Analysis of the Indian Civil Aviation Industry

Analysis of the Indian Civil Aviation Industry Civil Aviation Scenario Evolution In December 1910, a party from Belgium and two from England with many aircrafts arrived in India. The first amongst them was famous Humber motor companies. The team was led by Capt WG Windham, comprising two pilots, one French and one English and two mechanics. After reaching Bombay (Mumbai) they proceeded to Allahabad to demonstrate the aircraft at the Industrial Exhibition due to be held there shortly. The first actual flight was successfully attained by Mr. David in a Beriot on the 10th of December 1910 circled the Polo ground at a height of 25 to 30 feet. The second aircraft flew the next day, December 11, 1910, under the control of French Pilot Piguet and carried the first passenger in India. He was one of the sons of the Maharaja of Benares In a show at Tollygunj, near Calcutta on December 21, 1910, in a show Baron flew with a lady passenger Mrs. N.C. Sen who thus became the first woman in India to get airborne. The history of civil aviation in India started with its first commercial flight on February 18, 1911. It was a journey from Allahabad to Naini made by a French pilot Monseigneur Piguet covering a distance of about 10 km over the river Yamuna. The first domestic air route Karachi-Delhi began in December 1912 by the Indian State Air Services in collaboration with the Imperial Airways, UK. It was actual extension of London-Karachi flight The Indian aviation gathered momentum after three years (1915) with the opening of a regular airmail service between Karachi and Madras by the first Indian airline- Tata Sons Limited October 15, 1932, JRD Tata started Tata Aviation and piloted the first carriage of mail from Karachi to Bombay. Tata Aviation later became Air India. At the time of Independence, there were 9 air transport companies operating in India. Tata Airlines, Indian National Airways, Air Service of India, Deccan Airways, Ambica Airways, Bharat Airways, Mistry Airways and Oriental Airways Air Corporation Act of 1953 was passed nationalising all airlines. Air India International took over the international traffic and Indian Airlines Corporation the domestic. Sector structure/Market size The Indian civil aviation industry is among the fastest growing industries in the world with its growth rate of 18% per annum. Number of players as well as the number of aircraft is increasing in India at it is mainly due to the open sky policy of the government, because of which many overseas players are entering in the aviation market. Today, private airlines account for around 75 per cent share of the domestic aviation market. India was at 12th position in the world’s aviation market in 2006, but it has improved its position holding 9th position at present.In the year 2006 the domestic air services were available at 75 airport in India which has improved up to 82 airports now. Month-wise Indian Scheduled Domestic Operation (Aircraft Kms Flown) of Civil Aviation in India (May 1988 to December 2008) In India the air passenger travel is increasing at about 25% a year since the aviation sector opened up the skies to private carriers. Government has estimated that by 2025 the growth of aviation sector in India will outpace the global average. Currently the aviation sector is going through bad phase which started from 2008 after economic slowdown hit the market in 2008, while year 2007 was the best ever in terms of growth for Indias civil aviation sector. The domestic airlines passenger load increased by 36.47 % (to 317.29 lakh passengers) in the first three quarters of 2007. International Air Transport Association (IATA), estimated about the Indian aviation sector that India will contribute significantly to global air travel. This contribution which was US$ 5.1 billion in 2007 will soon cross US$ 5.6 billion after the market condition will be stable and then it will grow significantly. In 2007 market research firm PhoCus estimated that domestic air traffic will be more than double and touch 86.1 million passengers by 2010, up from 32.2 million passengers in 2007. But after economic slowdown this estimate may take some time to achieve after 2010. Opportunities Aviation sector is going to play a major role in terms of employment in this sector. There is going to be huge demand for technical and administrative employees in this sector due to the vast growth of aviation sector in the future. Aviation sector is not only limited up to pilots and air-hostesses but there are many employment options in this sector which are related to aviation and without which industry cannot function. Some of the Operations jobs include: Pilots, airhostesses, air traffic controller, cabin safety instructor, in-flight managers, In-flight base managers, cabin services instructor, maintenance controllers, aircraft maintenance engineers, quality control manager, cargo officers and ground staff. There is also a wide range of positions on the ground and these include the services of mechanics, baggage handlers, ticket agents and reservations agents. Potential for Growth and its future The Indian Civil Aviation market was worth US$ 5.6 billion in 2008 which has grown at a compound annual growth rate (CAGR) of 18 per cent. According to Centre for Asia Pacific Aviation (CAPA) the domestic traffic will increase by 25% to 30% till 2010. Also international traffic will grow by 15 per cent and total market will have more than 100 million passengers by 2010. At present the Indias civil aviation passenger growth is 20% and it is one of the highest in the world. By 2020, 400 million Indian passengers are likely to be airborne. More than 100 million passenger in which 60 million will be domestic passengers and around 3.4 million tons of cargo per annum are expected to handle by the Indian airports by 2020. There are many significant steps which are still to be taken by the government to propel growth in the Indian civil aviation sector. Indian government is already working on its plans to modernize existing airports by 2010 and is investing more than US$ 9 billion in the project. There is also a plan of the government to develop around 300 unused airstrips. Kapil Kaul, CEO India Middle East, Centre for Asia Pacific Aviation (CAPA), in an interview said that Indias civil aviation passenger growth is among the highest in the world. â€Å"The sector is slated to cruise far ahead of other Asian giants like China or even strong economies like France and Australia. The number of passengers who will be airborne by 2020 is a whopping 400 million.† The markets being as it is holds great promise for potential investors and numerous International no-frills budget carriers are making a beeline for India. With so much activity in the sector there is a tremendous need for personnel as well. While earlier, the airline industry was largely government owned and perceived as regulated and also a tad boring, with private and international players entering the market, opting for a career in the airlines has become both a lucrative and glamorous option To meet the growing demand, Indian scheduled carriers are placing major orders for aircraft. Based on press reports, Indian carriers placed orders over US $12 billion at the 2005 Paris Air Show. Of the 280 aircraft order received by Airbus, 135 are from Indian carriers. Moreover, of the $50 billion that Airbus can earn from these deals, the contribution of Indian carriers is over $15 billion. Airbus forecasts that the number of new aircraft it would sell to Indian carriers would go up to 400 by the year 2023. This will make the India the third largest market for new aircraft in Asia, behind China (1,790) and Japan (640), according to Airbus Global Market Forecast 2004-2023. The aviation industry is of the view that the European aircraft maker may have to again revise its projection upwards. The report further states that Boeing expects India to buy aircraft worth $35 billion in the next 20years. As per a press report, the Center for Asia Pacific Aviation (CAPA) estimates India domestic airlines would need 650 new aircraft by 2012, up from the current 210. Every new carrier launched in the country will need to buy a minimum of five aircraft to start operations, as stipulated under the license condition, in the next 12 months. Inter Globe Enterprises has placed firm orders for 100 aircraft worth $6.5 billion. The anticipated fleet augmentation planned by airlines of India are shown in Table Source DGCA It will be observed that India is likely to see large increase in aircraft registered in India and operation of such fleet would result in straining of aviation infrastructure. Policy decisions have been undertaken to enhance the airport infrastructure. Another component of aviation infrastructure that is of crucial importance to growth of Civil Aviation is up-gradation of capacity to train critical manpower. The training for making available operating crew and maintenance personnel is an expensive exercise and requires long gestation period. Prior to liberalization in early 90’s, the two State-owned airlines had established elaborate training infrastructure to train critical manpower for their needs. The training plans were evolved based on its fleet expansion plans. In the first phase of domestic market liberalization in early 90s the requirement of critical manpower had placed a strain on availability of this human resource. Large scale poaching of critical manpower from one airline to another had been resorted to. The growth of fleet in the first half of the current decade had again resulted in shortage of operating crew and maintenance personnel. The series of steps have been taken recently to meet the present shortfall of cockpit crew that include increase of eligibility age of pilots from 60 years to 65, permission to ex-pat pilots to operate airline services etc. Industry is still facing problem besides opening up of doors for foreign pilots. In fact DGCA has taken a lead role to alleviate the situation of shortage of pilots in all possible manners without compromising the safety aspects. Private airlines are equipping themselves with flight simulators for pilot training including recurrent checks. Indian Airlines has been inducting CPL holders for its training program at CTE Hyderabad. Air India has embarked on a planned program to cater to long-term requirement of pilots by resorting to induct trainees for outsourced training to PPL CPL level thus enabling them to be inducting into ab-initio training program at its training establishment. Based on the fleet augmentation plans of various airlines and expected increase in the number of airlines, the requirement of critical manpower is expected to be the key factor in maintaining sufficient operating capacity to meet the growing demand for air travel in the country. Demand For Operating Crew The requirement of operating crew, of which cockpit crew is most critical due to long gestation period in training and need for elaborate and expensive infrastructure involving training aides such as aircraft simulators and other equipment in addition to training aircraft. The demand for operating crew in the country is based on the combined fleet augmentation proposed by all existing scheduled airlines and the prospective entrants into the air transportation business. Apart from schedule operators, pilots are also required by a large number of existing non-scheduled operators involved in charter operations and also for corporate aircraft owned by large business houses. Since the unprecedented growth rates achieved in the domestic market, and huge orders placed by airlines for new aircraft to cater to expected passenger carriage in the market, government, airlines, and other research institutions involved in civil aviation have been making projections for pilots requirements in the country. The projection by various bodies are at variance depending upon their estimation of the size of the market and expectations of the fleet size. The Center for Asia Pacific Aviation (CAPA) estimates that Indias domestic airlines would need 650 new aircraft by 2012, up from the current 210. This projection results in annual induction of over 70 aircraft that would require over 500 pilots per year for the new aircraft yet to be inducted. While evaluating the emerging aviation scenario, Kaw Committee (2006) had the following to say about critical manpower requirements to meet future needs: â€Å"Induction of large number of aircraft would require more than thousand additional type-rated pilots and equally large number of type-rated engineers in span of a decade, to meet the growth requirements, in addition to the recurring requirement of the licensed personnel. At present, most of the private operators get their pilots and engineers trained at the facilities of aircraft manufacturers or approved training organizations abroad. Considering the huge potential of training engineers and pilots in the country, some agencies, including aircraft manufacturers are thinking of establishing type-training facilities in India. DGCA will have to be strengthened to conduct examinations and licensing of large number of pilots and engineers required to operate and maintain the additional aircraft being acquired†. Currently there are 1650 ALTP commercial pilots licensed by the DGCA to meet requirements of over 200 aircraft operated by scheduled airlines and 2300 CPL holders meeting the airlines and general aviation aircraft. There are about 500 expatriate pilots assisting airlines in keeping airlines aircraft flying. The total requirement of pilots that would have to be trained from initial stage should take into account natural wastage on account of superannuation. FAST estimates consolidated additional requirement of pilots for the Scheduled/ non-scheduled airlines and the corporate sector at around 3000 pilots during the five years (2007-2012). Broad estimation of the requirement is shown below in Table In the present civil aviation scenario, the fleet plans of various airlines can undergo changes keeping in view growth rates on micro basis and intensity of future competition. The projection of requirements of pilots on year-to-year basis is therefore fraught with uncertainties, but a projection of pilot requirement on a longer time horizon is likely to be more realistic. Demand for Pilot Training Apart from air transportation of passengers on scheduled services and corporate travel, another potential area that has not seen much development is the need of air transportation for disaster management and medical relief /evacuation. In the coming years the use of small aircraft /helicopters is likely to become prevalent and air linking of district centers with State capitals/ major towns will be necessary. Operation of aircraft for this sector of aviation will also add to requirements of pilots. It may be noted that there is great demand for Pilot Training in India that has arisen due to phenomenal growth in air travel spurred by economic growth during the past. The present policies of the Government of India pertaining to emphasis on infrastructure and services sector leads to a very positive economic outlook that will have impact on the air transportation sector. The growth of traffic recorded in recent years is likely to be sustained in the immediate future and is expected to stabilize at a reasonable level. The sustenance of this growth is dependent on the growth and development of Aviation infrastructure of which training of critical manpower is a very important feature. Type of Training Flying Training Institutes offer various levels of trainings for commercial flying. These include Private Pilot License (PPL), Commercial Pilot License (CPL), Multi-engine Rating, and Instrument rating; apart from Commercial Helicopter Pilot License, Flight Instructor License/Rating, and Airline Transport Pilot License. In the first phase it is proposed to impart training for PPL and CPL as these trainings involve flying training on single engine aircraft. For multi engine rating and IR rating, induction of twin-engine aircraft is required along with requisite training aids such as specific aircraft simulator. Eligibility Qualifications for Entry to PPL/ CPL course Candidates for PPL training should have completed Senior Secondary Examination (10+2). Minimum age of 17 years is prescribed for induction into the course. PPL holders would be eligible to be inducted for CPL training and should have PPL issued with 50 hours of flying and not less than 10 hours of solo flying within a period of preceding 12 months. The flying club issues student Pilot license after checking the general capability of the student to continue flying training such as enough leg space in the cockpit. Selection Procedure The selection of candidates may be done on the basis of a written examination followed by Pilot Aptitude Test and Interview. The written examination for entry into PPL course will be on general subjects such as English, Physics, Mathematics and Reasoning, where as for CPL written exam will be for subjects of Air Navigation, Aviation Met, Technical general and Air Regulations. Ground Courses and Flying Training Ground Courses: Topics for the ground courses that are laid down by DGCA for PPL and CPL along with duration are shown in Table 2.1. Trainee Intake Course Duration PPL Course: The Institute in the First Phase will cater to induction of a batch of 20 trainees for PPL course. Initially induction will be carried out twice a year. During the second year of operation of institute four batches of 20 trainees each are proposed to be inducted at three monthly intervals. Trainees are expected to complete PPL Course, Simulator and Flying Training in six months. The course work and part simulator training will be completed in three months followed by intensive flying training of 50 flying hours per trainee. CPL Course: The CPL course will commence during the second year of institutes’ functioning Training Infrastructure Flying and Gliding Clubs: It is observed that Flying and Gliding Clubs have been receiving financial assistance from the Central Government ever since their inception in 1928. This assistance gradually increased on the recommendation from various Committees set up for the purpose from time to time. It is also to be noted that in addition to receiving subvention from the Central Government most of the clubs were receiving grants and donations from the State Governments and other private organizations besides the revenue earned through: Flying fees paid by the trainees Membership fees/subscriptions etc. The subvention budget was raised to 3.5 crores by the Ministry of Civil Aviation. Later on this subvention was withdrawn except for SC/ST candidates. All the flying clubs except private one’s became sick due to non-subsidy to students as it was a great burden for pilot student to pay for full flying cost. Flying clubs are generally private bodies headed by Deputy Commissioner of the district, with Sr. public person and DGCA member on its board. Equipment i.e. aircraft are purchased by the Central Government (DGCA or Aero Club of India) and given to flying clubs but remain property of DGCA. Indira Gandhi Rashtriya Udan Academy (IGRUA) was set up in Fursatganj in U.P. to provide quality training to the pilots. The Academy envisaged a quantum improvement in the standards of flying and ground training of Commercial Pilots in the country. For this, the Academy is equipped with most modern and sophisticated trainer aircraft, up-to-date audiovisual training aids and other facilities for effective ground training. Highly qualified flying and ground instructors, with long experience in the field of aviation and flying training were recruited. Academy is funded by Ministry of Civil Aviation (Air India Indian) and is equipped with latest aircraft /simulator. It has produced a large number of pilots who are serving airlines. IGRUA charges Rs.16.5 lakhs for CPL training. IGRUA uses mainly TB-20 trainer aircraft and it charges per flying hour is Rs.12, 000/-. IGRUA have been permitted to admit 100 flying students per year. IGRUA is supported to the tune of Rs.10 crores (approximately) on its recurring annual account. Proposed Training Establishment At Gondia in Mahrashtra: Ministry of Civil Aviation (MCA) is in the process of setting up National Flying Training Institute (NFTI) at Gondia in Maharastra. MCA is concerned regarding shortage of world-class facilities for training the pilots in India to meet the large-scale demand of well-trained pilots. Ministry also envisages that specific infrastructure meeting the needs of International Standardized Flying Training including the research and development in the fields of pilot training, aviation related innovated and practical courses comparable to the requirements of standards of CAR, issued by DGCA (India). ICAO, FAA (of USA) and other international training centers of repute should be established. NFTI is a green field training center and aims to develop NFTI investment as viable economic units. NFTI may have institutional structure which meet the DGCA requirements for flying training. These are Society registered under the Societies Registration Act, 1860 Statutory body under an Act of Parliament Company incorporated under the Companies Act, 1956 Foreign Training Institutes/ Schools: Indian flying students also go abroad for flying training and obtaining PPL and CPL in foreign Academies predominantly in USA, Canada and Australia. The pilots having successfully completed the training program receive license issued by Civil Aviation Authorities of respective countries. DGCA accepts the license of foreign aviation authority and endorses the license after passing of the students of three papers and flight check by the DGCA pilot. The duration of obtaining CPL license is comparatively much less and may cost about $US 20,000/- as fees. The student pilot also pays additional expenditure for boarding and lodging and traveling Process For Grant Of Approval For Flying Training Institute Approval for setting up Flying Training Institute is issued by the DGCA in accordance with CAR Section 7, Series â€Å"D† Part 1 issued in July 1999 and subsequently amended from time to time. This document details eligibility requirements, and describes the process in details along with minimum requirements relating to infrastructure, procedures and manpower for grant of approval This document is applicable for flying training activities with aircraft having maximum certified take off mass not exceeding 5700 kgs. The document also encloses formats for applicants to be utilized at various stages in the process. Eligibility requirements for issue of approval: Approval of organizations undertaking flying training activities can be granted to Central Government or state owned or controlled ones. Indian citizens, Nonresident Indian, or overseas corporate bodies can also apply for setting up flying training institutes. A company registered in India having its principal place of business within India with or without foreign equity participation (excluding NRI equity as approved by Government of India from time to time is covered in eligibility criteria. Stages of Approval Under the prescribed process, approvals are granted stage-wise. The stages are as under: Grant of Initial ‘No Objection Certificate’ Permission for import/ acquisition of Aircraft Grant of Approval Grant of Initial No Objection Certificate (NOC) Stage 1 Application is to be made to the Director General of Civil Aviation in prescribed format. For issue of initial NOC, Security clearance and FIPB approval (in case of foreign equity participation) is necessary. Application should contain following information with supporting documents. Following details are required to be furnished in the application: Memorandum of Articles of Association duly registered with the competent authority No Objection Certificate from Airports Authority of India from air traffic point of view No Objection Certificate from Owner of the airport for use of airport for setting up of training institute and for providing parking and Hangar space. Financial soundness of applicant Project report giving details of organization, manpower, training plans, infrastructure and equipment for the institute, source of funding, viability of project etc. Details of Directors of the Board and Chairman/ CEO for necessary security clearance Type and number of aircraft and simulator and source of procurement Submission of requisite fee Initial NOC will be granted after the application is found satisfactory from the point of view of need of training institute, airport capacity and constraints at the proposed airport, suitability of proposed aircraft type, aircraft maintenance arrangements etc. This NOC is valid for one and half years during which applicant will take necessary steps to comply with requirements and acquire final approval for starting the training institute. Issue of permission to import of Aircraft Stage 2 Initial NOC holder will take necessary steps to the satisfaction of DGCA for establishing required infrastructure, recruitment and training of manpower, preparation and approval of training manual, maintenance system manual, MEL, Maintenance schedules, security program etc. Initial NOC holder will furnish necessary information to show that the specific aircraft proposed to be imported meets the requirements for import of aircraft and that all mandatory modifications and airworthiness directives are complied. On demonstration of necessary preparedness the initial NOC holder will apply to the Ministry of Civil Aviation for grant of permission to import/ acquire aircraft in the prescribed format. The permission to import aircraft shall be valid for one year extendable by three months on one time basis. For new aircraft extension may be permitted for actual lead-time of the delivery. Grant of Approval Stage 3 For the final grant of approval institute shall have necessary training aids, Hangars, suitable space for aircraft maintenance, well lighted workshops and fire fighting / safety equipments. Well-marked and adequate parking bays and taxi tracks along with facilities for mooring should be available. Adequate space for engineering, maintenance, operations and classrooms should be in place. The institute should have a well equipped library with aviation books, literature, up to date flying training circulars/ compendium, CARs, AICs, AIP, Jeppson Charts route maps etc. Chief flight instructor/ Flight Instructor, in-charge and Quality control Manager should be recruited for whom DGCA approval is obtained. Adequate number of flight instructors, ground instructors and engineering personnel should be employed. Specific approval is necessary for employment of foreign licensed pilots/ engineers. On completion of necessary preparedness, applicant will apply to DGCA for grant of approval to the flying institute. The application should cover the following aspects: Particulars of specific aircraft with installation of mandatory instruments and equipment Certification of Registration and Certificate of airworthiness of the aircraft Approval of the maintenance organization Name, license/ approvals and endorsements of flight instructors/ engineers Comprehensive insurance policy covering aircraft, occupants and third party risks in accordance with requirement Compliance of relevant CAR and conditions for initial NOC if any Details of facilities, equipment, procedures and necessary manpower. On satisfactory review by the DGCA, a team constituted in DGCA will carry out inspection of the institute. If the institute meets all requirements DGCA will grant approval to the institute that shall be valid for one year and shall be renewed each year. Sources For Instructors The sources from where instructors could be recruited are as follows: From general aviation Indian Air Force International Market There is a shortage of instructors at present in the Indian aviation market. However, NEC can approach Indian Air force for instructors on deputation. The instructors can also be sourced from the International market. Company Profile (Foundation for Aviation and Sustainable Tourism) Vision of FAST Foundation for Aviation and Sustainable Tourism (FAST) to be a Think Tank evaluating policies and a Research Organization of Repute. About FAST(Foundation for Aviation and Sustainable Tourism) Foundation for Aviation and Sustainable Tourism(FAST) is an international. non-government, non-political, autonomous research organization was founded in the year 1992 .It is not working for the profit but its objective is to promote the Civil Aviation and Tourism in harmony with the environment and provides common platform for the industry and the government to find a workable solutions. Its main aim is to function as an institutional base for the study of all aspects with regard to civil aviation and tourism including their management Organization Former Secretary General, International Civil Aviation Organization (ICAO), Dr. S.S.Siddhu is the founder Chairman of this organization. Lt. Gen (Retd.) K M Seth, PVSM, AVSM, former Governor of Tripura and Chattisgarh is the president. Former Executive Director, Airport Authority of India (AAI) Mr. Gurcharan Bhatura is the director general of FAST. Mr. B.K Joshi, former Joint Director General of Civil Aviation is the secretary general. Board of trustees FAST is managed by the board with following trustees: Lt. Gen. (Retd.) K.M. Seth PVSM, AVSM Former Governor of Tripura Chattisgarh Mr. N.N. Jha IAS (Retd.) Mr. B.N. Jha,IAS (Retd.) Mr. Uma S Bhartia, Manager Director India Glycols Ltd Mr. P.R.S. Oberoi CMD, East India Hotels (Oberoi group of hotels) Mr. Siddhanta Sharma, Chairman Spice Jet Mr. VP Agrawal, Member (Planning) AAI Mr. Gurcharan Bhatura, Director General, FAST. Executive Council Lt. Gen. (Retd.) K.M. Seth AVSM, PVSM former Governor of Tripura Chhattisgarh, President FAST Mr. M. P. Bezbaruah, IAS (Retd.) Mr. Raghu Menon, CMD, National Aviation Company of India Limited Mr. Anil Bhandari, MD International Travel House Ltd Mr. Kanu Gohain, Director General Civil Aviation Mr. Parvez Dewan, CMD India Tourism Development Corporation Mr. R. Krishnan, Consulting Editor Cruising Heights Mr. Raman Sidhu India Head, Corp Affairs Fidelity international Mr. MM Bhagat, Chairman Bhagat Group Mr. Gurcharan Bhatura, Director and Secretary General Mr. B. K. Joshi, Treasurer Corporate Members and Members from industry There are many members of this organization which is from the aviation industry. Some are as follows : Mr.Naresh Goyal – (