23 Udaipur   D  

24 Juhu   D  

25 Patna   LI  

26 Indore   D  

Bhuban
27   D  
eswar

28 Imphal   D  

Aurang
29   D  
abad

Bagdog
30   D  
ra

31 Madurai   D  

32 Vishaka   D  
 patnam

33 Silchar   D  

34 Rajkot   D  

Dibruga
35   D  
rh

Bhavna
36   D  
gar

Khajura
37   D  
ho

38 Leh   D  

Port
39   D  
Blair

40 Ranchi   D  

41 Bhopal   D  

42 Jodhpur   D  

43 Bhuj   D  

44 Agra   D  

45
-
Other   D  
12
0

Amritsa
    LI  
r

Tiruchir
    LI  
apalli

Legends:
I = International

LI = Limited International

D = Domestic

The aircraft handling capabilities of the airports in terms of handling maximum size of
aircraft, are as under :
Type of Aircraft No. of Airports(120) Being Developed/Planned(22)

Calcutta, Chennai, Delhi,

Mumbai, Ahmedabad, Jaipur, Guwahati
B-747
Thiruvanthapuram, (3)
Bangalore* (6)

Ahmedabad, Amritsar*, Aurangabad, Banaras,

Goa (CE), Guwahati, Bhubaneshwar, Calicut, Cochin
AB-300
Hyderabad, Nagpur*, (New) (Pvt.), Coimbatore,
Srinagar (CE) (7) Jaipur, Lucknow (8)

Agra (CE), Agartala*,

Aurangabad, Bagdogra
(CE), Bhubaneshwar,
Bhuj (CE), Bhopal,
Bhavnagar*, Calicut,
Coimbatore, Chandigarh
(CE), Dibrugarh*, Indore, Jammu (CE), Lilabari,
AB-320 Dimapur, Gwalior (CE), Mangalore, Madurai, Port Blair
Imphal, Jaipur, Jamnagar (CE) (6)
(CE), Jorhat (CE),
Lucknow, Patna*, Pune
(CE), Raipur*, Ranchi,
Trichi*, Tirupati, Tezpur
(CE), Udaipur, Varanasi,
Vadodara, Leh (CE) (30)

B-737 Allahabad (CE), Bikaner Jabalpur, Lengpui-New Airport

(CE), Cochin (CE),
 Gorakhpur (CE), Indore,
Jaisalmer (CE), Jamnagar
(CE), Jammu (CE),
Jodhpur (CE), Kanpur
(Chakeri) (CE),
Vijayawada (3)
Khajuraho, Madurai,
Mangalore, Port Blair
(CE), Rajkot*, Salem,
Silchar (CE), Vizag (CE)
(18)

Barapani, Belgaum Gaya,

Hubli, Jharsuguda,
Jabalpur, Kamalpur,
Kolhapur, Kandla,
Lalitpur, Keshod,
F-27 Lilabari, Ludhiana,  
Porbander, Pondicherry,
Rajamundry, Rupsi,
Sholapur, Tuticorin,
Tezu, Vijayawada,
Warangal (22)

Aizwal, Akola, Along

(CE), Balurghat,
Bilaspur, Cooch-Behar,
Cuddapah, Deparizo
(CE), Dehradun, Deesa,
Dornier Gaggal, Jhansi, Kota, Kargil, Tura-New Airport (2)
Kailashhar, Kanpur,
Kulu, Malda,
Muzzaffarpur, Mysore,
Passighat, Pantnagar,
Satna, Shimla, Zero (24)
 Behala, Juhu, Safdarjung,
Pushpak Type  
Nagigal, Donakonda (5)

Jogbani (DC-3),
Khandwa (DC-3),
Khowai (DC-3), Vellore
Not available for
(DC-3), Chakulai (F-27),  
operation
Panna (DC-3),Raxaul
(DC-3), Shella (DC-3),
(8)

Legends:
CE = Indicates Civil Enclaves

* = Restricted/load penalty operation

An analysis of the existing scenario brings forth the following problem areas :
There is need to declare some additional airports as international airports. These include
Hyderabad, Ahmedabad, Guwahati, Bangalore and Amritsar. Consequently, the facilities
have to be created and augmented.

There is congestion in the international airports at Mumbai, Delhi, Chennai and

Thiruvananthapuram and also the domestic airports at Delhi, Chennai, Bangalore, Goa,
Ahmedabad, Cochin and Mangalore. The reasons are limited terminal and apron capacity,
bunching of flights, delay in passenger clearances, etc.

At many airports, passenger amentias need to be upgraded for which steps are under way or
have not yet been initiated due to resource constrains.

There are also deficiencies in respect of ground handling facilities, night landing systems,
cargo handling, etc., at some airports.

Top

Future Trends
Considering the forecasts made by different organisation and taking a reasonably pragmatic
view, the expected traffic scenario upto the year 2010-11 has been projected by the
Foundation for Aviation and Sustainable Tourism. These projects have been extended upto
the year 2016-17 by AAI.

Projected Domestic Traffic Upto 2016-2017* :

International
Domestic Passengers Percent Percent
Year Passengers
(In lakhs) increase increase
(In lakhs)

1996-97
120.00 *10.5% 108.90 *7.0%
(Actual)

1997-1998 132.60 116.52

1998-1999 146.52 124.68

1999-2000 161.97 133.41

2000-2001 175.67 141.41

2001-2002 190.60 *8.5% 149.90 *6.0%

2002-2003 206.80 158.89

2003-2004 224.38 168.42

2004-2005 243.45 178.53

2005-2006 250.50 *7.0% 188.35 *5.5%

2006-2007 278.73 198.71

2007-2008 298.24 209.64

2008-2009 319.12 221.64

2009-2010 341.46 233.33

2010-2011 365.36 246.16

 2011-2012 390.93 259.70

2012-2013 414.39 *6.0% 272.43 **4.9%

2013-2014 439.25 285.78

2014-2015 465.61 299.78

2015-2016 493.54 314.47

2016-2017 523.16 329.88

(Forecast upto 2010-11 based on study by "Foundation for Aviation and Sustainable Tourism
- April 1996".)
Forecast from 2012-2017 is taken at the rate of 6% based on a report of AAI.

NB :

Projections have been made on a liberal scale for the purpose of future planning of aircraft
and airport infrastructure capacity in the country.

During the next twenty years, there is a quantum jump in the projected traffic - four times in
passenger and six times in cargo traffic. It will, therefore, be necessary to take a host of
measures so that the ground infrastructure keeps pace with the growth of traffic.

ICAO forecasts predict worldwide growth in air traffic at 5% a year or doubling in the
volume of traffic once in 14 years. The Asia Pacific region is set for higher than average
growth. According to an AUTC study, it might account for more than 50% of the world air
traffic by the year 2010. It is imperative that our procedures improve and facilities grow to
match the increase in volume of traffic.

It is expected that adequate capacity will be deployed by the operators to meet the growth
cargo traffic requirements in the years to come. Capacity induction in this sector is expected
to be determined by market forces. The only aspect which needs to be planned and developed
is the infrastructural facilities at the airports to handle various types of cargo traffic with
efficiency and speed.

Top

Proposed Classification of Airports

To develop the capacity of airports in accordance with the future projections, it is proposed to
reclassify the airports as follows :

International Hubs:

This category will be that of 'International Hubs' which may cover airports currently
classified at 'international airports' and those eminently qualified to be upgraded as such.
These would at present cover Delhi, Mumbai, Chennai, Calcutta and Thiruvananthapuram.
Airports at Bangalore, Hyderabad, Ahmedabad, Amritsar and Guwahati can be added to the
list as and when the facilities are upgraded to the desired level. International hubs would be
used for dispersal of international traffic to the hinterland. In these airports, the facilities shall
be of world class standards, including convenient connections to international and domestic
passengers, airport-related infrastructure like hotels, shopping areas, conferencing and
entertainment facilities, aircraft-maintenance bases, etc.

Regional Hubs:

Government is keen to encourage development of regional airlines based on small aircraft to

provide air-linkages in the interior areas of the country. Regional hubs will have to act as
operational bases for regional airlines and also have all the facilities currently postulated for
model airports, including the capability to handle limited international traffic. The
identification of Regional Hubs will be made on the basis of origin-destination surveys,
traffic demand and the requirements of the airlines. State Govt. will be closely associated as
co-promoters of regional airlines.

Other operational airports

These will be developed so as to be cost-effective on the basis of individual needs to meet the
requirements of traffic handled by them. Airports serving State Capitals will be given
priority.

The status of individual airports may be reviewed at five-yearly intervals, on the

recommendation of a Committee of Experts. Grant of status as International hubs will be with
prior Cabinet approval. It is clarified that international hubs shall have the status of
'international airport' for purposes of bilateral agreements.

Top

Modernisation and Upgradation of Airport Infrastructure

In keeping with the ICAO standards and recommended practices and the requirements of
upgrading airports to the level of international and regional hubs, detailed master plans for
the development of all selected airports will be prepared or revised by the operating agency.
Such master plans should be conceived of and executed by the best expert advice available
and taking futuristic requirements into account. All future upgradation and modernisation will
have to be normally done in accordance with the master plans. If there is a deviation from the
master plan, it will be approved by the Board of Directors of the operating agency and the
statutory Government agency designated for the purpose.

Priority will be accorded to safety, passenger facilities, aircraft and cargo handling, while
deciding the allotment of funds among different upgradation and modernisation schemes.

Air transport serves a time-sensitive market. The surface access to airports should, therefore,
be efficient and city planners should keep the airport-linked requirements constantly in view
while designing surface transport development plans. There is a special need to emphasise the
aspect of rail links with airports, in view of its near absence in India as contrasted with other
countries.

The helicopter provides a direct and rapid means of transport over short-haul routes and is,
therefore, particularly attractive for businessmen. There is also a great potential for helicopter
operations in off-shore oil exploration and production, movement of food grains and essential
commodities in remote, hilly and inaccessible areas, traffic management in metropolitan
cities and so on. A planned programme for building of heliports will be taken up to give a
boost to the helicopter industry.

Top

Greenfield Airports

In view of the fact that there are already a sufficient number of airports, many of which are
not viable, greenfield airports will normally not be taken up either in the public or private
sector without the prior approval of the Government. In the case of the Other Airport
category run by private operators, the approval of the DGCA would suffice as at present.

A Greenfield airport may be permitted where an existing airport is unable to meet the
projected requirements of traffic or a new focal point of traffic emerges with sufficient
viability. It can be allowed both as a replacement for an existing airport or for simultaneous
operation. This aspect will have to be clearly spelt out in the notice inviting tenders.

No Greenfield airport will normally be allowed within an aerial distance of 150 kilometers of
an existing airport. Where it is allowed as a second airport in the same city or close vicinity,
the parameters for distribution of traffic between the two airports will be clearly spelt out.

The Government may, while permitting a Greenfield airport, decide whether it will be in the
public or private sectors or be taken up as a joint venture.

Where the Government decides to set up a Greenfield airport throughout the AAI on social
considerations even though the same is not economically viable, suitable grant-in-aid will be
provided to AAI to cover both the initial capital cost as well as the recurring losses.

Top

Air Traffic Services

The AAI will provide the Air Traffic Services over the Indian airspace and adjoining oceanic
areas in accordance with the ICAO Standards and Recommended Practices.

New CNS/ATM systems will be introduced on a priority basis in terms of the AAI's plan as
well as the ICAO's Regional Plan. These will ensure a total coverage of the airspace in India.

There will be greater civil-military liaison for joint surveillance of Indian airspace.
Integration of Civil/Military Air Traffic Services will be developed to ensure uniformity in
air-traffic control services at civilian and Defence airports. To achieve air safety of the
highest order, unidirectional air corridor concept shall be introduced, wherever traffic so
justifies, in close liaison with the Defence authorities. Maximum use will be made of radars
and other navigational aids available with civil and Defence airport authorities thus
enhancing the overall route navigation and surveillance facilities.

A Central Control Unit will be established in order to monitor all flights in the country from
the security point of view.

In airports now owned or operated by AAI, air traffic control equipment may be installed
either by AAI or the concerned airport operator. Air traffic control services will normally be
provided by AAI, except for approach and aerodrome control services, which may be
provided by licensed ATCs engaged by the airport operators.

Top

Ground Facilities

Speed is the essence of air transport. The AAI will set standards of performance in various
areas of passenger and cargo handling, so that both ICAO standards as well as comparable
standards at similar airports around the world, are achieved. For this purpose, procedures will
be simplified, regulations which delay or restrict movement of traffic reviewed and efforts
made to reduce ground delays to a minimum.

Dwell time of passengers and cargo will be drastically reduced, thus enhancing capacity at
existing airports. The short-term objective will be to clear incoming international passengers
within 45 minutes of arrival and clear departing passengers in 60 minutes including check-in-
time. Similar targets of 30 and 45 minutes respectively, will be laid down for domestic
flights.

Technological and other improvements will be made by introduction of automation and

computerisation, mobile check-in counters, improvement in emigration/immigration and
security checks, mechanisation of baggage and ground handling services, provision of aero-
bridges, introduction of better systems of passenger transfer between terminals, improvement
in cargo terminals, reduction in bunching of flights and contracting out of operating and
maintenance facilities. New approaches in airport design will be required to accommodate
technological innovations like the New Large Aircraft. Construction technology and
architectural inputs will also need to be updated to standards applicable globally.

Efforts will be made to upgrade the facilities, manpower, equipment, etc., by concerned
departments and institutions like customs, immigration, meteorology, oil companies, etc., so
that these keep pace with the upgradation of airports, enabling the users to experience the
optimum benefits of airports as 'cohesive' transit points.

Apart from the AAI and the national carriers, private agencies will also be encouraged for
providing ground handling services.

Top

Cargo Facilities

Special attention needs to be given to the speedy handling of cargo and reducing its dwell
time. The objective will be to reduce dwell time of exports from the present level of 4 days to
12 hours, and of imports for the present level of 4 weeks to 24 hours to bring us in line with
internationally achieved norms. Cargo clearance will be on 24-hour basis.

Infrastructure relating to cargo handling like satellite freight cities with multi-modal
transport, cargo terminals, cold storage, automatic storage and retrieval systems, mechanised
transportation of cargo, computerisation and automation, etc., will be set up on top priority
basis. Such facilities have to come up at smaller places too.

The Electronic Data Interchange systems will be developed and linked amongst all stake-
holders in the trade.

Top

Commercial Activities

Across the world, the trend is towards a very high percentage, ranging from 60 to 70%, of the
total revenue of airport operators being generated from non-aeronautical sources at major
airports. In India, although these services are even now provided by private agencies, the
comparable figure for AAI at international airports is just 22%. There will be a major thrust
towards increasing the share of commercial revenue emerging from non-aeronautical sources.
This will help in optimal exploitation of the full commercial potential of airports and make
many airports not only viable but capable of generating surpluses for further expansion and
development.

In order to maximize the revenue while at the same time maintain transparency, there will be
a master plan for development of commercial activities and facilities, as part of the overall
master plan approved by the management, for the airport as a whole. The space-use patterns
will normally not be deviated from.

In the allocation of space among concessionaires, there will be a strict adherence to stipulated
procedures, while maintaining sufficient flexibility in order to ensure quality products and
services and attract the holders of reputed brand-names. For this purpose, innovative
tendering procedures involving limited tenders, two-bid system, use of net present value of
bids spread over several years, grant of management contracts, bunching of similar facilities
etc. will be devised.

Except for user developmental fees, there will be total freedom for airport operators in the
matter of raising revenue through non-aeronautical charges and there will not be any
Government control over the same.

Top

Airport Security

The objective of airport security will be to safeguard the passengers, crew, ground personnel,
the general public and the airport infrastructure against unlawful acts as per ICAO Standards
and Recommended Practices laid down in Annexure-17 to the Chicago Convention. The level
of security will be calibrated by the BCAS according to the threat perception at any point of
time. Security will have to be cost-effective when compared to internationally accepted
norms. New staffing patterns, different from the normal police stations, will have to be
innovated for airports. There will be greater accent on modern technology and mechanization,
so as to reduce the need for manpower and increase the effectiveness of the force deployed.

Airport security will be looked after by specialized police agencies, state police and airport
security organizations, depending on the internal security conditions prevalent in a particular
area. BCAS will continue to coordinate the working of the various agencies to ensure that all
security norms are followed by them.

Govt. recognises the urgent need to develop an airport security organization, in order to have
a quietly efficient, specialized, commercially conscious, passenger-friendly force, at the
international airports to begin with. Private security agencies will also be allowed at certain
airports, if the threat assessment so permits.

There will be constant training of security personnel posted at airports in order to improve
their effectiveness and passenger-friendliness. The present training centre at BCAS
Headquarters will be upgraded and strengthened for this purpose.

Top

Financing of Airport Infrastructure

It has to be appreciated at the outset that financing of airport infrastructure has some inherent
problems. These projects have a large element of sunk cost, a very long gestation period and
highly uncertain returns on investment based on several assumptions of traffic growth that
may fail to materialize.

The current pattern of financing is predominantly based on internally generated resources of

the AAI. Funding through external assistance, external commercial borrowings, loans and
equity has been negligible. The allocation of budgetary grants is limited to certain airports in
remote and inaccessible areas. Considering the astronomical sums which seem to be required
for modernization and upgradation of existing airports and for the new airports at Mumbai
(Rs.10, 000 crores), Bangalore (Rs.1,600 crores) etc., there has to be a clear privatisation of
projects so as to utilize state resources in the most optimal manner. Further, the financing
strategies will have to be looked at from a thoroughly novel standpoint.

Taking the internal resources first, the following steps will be initiated:

 Optimization of revenue from aeronautical charges, through negotiation with IATA

and keeping Government approvals in view.
 A revolutionary thrust towards raising of revenue from non-aeronautical commercial
sources.
 Rationalisation and optimisation of various charges like passenger service fee, user
development charges, aerobridge charges, etc. and imposition of new levies like
security charges, fuel throughput charges etc.
 Massive economy in expenditure by manpower optimization, cost reduction,
elimination of duplication, increased productivity, contracting out of services, etc.
 Greater resource to additional sources like external assistance, public bonds, external
commercial borrowings, public issues, loans from Government/financial institutions
etc.

Currently, the revenue from the taxes imposed in the aviation sector in the shape of IATT and
FTT is credited to the Consolidated Fund of India, with only 10% of FTT being given to the
AAI. Even this 10% IS NOW SOUGHT TO BE TAKEN BACK. Taking into account the
vast sums required for infrastructural development, there is a strong case for conversion of
these taxes into a common Civil Aviation Cess, the proceeds of which should be credited to a
National Civil Aviation Fund to be operated by the Ministry of Civil Aviation.

There has to be a general appreciation about the needs of the airport infrastructure sector and
the plan allocations to the AAI need a hefty increase.

There is, at present, some money flowing to the AAI for construction of airports in remote
and inaccessible areas. This money, which was available, till recently as grant, is now sought
to be converted into a loan. It should continue to be given as grant-in-aid.

A general policy decision needs to be taken that the AAI will only invest in projects with
demonstrated economic viability and positive rate of return . Wherever Government compels
AAI to invest in non-viable projects for the fulfillment of social objectives, the initial capital
cost of the project and the recurring annual loss sustained by the AAI on this account will be
reimbursed.

There will also be need for commercialization of marginal or loss-making airports by

transferring them to private companies, State Governments, urban local bodies etc. for
operation and management under negotiated terms and conditions. Some of the guidelines
may need to be modified in order to make the operations cost-effective. Facilities could be
allowed to be commercially exploited even outside operational hours, meeting minimum
security requirements.

In the final analysis, looking at the quantum of investment required, the answer to all the
problems lies in the infusion of private (including foreign), investment in this sector. This
needs to be encouraged by adopting a flexible and positive attitude towards such proposed
ventures. The possibility of international aid and cooperation for building of new airports or
for modernization and upgradation of existing ones will be seriously explored.

The truth of the matter is that public funds for development of airports are getting more and
more scarce and private sector involvement has, therefore, got to grow. There is a definite
worldwide movement from monopoly state ownership of airports to corporatization, in the
first phase, with the final aim of privatization of ownership and management. India has to be
a apart of this global transition.

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Ownership and Management

The Constitution of India refers to civil aviation as a subject in the Central List. Resultantly,
the subject falls within the legislative competence of Parliament. The Aircraft Rules, 1937
permit airports other than Government airports to be owned by citizens of India or companies
or corporations registered and having their principal place of business in India. Thus the
legislative framework for privatization of airports already exists. In fact, some airports are
already owned by State Governments, private companies and even individuals.

What is needed now, in view of the worldwide thrust towards corporatization and
privatization of airports, is a strategy that permits utmost latitude in the patterns of ownership
and management of airports in the country. Thus, airports may be owned by the Central
Government, PSUs, State Governments, Urban local bodies, private companies and
individuals, as also by joint ventures involving one or more of the above. Similarly, it would
be best to keep all the options open in respect of the management of airports or parts of
airports. These could be on Build-Own-Transfer (BOT), Build-Own-Lease-Transfer (BOLT),
Build-Own-Operate (BOO), Lease-Develop-Operate (LDO), Joint venture, Management
Contract or Wrap-around Addition basis. In each individual case, the exact pattern could be
negotiated, depending on the circumstances.

In the case of high-cost projects involving international hubs, Government may seek
international or bilateral cooperation with countries having the requisite expertise and
financial strength. The actual implementation of the projects would be entrusted to consortia
interested in turnkey execution on a joint venture basis.

Foreign equity participation in such ventures may be permitted upto 74% with automatic
approvals, and upto 100% with special permission. Such participation could also be by
foreign airport authorities.

It may be clarified that the normal procedures of licensing of airports by the DGCA would
continue to apply in accordance with the laid down regulations.

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Private Sector Participation

Both the reasons of bridging the yawning gap in resources as also to bring in greater
efficiency in management of airports, the participation of private parties (including foreign
ones) is a must. Government will take all possible steps to encourage such participation.

An Airport Restructuring Committee in the Ministry of Civil Aviation will identify existing
airports, in respect of which private sector involvement for development and upgradation of
infrastructure is desired. It will also prepare a shelf of projects in respect of Greenfield
airports. The pre-feasibility reports will be made available to private investors.

The AAI will create separate profit centers for all individual airports and hive them off as
subsidiary companies on a case to case basis, for the purpose of entering into commercial
arrangements or joint ventures with private parties.

Where airport operators desire private participation in their existing airports, all patterns of
ownership and management would be open to them as elucidated in the preceding section. No
Government approval would, however, be required.

In case of Greenfield projects, the Central Government, the AAI, a State Government private
company or a group of individuals can act as the promoter. The promoter will be required to
prepare a pre-feasibility study and submit the formal proposal to the concerned State
Government. The State Government will add its comments to the proposal in respect of
acquisition of land, supply of water and power, construction of access roads, etc. and forward
the proposal to the Central Government.

The Central Government will set up an independent statutory body called the Airport
Approval Commission, having adequate technical and financial expertise to examine such
proposals quickly and submit its recommendations on three aspects:

 Whether there is need for a Greenfield airport at the suggested place, taking into
account the existing airports in the vicinity and projected increase in traffic;
 Which is the best site, which is technically feasible and economically viable;
 In case there is need for a Greenfield airport and it is found to be prima facie, feasible
and viable, whether it should be executed in the public or private sector or be taken up
as a joint venture.

On the receipt of the report of the Airport Approval Commission, the matter will be examined
by the Central Government at the appropriate level for a decision. A decision once taken will
normally not be subject to modification at a later stage.

Once the Central Government has cleared the project, the promoter, if it is a Government
body, will follow the prescribed procedure for floating global tenders in order to select the
best party capable of executing the project as also to obtain the best possible terms. The
tendering procedure will be transparent. The selected party would then prepare a detailed
feasibility report, which would be sent to the Central Government for final acceptance.
Approvals once accorded would not normally be revoked.

Fiscal incentives would be provided to those involved in infrastructure projects, as maybe

decided by Government for time-to-time. Currently, the following incentives are available:

 Hundred per cent deduction in profits for purposes of Income Tax for the first five
years.
 Thirty per cent deduction in profits for the same purpose for the next five years.
 Full deduction to run for continuous ten out of twenty fiscal years of the assessees
choice.
 Forty per cent of the profit from infrastructure is also deductible for financial
institutions providing long-term finance for infrastructure projects.

Such incentives should be made available not only to new companies investing in airport
infrastructure but also to AAI and the existing agencies investing in upgradation of existing
airport infrastructure.

AAI may provide air traffic control services in private airports on terms and conditions
mutually agreed upon. Alternatively, it may provide ATC staff on deputation and give advice
on the specifications of the equipment to be compulsorily installed for communication,
navigation and surveillance.

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Role of the Central and State Governments

The role and functions of the Central Government as contained in the various statutes and the
preceding sections extend to the following matters;

 investment in airport infrastructure

 Clearance of Greenfield airport projects
 Airspace management, safety and security of airports
 Bilateral air services agreements, including those involving international cooperation
for modernisation and upgradation of airports
 Licensing of airports and ATC personnel
 Environmental aspects and removal of obstructions around airports
 Approval of aeronautical charges

The Ministry of Civil Aviation will try to facilitate the speedy clearance of projects from
different Ministries.

The State Governments will deal with the following aspects:

 acquisition of private land and allotment of government land

 supply of water and power, and provision of sanitation and sewage services
 provision of surface access through multi-modal linkages
 prevention of environmental pollution
 maintenance of law and order
 protection of airports from encroachments and vandalism.

In case Government land is allotted by a State Government for an airport owned by a private
party, it may be made available at the same rate as is charged from other industrial ventures
in the State.

Government will ensure that legislative and administrative mechanisms for speedy
acquisition of land are devised.

The Ministry of Civil Aviation will liaise with the State Governments in order to ensure
provision of all these essential services and basic facilities. The State Civil Aviation
Secretaries will act as coordinating officers for single-point liaison with all the State-level
departments and authorities.
 Top

Civil-Military Cooperation

There are numerous areas of interaction between the civilian departments and the Defence
authorities. Action is required as under to sort out the various issues:

 In order to meet the expanding requirements of civil air traffic there is an urgent need
to widen the existing air corridors, provide them Uni-directional air corridors, to
provide smooth flow of air traffic and thus enhance air safety.
 We have to optimise the utilisation of restricted air space, by networking of radar and
data systems, which should be acquired on the basis of mutual compatibility.
 Additional land is to be provided at civilian enclaves in military airports. Revenue
from aeronautical charges at these airports deserves to be shared with the AAI, in
order to compensate it for the capital investment it has made.
 Additional slots should be made available for civilian flights at military airports.

In order to ensure civil-military cooperation, coordination committee at the level of

respective Ministries as well as at operational level will be energised.

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Human Resource Development

Airport management, air safety, airport security, navigation and communication and fire
prevention are critical areas of human resource development, especially in the context of
privatisation of these functions. Stress needs to be laid on developing an overall environment
of courteous behaviour by all associated with airport operations besides inculcating safety
and security as a habit. It is thus of utmost importance that private institutions are set up for
training of airport managers, air traffic controllers, navigation and communication engineers,
airport security and fire-fighting personnel and they are licensed by the Government.
Appropriate syllabi and course contents should be laid down and there should be legal
provision for licensing of these personnel.

Simultaneously, the training facilities in the public sector have to be upgraded and
refurbished so as to cater to the growing demands for trained personnel as also to counter the
phenomenon of technological obsolescence.

The National Institute of Aviation Management and Research should be strengthened so as to

act as the lead institution for human resource development. It should develop academic
linkages with ICAO, IIT, IIMs and Universities. Chairs on Civil Aviation research will be
created in the institutions of learning.

In certain areas of human resources, there may be need for introduction of innovative systems
of deployment like the flexible complementing scheme prevalent in the scientific community,
so that the benefits of specialization are not frittered away at the time of promotion.

Contingency and back-up plans will be drawn up to meet emergencies arising out of
industrial unrest among airport staff.

Airport management needs expertise in diverse fields and cannot survive except by sub-
contracting of specialised activities to a host of private organisations. Legal hurdles to
engagement of contract labour or contractual agencies will have to be dismantled through
legislative intervention.

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Environmental Issues

The operation of airports has to be in full accord with the provisions relating to prevention of
air, water and noise pollution. All effluents would require to be treated before these are
allowed to leave the airports. There will be close liaison with state governments and
municipal authorities to maintain cleanliness and remove encroachments in airports and
surrounding areas, so as to obviate the menace of bird hits. Large scale plantations and other
eco-friendly activities like construction of golf courses would be encouraged around airports,
both for environmental purposes as also to provide relaxation to transit passengers. Such
environmental issues would need close interaction with regional planning bodies.

The airports would be set up after the requisite environmental clearances and a time-frame of
90 days would be prescribed by Ministry of Environment and Forests for completing the
processing of applications for such clearances.

Improved connectivity between airports and adjacent population centers should form an
integral part of each airport infrastructure development projects and not be left to evolve by
itself.

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Regulatory Mechanisms

In the context of a multiplicity of operators (including private areas) and the possibility of
oligo-polistic practices, there is a need for an appellate authority which could look into
grievances with regard to fixation of tariff rates, allotment of slots, working of air traffic
controllers, allocation of space in the airports etc. To this end, Government will create a fair
and independent Airport Regulatory Board comprising representatives of the Ministry of
Civil Aviation, DGCA, airport and airline operators etc. This grievance re-dressal mechanism
would help in speedy and effective resolution of disputes among the various stakeholders.

There will also be a legislation for conversion of the DGCA into a Civil Aviation Authority
with full powers of regulation overall aspects of the aviation industry.

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User and Community Participation

An airport is a living entity and it should co-exist with all members of the community,
especially the users of its various facilities. The Airport Advisory Committees should be
more broad-based and meet frequently so as to serve as an effective means for grievance
redressal and achieving better facilitation for airport users. Special representation should be
given to associations of passengers and cargo handling agents.

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Legal Framework

All changes necessitated by this policy in the existing Acts, Rules, Regulations and other
provisions should be carried out expeditiously, so as to facilitate its implementation.

Presently property tax is being levied on the properties of AAI, thus putting a further strain
on the viability of the airports. This anomaly needs to be rectified, because airport land is
owned by the Central Government and AAI is only a trustee.

Domestic Airlines

In the recent past, Indian civil aviation sector has grown manifold. Several new players have
entered the industry and many more are about to enter the arena. Apart from the state-owned
airline, a number of private companies have entered the arena, thereby providing more
choices to the passenger. Today, air travel is no more the monopoly of the rich and the
mighty. With the arrival of cheap airline carriers in India, air traveling has become simpler
and cheaper. Private players including Kingfisher Red, Spice Jet, Jetlite, Indigo etc. are
coming up with attractive rates for their passengers, thereby making civil aviation lucrative.

Now, airline has become a common man’s vehicle and revolutionized the way a common
Indian traveler used to travel. The airlines are adding more and more cities to their list of
destinations covered throughout the country. Therefore, it can be said that the domestic
airlines of India have made traveling easier for the masses. More and more people are opting
for traveling by air, because they save a lot
of time in traveling, as compared to other means of transportation. Here is a brief preview of
domestic airlines in India. This includes private airlines as well as low cost airlines in India.

Air Deccan
Founded as Air Deccan on 25 August 2003, Kingfisher Red holds the distinction of being
India's first low-cost airline. Its founder is Captain G R Gopinath. Soon after its conception,
the airline started its regular air operations, with its flights scheduled to ply from Bangalore to
Mangalore and Hubli.

Air India
With a worldwide network of passenger and cargo services, Air India continues to be India’s
national Airline. The history of the airline can be traced back to October 15, 1932. Air India
was earlier known as Tata Airlines. At the time of its inception, Tata Airlines consisted of
one Puss Moth, one Leopard Moth, one palm-thatched shed, one whole time pilot, one part-
time engineer and two apprentice-mechanics.

Air Sahara
Air Sahara is one of India’s leading private airlines. It is part of the multi-Crore 'Sahara India
Pariwar' business conglomerate. Air Sahara was established on September 20, 1991. It began
its operations on December 3, 1993, with a fleet of two Boeing 737-200 aircrafts. It was then
known as Sahara Airlines.

GoAir Airlines
Established in June 2004, GoAir Airlines is a low-cost budget airline, based in Mumbai. It
has been showcased as “The People's Airline”. It is promoted by Wadia Group, which has
been at the forefront of industry in India, for the past 116 years. GoAir Airlines is the
brainchild of Jeh Wadia, who is the Managing Director of GoAir.

Indian Airlines
Indian Airlines is India's premier airline. The fully state-owned airline is administered by
Ministry of Civil Aviation, Government of India. The airline came into existence in 1953,
with the enactment of the Air Corporations Act 1953. Indian Airlines started its operation on
August 1, 1953.

IndiGo Airline
IndiGo is the latest entrant to the domestic civil aviation space in India. Based in Gurgaon,
Haryana, India, the low cost carrier took off its inaugural flight from Delhi to Imphal (via
Guwahat), on August 4, 2006. InterGlobe Enterprises, a renowned travel corporation, is the
owner of IndiGo.

Jagson Airline
Jagson Airlines is a private low-cost budget airline based in Delhi, India. In 1991, when the
aviation sector was opened for the private sector, Jagson Airlines was the first private airline
to avail of this opportunity. The airline commenced its operations in 1992. The airline is
owned by Jagson International, the flagship of Jackson Group of Companies.
Jet Airways
Jet Airways is India’s premier private airline. Naresh Goyal is currently the chairperson of Jet
Airways, who is also the founder of the airline. It holds the distinction of being the second
largest airline in India, next to Kingfisher. Jet Airways has won a number of awards in
recognition of the world-class standards of its service.

Jet Airways Konnect

Jet Airways Konnect is a low cost airline that serves as a division of Jet Airways, a leading
private carrier in India. The air service was launched on May 8, 2009 and has the same airline
designation as Jet Airways. It is headquartered in Mumbai and its primary hub is Chhatrapati
Shivaji International Airport.

Kingfisher Airline
Kingfisher Airlines is a private airline based in Bangalore, India. Currently, it holds the status
of India's largest domestic airline, providing world-class facilities to its customers. Owned by
Vijay Mallya of United Beverages Group, Kingfisher Airlines started its operations on May
9, 2005, with a fleet of 4 brand new Airbus - A320

Paramount Airways
Paramount Airways is a private domestic airline of India, based in Chennai. The airline was
launched on October 19, 2005, by Paramount Group, a leading Indian textile manufacturer
based in Madurai (Tamil Nadu). The headquarters of Paramount Airways is located in
Coimbatore.

SpiceJet Airlines
SpiceJet is a low-cost airline of India, headquartered in New Delhi. The airline started its
operations in May 2005, with an aim to become India’s most preferred low cost airline, by
providing the lowest air fares and the highest consumer value to the price sensitive consumers
of the country.

JetLite
Formerly known as Air Sahara, JetLite is an airline based in New Delhi, India. It is controlled
by the Jet airways. The main base of JetLite is Indira Gandhi International Airport and its
hubs are Rajiv Gandhi International Airport in Hyderabad and Chatrapati Shivaji
International Airport in Mumbai.

Kingfisher Red
Kingfisher Red is a low-cost domestic airline in India, operated by one of the leading names
in the civil aviation industry of the country - Kingfisher Airlines. Headquartered in
Bangalore, India, Kingfisher Red was named as Simplifly Deccan and prior to that, as Air
Deccan.

MDLR Airlines
MDLR Airlines is a recent entrant in the civil aviation industry of India. It is a low-cost
domestic airline, founded and owned by Murli Dhar Lakh Ram (MDLR) Group, which has
established its name in the field of real estate development in India. The Group has its
business in commercial as well as residential real estate development.