Aviation industry

Aviation industry profile

India is one of the fastest growing aviation markets in the world. The Airport
Authority of India (AAI) manages a total of 127 airports in the country, which include
13 international airports, 7 custom airports, 80 domestic airports and 28 civil
enclaves. There are over 450 airports and 1091 registered aircrafts in the country. The
genesis of civil aviation in India goes back to December 1912 when the first domestic
air route between Karachi and Delhi became operational. 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 continued for the
next forty years.
The Directorate General of Civil Aviation(DGCA) controlled every aspect
of aviation, 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 (AAI) was assigned the responsibility of managing all
national and international airports and administering every aspect of air transport
operation through the Air Traffic Control.
In 1990s, aviation industry in India saw some important changes. The Air
Corporations Act was abolished to end the monopoly of the public sector and private
airlines were reintroduced. With the liberalization of the Indian aviation sector, the
industry has witnessed a transformation with the entry of the privately owned full
service airlines and low cost carriers. In 2006, the private carriers accounted for
around 75% share of the domestic aviation market. The sector has also seen a
significant increase in the number of domestic air travel passengers. Some of the
factors that have resulted in higher demand for air transport in India include the
growing middle class and their purchasing power, low airfares offered by low cost
carriers like Air Deccan, the growth of the tourism industry in India, increasing
outbound travel from India, etc.

Increasing liberalization and deregulation has led to an increase in the

number of private players. The aviation industry comprises of three types of players:
• Full cost carriers
• Low cost carriers (LCC)

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• Other start-up airlines

It is a phase of rapid growth in the industry with estimated growth of domestic
passenger segment at 50% per annum.. This has led to intense price competition due
to which full service carriers like Jet Airways, Indian Airlines and Air Sahara are
giving discounts of up to 60-70% for certain routes to match the new entrants' ticket
prices. The customer has thus gained enormously as a result of liberalization of the
sector.

Sector Overview
The Indian aviation market is booming. The estimated growth of domestic
passenger segment is at 50% per annum and growth for international passenger
segment is 25%. The international cargo is likely to grow at a rate of 12%.
During the period April-September, 2006, international and domestic
passengers recorded a growth of 15.8 per cent and 44.6 per cent respectively, leading
to an overall growth of 35.5 per cent. Moreover, the international and domestic cargo
recorded growth of 13.8 per cent and 8.7 per cent respectively, resulting in an overall
growth of 12.0 per cent.

According to Ministry of Civil Aviation, India will need 1,500 to 2,000

passenger planes in next 10 years. Over 135 aircrafts have already been added in the
last two years alone. By 2010, India's fleet strength will stand at 500-550. It is also
estimated that the domestic market size will cross 60 million and the international
traffic will reach 20 million in the same period. By 2020, Indian airports are estimated
to handle 100 million passengers, including 60 million domestic passengers. The
amount of cargo handled will fall in the range of 3.4 million tonnes per annum.

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Airlines: Current fleet and acquisition & investment plans

Airlines Current Acquisition Investment in US

fleet plans $billion)
Jet Airways 62 30 by 2012 2

Air Deccan 43 79 by 2010 2.7

Kingfisher 11 100 by 2012 4.5

Spice Jet 6 38 by 2010 1.9

GoAir 4 33 by 2008 2.4

Classification of Indian Aviation Sector

The Indian aviation sector can be broadly divided into the following main
categories:
1. Scheduled air transport service, which includes domestic and international airlines.
2. Non-scheduled air transport service, which includes charter operators and air taxi
operators.
3. Air cargo service, which includes air transportation of cargo and mail.
Scheduled air transport service: It is an air transport service undertaken between
two or more places and operated according to a published timetable. It includes:
1. Domestic airlines, which provide scheduled flights within India and to select
international destinations. Air Deccan, Spice Jet,kingfisher airline and Indigo are
some of the domestic players in the industry.

2. International airlines, which operate scheduled international air services to and

from India.
Non-scheduled air transport service: It is an air transport service other than the
scheduled one and may be on charter basis and/or non-scheduled basis. The operator
is not permitted to publish time schedule and issue tickets to passengers.
Air cargo services: It is an air transportation of cargo and mail. It may be on
scheduled or non-scheduled basis. These operations are to destinations within India.
For operation outside India, the operator has to take specific permission of Directorate
General of Civil Aviation demonstrating his capacity for conducting such an

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operation.

At present, there are 2 scheduled private airlines (Jet Airways and Air Sahara),
which provide regular domestic air services along with Indian Airlines. In addition
there are 47 non-scheduled operators providing air-taxi/non-scheduled air transport
services.

Apart from this, the players in aviation industry can be categorized in three
groups:
• Public players
• Private players
• Start up players

There are three public players: Air India, Indian Airlines and Alliance Air.
The private players include Jet Airways, Air Sahara, Kingfisher Airlines, Spice Jet,
Air Deccan and many more. The start up players are those planning to enter the
markets. Some of them are Omega Air, Magic Air, Premier Star Air and MDLR
Airlines.

Growth

You would be surprised to know the influence that the air transport sector has
on the economy. Indeed, this industry affects almost all other sectors of the economy.
To cite a few of those influenced by any good or bad movements in the air transport
industry are surface transport, tourism, accommodation, catering, recreation,
entertainment, financial services, information technology services and even retail
trade.
A more in depth study of the industry reveals that this is truly a sector for the
“many”, not just an elite few. No other industry can boast of a more direct or indirect
influence on so many aspects of the economy as air transport does. One only has to
visit smaller countries around the region such as Malaysia, Singapore or Thailand to
witness the tremendous growth that has been achieved through a well developed and
efficient air transport sector. All boast national carriers of world class standing and
have made substantial investments in airport infrastructure that has attracted increased

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air transport traffic to their countries. But can air transport really help to accelerate
economic development?
There is sufficient evidence to suggest a close relationship between airline
activity and economic growth. It is said that growth in air transport drives economic
progress and in turn benefits from it. A study by ICAO of Global GDP and air
transport activity as measured by Revenue Passenger Kilometers over the 20-year
period from 1975 to 1995 showed a positive correlation between this sector and
global prosperity.
Again, in a paper on the effects of the 1995 US-Canada “Open Skies”
agreement, it was reported that the bilateral agreement triggered traffic growth of a
million passengers in the first year alone, a growth of 15%.
This was a five-fold increase over the historical annual growth rate of about
3 per cent. Increased air transportation between the two countries was expected to
boost economic activity to the tune of US$ 15 billion and create thousands of jobs in
both countries. Strong evidence indeed of synergy between air transport and economic
growth. Such correlation can even lead one to conclude that the extent of increase in
air transport activity can provide a useful indicator of the level of economic growth
taking place in a country.
Increase in tourist arrivals: Tourists bring “spending dollars” boosting the
country’s foreign exchange reserves. They create demand for accommodation,
transportation, shopping, sight-seeing and a host of travel related services.

Growth Prospects of Indian Aviation Sector

The Indian aviation industry has witnessed remarkable growth in recent years,
with key drivers being positive economic factors, including high GDP growth, good
industrial performance, and corporate profitability and expansion. Other factors
include higher disposable incomes, growth in consumer spending, and availability of
low fares.
As of May 2006, private carriers accounted for around 75% share of the
domestic aviation market. During April-September 2006, the total aircraft movements
witnessed an increase of 29.6% year on year to 494.92 thousand aircraft movements,
as compared to 318.89 thousand during April-September 2005. The total air passenger

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traffic in September 2006 has shown an increase of 31.1%, as compared to 2005.

Centre for Asia Pacific Aviation (CAPA) predicts that domestic traffic will grow at 25
per cent to 30 per cent a year until 2010 and international traffic will grow by 15 per
cent, taking the overall market to more than 100m passengers by the end of the
decade. Indian carriers have 480 aircraft on order for delivery by 2012, which
compares with a fleet size of 310 aircraft operating in the country today.

Scope
The Indian aviation industry has shown continued growth in recent years with
key drivers being positive economic factors (including high GDP growth), industrial
performance, corporate profitability/expansion, higher disposable incomes and growth
in consumer spending as well as wider availability of low fares.

Current Scenario
The current growth rate in domestic and international travel exceeds 25%, the
highest in the world. In the period April-September 2006, the total aircraft movements
witnessed an increase of 29.6% year-on-year to 494.92 thousand aircraft movements,
as compared to 318.89 thousand during April-September 2005
The Indian domestic market grew at almost 50% in the first half of 2006. On average,
full service carriers are shedding a remarkable 1.5% of market share every month to
low cost carriers.

Future Scenario

The aviation industry is expected to grow at a compounded annual growth rate of

25% till 2010. Also, by 2010 Indian airports will be handling between 90 and 100
million passengers per year, as against the current 34 million passengers. It is
expected that nearly 80% of this growth will be driven by the low cost carrier segment
(LCC). By 2008, the LCCs would capture 65% of the direct on-line air ticket market
from 61% in 2005.

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Challenges for Aviation Industry

The growth in the aviation sector and capacity expansion by carriers have
posed challenges to aviation industry on several fronts. These include shortage of
workers and professionals, safety concerns, declining returns and the lack of
accompanying capacity and infrastructure. Moreover, stiff competition and rising fuel
costs are also negatively impacting the industry.

1. Employee shortage: There is clearly a shortage of trained and skilled manpower in

the aviation sector as a consequence of which there is cut-throat competition for
employees which, in turn, is driving wages to unsustainable levels. Moreover, the
industry is unable to retain talented employees.
2. Regional connectivity: One of the biggest challenges facing the aviation sector in
India is to be able to provide regional connectivity. What is hampering the growth of
regional connectivity is the lack of airports.
3.Rising fuel prices: As fuel prices have climbed, the inverse relationship between
fuel prices and airline stock prices has been demonstrated. Moreover, the rising fuel
prices have led to increase in the air fares

4.Declining yields: LCCs and other entrants together now command a market share
of around 46%. Legacy carriers are being forced to match LCC fares, during a time of
escalating costs. Increasing growth prospects have attracted & are likely to attract
more players, which will lead to more competition. All this has resulted in lower
returns for all operators.
5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is
inadequate to support growth. While a start has been made to upgrade the
infrastructure, the results will be visible only after 2 - 3 years.
6. Trunk routes: It is also a matter of concern that the trunk routes, at present, are not
fully exploited. One of the reasons for inability to realize the full potential of the trunk
routes is the lack of genuine competition. The entry of new players would ensure that
air fares are brought to realistic levels, as it will lead to better cost and revenue
management, increased productivity and better services. This in turn would stimulate

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demand and lead to growth.

7. High input costs: Apart from the above-mentioned factors, the input costs are also
high. Some of the reasons for high input costs are:-
Withholding tax on interest repayments on foreign currency loans for aircraft
acquisition. Increasing manpower costs due to shortage of technical personnel.

Number Of Companies

1. Indian Airways

2. Kingfisher

3. Air India

4. Air Deccan

5. Lufthansa India Airlines

6. Air Sahara

7. IndiGo

8. Alliance Air

9. Paramount Airways Private Limited

10. Jet Airways

11. Air Charters India

12. Go Airlines (India) Private Limited

13. Multi Track

14. Sabena airlines in India

15. Sam Aviation Private Limited

16. TajAir Limited

17. Gujarat Airways

18. NEPC Airlines

19. KLM India

20. Directorate General of Civil Aviation

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Top Players

Players in Indian aviation industry can be categorized in three groups:

• Public players
• Private players
• Start up players

There are three public players: Air India, Indian Airlines and Alliance Air.
The private players include Jet Airways, Air Sahara, Paramount airways, Go Air
Airlines, Kingfisher Airlines, Spice Jet, Air Deccan and many more. The start up
players are those which are planning to enter into the markets. Some of them are
Omega Air, Magic Air, Premier Star Air and MDLR Airlines

1. Air India Limited

Air India Ltd. was established in 1953 with its headquarters at Mumbai.
With 34 aircrafts Air India operates 46 destinations. The number of employees in
Air India as on October 31, 2006 is 15,136. The airline has been profitable in most
years since its inception. In the financial year ending March 31, 2006, Air India has
made a net profit of Rs.9.7 crores, and earned a revenue of Rs.87,480 million which
represents a growth of almost 15 per cent over the previous year. The number of
passengers carried during the same year was 4.86 million.

Air India Fleet

Type of Air Craft Number

Boeing 747-400 8
Boeing 747-400 Combi 1
Boeing 747-300 Combi 2
Airbus 310-300 19

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Boeing 777-200 4
Total 34
2 Indian Airlines
The airlines started its operation on 1st August, 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 70 aircrafts.
The airlines network spans from Kuwait in the west to Singapore in the East
and covers 76 destinations - 58 within India and 18 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 Fleet Number

Type of Air Craft
Airbus A300 3
Airbus A320 47
Boeing 737 11
Dornier D-228 2
Airbus A319 3
ATR-42 4
Total 70

Indian Airlines is presently fully owned by Government of India and has

total manpower strength of around 19,300 employees. Its annual turnover, together
with that of its subsidiary Alliance Air, is well over Rs.6000 crores (around US$ 1.4
billion). Together with its subsidiary Alliance Air, Indian Airlines carries a total of
over 7.5 million passengers annually.

3: Jet Airways
Jet Airways commenced its operations on May 5, 1993. It has emerged as
India's largest private domestic airline. It has a market share of 25%. Jet Airways'
current fleet consists of 62 aircraft. It operates 340 flights daily to 50 destinations.
During 2005, it introduced medium and long-haul international operations.

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Key Stats & Ratios

Quarterly Annual Annual
(Dec '06) (2006) (TTM)
Net Profit Margin 1.97% 7.37% 2.23%
Operating Margin 3.05% 11.77% 2.23%
EBITD Margin - 23.45% 12.54%
Return on Average Assets - 5.90% -
Return on Average Equity - 20.95% -
...
4: Spicejet Airlines
SpiceJet airlines aims to be a low cost airline. Its fleet consists of several
Boeing 737-800 aircrafts only. This single aircraft type fleet allows efficiency in
maintenance. It operates in 14 destinations.
Careers:
Currently, Spice Jet is recruiting for the following openings:
Aircraft maintenance engineer
Trainee aircraft maintenance engineer
Manager-aircraft appearance and condition
5:Air Deccan
Air Deccan began its operations in August 2003 with 1 aircraft and 4 flights a
day and is today the fastest growing airline flying over 300 flights a day. Air Deccan
is presently operating a fleet of 43 aircraft over 64 destinations. Air Deccan provides
affordable air travel at very low costs. The number of passengers carried during 2006-
07 was 9 million.

Boom In Indian Aviation

Aviation sector in India is growing at a whopping 25% per annum, creating a

large number of jobs. There is presently a shortage of trained pilots. The industry
is expected to add 130 airliners to its current fleet of 270 airliners, which would,
in turn, increase manpower demand. The job opportunities include that of flight
dispatchers, cabin crew, airline managers, airport managers and ground handling
personnel. The industry would create 2,00,000 jobs by 2017.

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There is already a shortage of pilots in the sector and so is that of commanders

and captains. Currently, 2,500 pilots are working with airlines in India, of which 475
are expat pilots. The doors of the cockpit are now open to the women as well. The
number of women joining aviation sector is on the rise. From one or two women in a
batch of 100 students, the number has now increased to 10 or 12. Indian currently has
76 women pilots, and the number is rising with every new batch. As per the statistics,
forty of Air Deccan's 496 pilots are women. Kingfisher, which has 26 women from a
total of 390 pilots, also got its first woman captain just recently. Even though more
and more women are opting for this career, the shortage still continues. Due to this
paucity of pilots, airlines in India are largely dependent on expatriate pilots.

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Income & expenditure

Air Transport Services

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Total income 13745.48 15714.64 19056.37 25171.07 31494.1 26730.24

Sales 13281.06 15303.39 18632.05 24061.19 29096.25 24320.28
Industrial sales 7.52 39.43 39.46 84.08 159.68 54.95
Income from non-financial services 13273.54 15263.96 18592.59 23977.11 28936.57 24265.33
Income from financial services 214.84 215.27 118.51 184.37 479.66 658.19
Interest 134.57 79.6 76.55 110.22 156.79 133.46
Dividends 23.6 4.13 6.2 2.35 3.47 11.98
Treasury operations 56.67 120.99 20.09 55.19 301.44 500.13
Other income 46.4 38.13 29.61 45.84 192.95 242.47
Prior period income & extraordinary income 203.18 157.85 276.2 879.67 1725.24 1509.3
Change in stock 0 0 0 0 0 0

Total expenses 14124.7 15357.67 18523.64 25270.25 33686.08 28851.15

Raw material expenses 670.77 763.91 1003.22 965.74 868.35 459.51
Packaging expenses 0 0 0 0 0 0
Purchase of finished goods 0 0.51 0.85 0.5 0.55 0.55
Power, fuel & water charges 2996.46 3418.8 5167.76 8367.83 11463.41 10336.3
Compensation to employees 2488.99 2674.57 2936.48 3431.12 4449.74 3503.37
Indirect taxes 11.53 13.25 22.28 35.58 99.01 136.27
Royalties, technical know-how fees, etc. 4.25 4.24 0 100.01 159.97 159.97
Lease rent & other rent 267.72 408.6 380.12 516.01 751.87 558.14
Repairs & maintenance 697.98 814.64 801.97 1080.7 1851.99 1397.38
Insurance premium paid 369.51 288.71 254.67 298.45 358.45 216.13
Outsourced mfg. jobs (incl. job works, etc.) 0 0 0 2.6 0 0
Outsourced professional jobs 13.56 13.17 24.99 69.43 115.78 99.11
Directors' fees 0.03 0.03 0.06 0.2 0.7 0.31
Selling & distribution expenses 998.46 1032 1239.72 1651.47 1970.26 1791.01
Travel expenses 285.63 364.2 402.96 574.09 726.14 768.53
Communication expenses 174.76 186.93 204.34 253.83 321.46 296.34
Printing & stationery expenses 14.85 16.66 19.56 24.3 30.62 22.71
Miscellaneous expenses 115.37 104.17 105.47 166.05 269.57 316.62
Other operational exp. of indl. enterprises 3.1 7.37 7.36 0 0 0
Other oper. exp. of non-fin. service enterprises 3285.79 3511.04 4214.2 5513.48 7707.59 6893.28
Share of loss in subsidiaries/JVs,etc. 0 0 0 0 0 0
Lease equalisation adjustment 0 0 0 0 0 0
Loss on securitisation of assets/loans 0 0 0 0 0 0
Fee based financial service expenses 2.79 3.51 8.39 56.57 65.7 67.97
Treasury operations expenses 4.25 0.43 14.8 50.44 9.35 0.03
Total provisions 69.23 77.06 52.02 93.87 108.18 55.74
Write-offs 0.92 25.81 53.56 30.7 82.33 53.51
Less: Expenses capitalised 7.16 6.38 3.69 58.76 427.48 324.65
Less: DRE & expenses charged to others 0 0 0 0 0 0
Prior period & extraordinary expenses 142.74 198 75.18 70.7 144.09 68.85

PBDITA 1133.95 1793.41 2070.1 1876.16 366.47 -146.74

Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94
Financial charges on instruments 0 0 0 0 0 0
Expenses incurred on raising deposits/debts 0 0 0 0 0 0
PBDTA 880.42 1621.52 1943.52 1429.98 -782.8 -1439.68
Depreciation 1265.79 1289.2 1214.44 1177.25 1261.16 1311.35

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Amortisation 6.8 7.68 12.83 30.46 79.2 26.62

PBT -392.17 324.64 716.25 222.27 -2123.16 -2777.65
Provision for direct taxes -12.95 -32.33 183.52 321.45 68.82 -656.74
PAT -379.22 356.97 532.73 -99.18 -2191.98 -2120.91

No of companies 15 18 18 21 20 17

Assets

Air Transport Services

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Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Gross fixed assets 18289.98 18194.56 18624.59 23799 31064.01 33164.97

Land & building 430.65 427.97 432.2 439.99 866.81 2164.26
Plant & machinery 549.32 653.26 591.24 826.19 900.85 699.61
Transport & comm. equipment/infrastructure 16044.84 16069.45 16127 15659.14 18687.23 23112.73
Furniture,amenities & other fixed assets 939.6 977.94 1151.39 845.89 901.58 425.27
Capital work-in-progress 324.12 51.61 270.76 5830.59 9455 6491.97
Intangible assets 1.45 13.88 51.55 195.16 228.87 247.59

Net pre-operative expenses pending allocation 0 0 0 0.04 0.04 0.04

Net lease reserve adjustment 0 0 0 0 0 0
Less: Cumulative depreciation 8927.71 10167.51 11337.88 11571.48 11408.66 7152.01
Less: Arrears of depreciation 0 0 0 0 0 0

Net fixed assets 9362.27 8027.05 7286.71 12227.52 19655.35 26012.96

Investments 128.55 299.85 1661.8 280.56 248.02 1568.33
Equity shares 71.69 71.86 72.68 102.97 108.79 1212.19
Preference shares 0 0 0 0 0 340
Mutual funds 64.22 236.81 1599.35 189.09 152.05 10.76
Debt instruments 9.32 7.86 6.45 7.96 6.63 6.63
Approved securites (slr/statutory req.) 0 0 0 0 0 0
Assisted companies 0 0 0 0 0 0
Others 2.78 2.78 2.78 0 0.01 0
Less: Provision for dimunition in value of
investments 19.46 19.46 19.46 19.46 19.46 1.25

Group companies 61.11 62.82 63.55 92.87 93.64 1537.72

Non-group companies 84.12 253.71 1614.93 207.15 173.83 31.86

Market value of quoted investments 100.43 275.4 1652.79 227.9 195.06 47.71

Deferred tax assets 606.13 710.18 556.59 243.22 677.74 1381.49

Current assets 4757.98 4849.96 6333.44 10194.33 11484.38 9619.56

Cash & bank balance 1136.06 1189 2131.99 3408.23 3507.06 2221.66
Inventories 877.87 888.22 881.11 1117.67 1536.45 1469.9
Receivables 2698.85 2716.32 3200.7 5521.45 6113.31 5570.52
Expenses paid in advance 45.2 56.42 119.64 146.98 327.56 357.48

Loans & advances 379.6 286.08 300.65 484.6 1638.17 1471.74

Deferred revenue expenditure 26.24 29.35 40.14 71.23 69.18 54.58
Total assets 15260.77 14202.47 16179.33 23501.46 33772.84 40108.66
No of companies 15 18 18 21 20 17

Liabilities

Air Transport Services

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Net worth -82.35 126.97 1826.98 2851.27 1945.57 3441.37

Authorised capital 1528.65 1585.1 2143.1 2548.6 3271.91 2446.95

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Issued equity capital 734.87 759.56 784.47 1489.49 1828.75 1290.44

Paid up equity capital (net of forfeited capital) 725.05 744.49 769.4 1489.29 1828.75 1290.44
Forfeited equity capital 0.91 0 0 0 0 0
Paid up preference capital (net of forfeited
capital) 69.83 70.48 0.5 97.15 148.9 438.9
Capital contibution, suspense and application
money 0 0 0 0 340 50

Reserves & surplus -878.14 -688 1057.08 1264.83 -372.08 1662.03

Free Reserves 859.3 1056.81 2085.67 3018.88 3707.1 3270.34
Security premium reserves (Net of
deductions) 141.04 152.98 1575.23 2072.24 2881.27 2869.08
Other free reserves 718.26 903.83 510.44 946.64 825.83 401.26
Specific Reserves 732.15 583.33 632.92 643.29 646.87 77.82
Revaluation Reserves 540.87 387.57 259.27 162.02 132.44 2699.9
Less Accumulated losses 3010.46 2715.71 1920.78 2559.36 4858.49 4386.03

Total borrowings 7301.45 5705.3 5342.51 11418.5 20499.3 26575.67

Bank borrowings 1646.64 1089.39 1290.79 6202.82 12071.91 11133.21
Short term bank borrowings 1533.64 930.01 1081.17 3687.46 8562.83 8401.98
Long term bank borrowings 113 159.38 209.62 2515.36 3509.08 2731.23
Financial institutional borrowings 2.59 65.95 65.95 56.05 95.56 62.52
Central & state govt. (usually sales tax deferrals) 15.97 23.67 23.67 23.67 23.67 23.67
Debentures / bonds 0 4.2 10.7 4.2 1.91 0
Convertible 0 0 0 0 0 0
Non-convertible 0 4.2 4.2 4.2 0 0
Fixed deposits 0 0 0 0 0 0
Foreign borrowings 1838.94 1217.08 772.45 2077.63 2495.39 2793.28
Of which : euro convertible bonds 0 0 0 0 0 0
Borrowings from corporate bodies 325.04 108.13 107.75 181.46 1219.54 1431.2
Group / associate cos. 23.24 18.82 18.36 103.98 1180.66 1360.44
Borrowings from promoters / directors 1.74 1.75 3.58 5.4 0.3 0.3
Commercial paper 0 0 0 0 0 0
Hire purchase borrowings 2958.46 2841.57 2570.73 2178.87 2546.54 9326.75
Deferred credit 0 0 0 0 0 412.5
Other borrowings 512.07 353.56 496.89 688.4 2044.48 1392.24

Secured borrowings 5200.96 4385.7 3832.14 5909.5 9179.91 16844.69

Unsecured borrowings 2100.49 1319.6 1510.37 5509 11319.39 9730.98
Current portion of long term debt 1160.84 1130.78 1448.87 656.9 3142.9 2136.06

Current liabilities & provisions 7031.34 7329.8 8014.68 8415.25 10137.07 8902.39
Sundry creditors 3052.05 2727.91 3041.31 3173.71 4120.13 4012.29
Acceptances 71.29 0 0 0 0 75.08
Deposits & advances from customers &
employees 1144.05 1358.89 1459.87 1151.56 1912.29 2390.69
Interest accrued 508.22 381.93 43.93 45.69 82.25 120.87
Share application money 0 0 0 0.04 0.04 0.03
Other current liabilities 1370.31 1653.33 2154.34 2888.04 2817.18 1583.39
Provisions 885.42 1207.74 1315.23 1156.21 1205.18 720.04

Deferred tax liability 1010.33 1040.4 995.16 816.44 1190.9 1189.23

Total liabilities 15260.77 14202.47 16179.33 23501.46 33772.84 40108.66

Net worth (net of reval & DRE) -649.46 -289.95 1527.57 2618.02 1743.95 686.89
Contingent liabilities 1354.78 2109.38 12889.3 71191.1 67056.53 70854.77
No of companies 15 18 18 21 20 17

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APGMS, rajampet.
 Aviation industry

Investments

Air Transport Services

Mar- Mar- Mar-
Rs. Crore (Non-Annualised) 03 Mar-04 Mar-05 06 07 Mar-08

Investments 128.55 299.85 1661.8 280.56 248.02 1568.33

In equity shares 71.69 71.86 72.68 102.97 108.79 1212.19
Group companies 61.11 62.82 63.55 92.87 93.64 1197.72
Other than group companies 10.58 9.04 9.13 10.1 15.15 14.47
In preference shares 0 0 0 0 0 340

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 Aviation industry

Group companies 0 0 0 0 0 340

Other than group companies 0 0 0 0 0 0
In debt instruments 9.32 7.86 6.45 7.96 6.63 6.63
Other than government debentures/bonds 9.32 7.86 6.45 7.96 6.63 6.63
Group companies 0 0 0 0 0 0
Other than group companies 9.32 7.86 6.45 7.96 6.63 6.63
In bonds/debentures of government/local bodies 0 0 0 0 0 0
In mutual funds 64.22 236.81 1599.35 189.09 152.05 10.76
Group companies 0 0 0 0 0 0
Other than group companies 64.22 236.81 1599.35 189.09 152.05 10.76
In others 2.78 2.78 2.78 0 0.01 0
Less: Provision for diminution in value of investments 19.46 19.46 19.46 19.46 19.46 1.25
Non-provisioning of diminution in investments 0 0 0 0 0 0
Book value of quoted investments 6.53 2.07 2.05 188.16 152.97 11.57
Market value of quoted investments 100.43 275.4 1652.79 227.9 195.06 47.71
Marketable securities 66.23 238.88 1601.4 190.01 152.97 11.57
Investment lodged as security 0 0 0 0 0 0
No of companies 15 18 18 21 20 17

Profits

Air Transport Services

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
PBDITA 1133.95 1793.41 2070.1 1876.16 366.47 -146.74
Depreciation 1265.79 1289.2 1214.44 1177.25 1261.16 1311.35
Amortisation 6.8 7.68 12.83 30.46 79.2 26.62
PBIT -138.64 496.53 842.83 668.45 -973.89 -1484.71
Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94
Financial charges on instruments 0 0 0 0 0 0
Fee based financial services
expenses 0 0 0 0 0 0

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 Aviation industry

PBT -392.17 324.64 716.25 222.27 -2123.16 -2777.65

Provision for direct tax -12.95 -32.33 183.52 321.45 68.82 -656.74
Corporate tax 17.9 41.82 74.62 153.15 25.52 1.75
Deferred tax 11.94 222.07 228.77 152.65 260.92 235.05
Less: Deferred tax assets /
credit 43.08 296.25 120.24 18.47 250.66 919.01
Other direct tax 0.29 0.03 0.37 34.12 33.04 25.47
Fringe benefits tax 0 0 0.15 33.88 32.79 25.23
PAT -379.22 356.97 532.73 -99.18 -2191.98 -2120.91
PAT (as reported by the Co.) -384.73 352.7 525.78 -105.72 -2195.16 -2119.79
Prior period & extra-ordinary
income 203.18 157.85 276.2 879.67 1725.24 1509.3
Prior period & extra-ordinary
expenses 142.74 198 75.18 70.7 144.09 68.85
Net prior period & extraordinary
transactions -60.44 40.15 -201.02 -808.97 -1581.15 -1440.45

PBDITA net of P&E 1073.51 1833.56 1869.08 1067.19 -1214.68 -1587.19

PBIT net of P&E -199.08 536.68 641.81 -140.52 -2555.04 -2925.16
PBT net of P&E -452.61 364.79 515.23 -586.7 -3704.31 -4218.1
PAT net of P&E -439.66 397.12 331.71 -908.15 -3773.13 -3561.36
Distribution of profits (%)
PBDITA 100 100 100 100 100 100
-
Depreciation & Amortisation 112.226289 72.3136371 59.2855418 64.3713756 365.748902 911.796375
-
Financial charges 22.3581287 9.58453449 6.11468045 23.7815538 313.605479 881.109445
- -
Tax 1.14202566 1.80271104 8.86527221 17.1334001 18.7791634 447.553496
- - -
PAT 33.4423916 19.9045394 25.7345056 5.28632952 598.133544 1445.35232
Non--provisions for: 56.45 64.46 0.33 0 11.75 14.43
Diminution in investement 0 0 0 0 0 0
Sundry debtors 0 0 0 0 8.14 8.14
Loans & advances including
NPAs 0 0 0.33 0 3.61 6.29
Loans & advances to group cos. 0 0 0 0 0 0
Interest expenses 56.45 64.46 0 0 0 0
Power expenses 0 0 0 0 0 0
Gratuity 0 0 0 0 0 0
Others 0 0 0 0 0 0
No of companies 15 18 18 21 20 17

Tools of Analysis
1. Cost structure
Fixed Charges
Cost Structure = -------------------------
Value Added
2. Operating Performance
Operating profit
Operating Performance = ----------------------- *100
Net assets

3. Financial Performance

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 Aviation industry

Net Profit
Financial Performance = --------------------*100
Net Worth
4. Correlation Analysis

Correlation is the degree of association between two variables and it is

represented in terms of a coefficient known as correlation. The range of the
correlation coefficient it is in between -1and+1. If the correlation coefficient is
negative, then the variables are inversely proportional and maximum when it is-1; if
the coefficient is 0, there is no association between the variables. If the coefficient is
positive then the variables are associated directly and it is maximum when it is+1.
_ _
∑(x- x) (y-y)
r= …………………..
_ _
√ ∑(x- x)2 √∑ (y-y)2

5. Trend Analysis

Y = a+bx

⇒ ∑y = Na +b ∑x − (1)
⇒∑( x y ) = a ∑x +b ∑x 2
− ( 2)

6. Growth Analysis:
Growth Rate Pn = Po (1+r) n

1. Cost structure

Fixed Charges
Cost Structure = -------------------------
Value Added
S.No Particulars 2003 2004 2005 2006 2007 2008
1 Net sales 13281.06 15303.39 18632.05 24061.19 29096.25 24320.28
2 Raw materials 0 0.01 0.06 0 0.01 0.01
expenses
3 Power fuel water 2996.46 3418.8 5167.76 8376.83 11463.41 10336.3
changes

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 Aviation industry

4 Compensation to 2488.99 2674.57 2936.48 3431.12 4449.74 3503.37

employees
5 Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94
6 Depreciation 1265.79 1289.2 1214.44 1177.25 1216.16 1311.35
7 Value added (1-2-3) 10284.6 11884.5 13464.23 15693.36 17632.83 13983.97
8 Fixed charges(4+5+6) 4008.31 4135.66 4277.5 5054.55 6860.17 6107.66
9 Fixed charges 0.38 0.34 0.31 0.32 0.38 0.43

Growth rate of sales

0.5
0.4
0.3
Grow th rate
0.2
0.1
0
2003 2004 2005 2006 2007 2008
YEARS

Interpretation: From the above table it is observed that the fixed charges /value
added is showing fluctuation during the study period (2003-2008).Expect in the year
2005 power fuel & water charges are increased. Increase in the sales and fixed
charges effects the cost structure.
2. Operating Performance

Operating profit
Operating Performance = ----------------------- *100
Net assets

(Rs in Crores)
Year EBIT Net assets EBIT/Net assets
2003 -138.64 9362.27 -1.4
2004 496.53 8027.05 6.1
2005 842.83 7286.71 11.5
2006 668.45 12227.52 5.4
2007 -973.89 19655.35 -4.9
2008 -1484.71 26012.96 -5.7

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 Aviation industry

Operating performance

15
10
5
RATIO
0
-5
-10
2003 2004 2005 2006 2007 2008
YEARS

Interpretation: From the above table.2, it is observed that the operating performance
of aviation industry showing many fluctuations during the study period (2003-
2008).The EBIT of the aviation industry show negative values in the years 2007 &
2008 because of increase in interest paid.

3. Financial Performance

Net Profit
Financial Performance = --------------------*100

Net Worth
(Rs in Crores)

Year PAT Net worth PAT/Net worth

2003 -379.22 -82.35 461.57
2004 356.97 126.97 281.1
2005 532.73 1826.98 29.15
2006 -99.18 2851.27 -3.47
2007 -1291.98 1945.57 -66.4
2008 -2120.91 3441.37 -61.6

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APGMS, rajampet.
 Aviation industry

Financial performance

500
400
300
RATIO 200
100
0
-100
2003 2004 2005 2006 2007 2008
YEARS

Interpretation: From the above table ,it is observed that the financial performance of
aviation industry have many fluctuations during the study period(2003-2008).In the
year 2006-2008 the net profit of the company was decreased with that the financial
performance of the industry has decreased.

4. Trend Analysis

 Estimation of Sales
Y = a+bx

⇒ ∑y = Na +b ∑x − (1)
⇒∑( x y ) = a ∑x +b ∑x 2
− ( 2)

(Rs in Crores)

Year(x) Sales(y)

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APGMS, rajampet.
 Aviation industry

2003 13281.06
2004 15303.39
2005 18632.05
2006 24061.19
2007 29096.25
2008 24320.28
2009* 30982.76
2010* 33897.15
2011* 36811.543
*Indicates estimated values

TREND ANALYSIS

40000
S 35000
E 30000
25000
L
A
S 20000
15000
10000
5000
0
1 2 3 4 5 6 7 8 9

YEARS

Interpretation: The forecasted sales for the year 2009 is Rs.30982.76

2010 is Rs.33897.15, and 2011 is Rs.36811.54.
5. Trend Analysis
 Estimation of Net profit
Y = a+bx
⇒ ∑y = Na +b ∑x − (1)
⇒∑( x y ) = a ∑x +b ∑x 2 − ( 2)

(Rs in Crores)

Year(x) Net profit

2003 -379.22
2004 356.97
2005 532.73
2006 -99.18
2007 -2191.98
2008 -2120.91

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 Aviation industry

2009* -8336.81
2010* -5498.78
2011* -2659.87
* Indicates estimated values

TREND ANALYSIS
2000
T
FI 0
O 1 2 3 4 5 6 7 8 9
R -2000
P
T -4000
E
N -6000

-8000

-10000
YEARS

Interpretation:The forcasted net profit for the year 2009 is Rs. -8336.81
2010 is Rs.-5498.78, and 2011 is RS. -2659.87.

6. Trend Analysis
 Estimation of Capital employed
Y = a+bx
⇒ ∑y = Na +b ∑x − (1)
⇒∑( x y ) = a ∑x +b ∑x 2 − ( 2)

(Rs in Crores)

Year(x) Capital employed

2003 6340.96
2004 5144.27
2005 8226.57
2006 15534.60
2007 22072.79
2008 31679.07
2009* 33311.47
2010* 38591.01

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 Aviation industry

2011* 43870.55
*Indicates estimated values

TREND ANALYSIS

50000

40000

YED 30000
EMPLO
L 20000
CAPITA
10000
0
1 2 3 4 5 6 7 8 9

YEARS

Interpretration:The forecasted Capital employed for the year 2009 is Rs

33311.07,2010 is Rs 38591.01 and 2011 is Rs 43870.55.

7. Trend Analysis
 Estimation of Total cost
Y = a+bx
⇒ ∑y = Na +b ∑x − (1)
⇒∑( x y ) = a ∑x +b ∑x 2
− ( 2)

(Rs in Crores)

Year(x) Total cost

2003 14124.7
2004 15357.67
2005 18523.64
2006 25270.25
2007 33686.08
2008 28851.15
2009* 36172
2010* 40039.54
2011* 43907.08

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 Aviation industry

* Indicates estimated values

TREND ANALYSIS

50000

40000

30000
TOTAL COST

20000

10000
0
1 2 3 4 5 6 7 8 9

YEARS

Interpretation: The forecasted total cost for the year 2009 is Rs.36172, 2010 is
Rs.40039.54 and 2011 is Rs.43907.08.
8. Growth rate of sales

Pn = P0 (1+r)n

(Rs in Crores)

Year Sales Growth rate (in%)

2003 13281.06 -

2004 15303.39 0.152

2005 18632.05 0.217

2006 24061.19 0.291

2007 29096.25 0.209

2008 24320.28 0.164

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 Aviation industry

Growth rate of sales

0.3
0.2
0.1
Growth rate
0
-0.1
-0.2
2003 2004 2005 2006 2007 2008
YEARS

Interpretation: From the above table it is observed Growth rate of sales aviation
industry was increased from the year 2003-2007, because of increase of sales year
after year. But in the period 2008 the growth rate is in negative because of decreasing
of sales. When compared with before year 2008 sales.

9. Co-efficient of correlation between total income& total

expenditure

∑(x- x) (y-y)
r = -------------------------
√ ∑(x- x) 2 √∑ (y-y) 2

Years Total income Total Expenditure

2003 13745.456 14124.7

2004 15714.64 15357.67

2005 19056.37 18523.64

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 Aviation industry

2006 25171.07 25270.25

2007 31494.1 33686.08

2008 26730.24 28851.15

CO-efficient Of Correlation=0.995

• It is evident from the above table there is a strong relationship between the
total income & total expenditure. Because of 1% change in total expenses
that must be lead to 0.995% change in total income. It showing positive
relationship between total income & total expenditure.

10. Coefficient of correlation between Total sales and PAT

∑(x- x) (y-y)
r = -------------------------
√ ∑(x- x) 2 √∑ (y-y) 2

Years Total sales profit

2003 13281.06 -379.22

2004 15303.39 356.97

2005 18632.05 532.73

2006 24061.25 -99.18

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 Aviation industry

2007 29096.25 -2191.98

2008 24320.28 -2120.91

CO-efficient Of Correlation=-0.030

 From the year 2003 to 2007 the sales of coefficient was increased in the
year 2008 sales was decreased. The net profit of the coefficient was
negative in the years 2003, 2006, 2007& 2008.The Co-efficient of
correlation between Total sales & PAT is -0.030 which shows a negative
relationbetweenthetwo.

11. Number of Companies

Year Number of Companies

2003 15

2004 18

2005 18

2006 21

2007 20

2008 17

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 Aviation industry

• The number of companies in the aviation Industry increased year by year

from 2003-2006. Because of growing tourism & rising income levels will
leads to increase in number of companies. From the year 2007-2008 there
is decrease in number of companies from 20-17 because of shortage of
trained pilots shortage of airports & high prices.

SWOT ANALYSIS

Strengths

1. Growing tourism: Due to growth in tourism, there has been an increase in number
of the international and domestic passengers. The estimated growth of domestic
passenger segment is at 50% per annum and growth for international passenger
segment is 25%.

2. Rising income levels: Due to the rise in income levels, the disposable income is
also higher which are expected to enhance the number of flyers.

Weaknesses

1.Under penetrated Market : The total passenger traffic was only 50 million as on
31st Dec 2005 amounting to only 0.05 trips per annum as compared to developed
nations like United States have 2.02 trips per annum.

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 Aviation industry

2. Untapped Air Cargo Market: Air cargo market has not yet been fully taped in the
Indian markets and is expected that in the coming year’s large number of players will
have dedicated fleets.

3. Infrastructural constraints: The infrastructure development has not kept pace

with the growth in aviation services sector leading to a bottleneck. Huge investment
requirement for physical infrastructure for airports.

Opportunities

1.Expecting investments: investment of about US $30 billion will be made.

2. Expected Market Size: Average growth of aviation sector is about 25%-30% and
the expected market size is projected to grow upto100 million by 2010.

Threats

Huge investments are expected to take place in aviation sector in near future. It is
estimated that by 2012.

1. Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and

ground staff which is severely limiting growth prospects.

2. Shortage of Airports: There is a shortage of airport facilities, parking bays, air

traffic control facilities and takeoff and landing slots.

32
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 Aviation industry

3. High prices: Though enough number of low cost carriers are already existing in
the industry, majority of the population is still not able to fly to other destinations.

Findings

• The fixed cost as a proportion of value added has fluctuation during the study
period 2003-2008.In the year 2003 it is of 38% & 43% in the year 2008.The
value addition is increased because of more increase in sales & less increase in
the cost of fuel & water charges the fixed charges also increased year by year
due to the increase in compensation to employees.

• The operating performance of Aviation Industry is showing fluctuation during

the study period of 2003-2008.This is due to the fluctuation in EBIT. In the
year 2005 it was very high (11.5) due to increase in net assets & EBIT. In the
year 2008 it was very low due to the decrease in EBIT.

• The financial performance of Aviation Industry is showing fluctuation during

the study period of 2003-2008.This is due to the fluctuation PAT & Net worth.
In the year 2004 it was very high (281.1) due to increase in PAT & Net worth.
33
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 Aviation industry

In the year 2008 it was very low, due to the decrease in PAT of Aviation
Industry.

• The trend analysis of Aviation Industry was increased year by year during
fluctuation study period of 2003-2008 because of fluctuation increase of sales.

• That there is a strong relationship between total income & total expenses.
Because 1% change in total expenses that must be lead to 0.995% charge in
total income. It showing positive relationship between total income & total
expenses.

• That there is a week relationship between total sales & PAT, Because 1%
change in total sales that must be lead to -0.030% change in PAT .It showing
negative relationship between total sales & PAT.

• The growth rate in total income of Aviation Industry was increased year by
year during fluctuation study period of 2003-2007.In the year 2008 the growth
rate is in negative because of decreasing of sales when compared with before
year.

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 Aviation industry

Conclusion

The growth rate of sales & estimated values of sales are increasing when compared to
the present values of sales & from the cost structure also it is observed that the cost of
the industry is minimizing from year to year during study period.

Hence it can be concluded that the domestic demand for Aviation Industry is
increasing in India.

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 Aviation industry

36
APGMS, rajampet.