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CAPA-SITA
White Paper on
Information Technology
in Indian Aviation
Prepared in collaboration
with our Knowledge Partner
www.capa ind ia .com
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Disclaimer
CentreforAsiaPacificAviationIndiaPvt.Ltd.(CAPAIndia)andSITAhavemadeeveryeffortto
ensuretheaccuracyoftheinformationcontainedinthispublication.
CAPAIndia
and
SITA
do
not
accept
any
legal
responsibility
for
consequences
that
may
arise
from
errors,omissionsoranyopinionsgiven.Thispublicationisnotasubstituteforspecificprofessional
adviceoncommercialorothermatters.
ThecontentsandcommentsinChapter1toChapter3ofthisreportaresolelyCAPAIndiasview.
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CONTENTS
FOREWORD
FROM
SITA
CEO...................................................................................................................
3
FOREWORDFROMCAPACHAIRMAN.....................................................................................................4
CHAPTER1:BackgroundonIndianAviation...........................................................................................6
CHAPTER2:ChallengesFacedbyIndianAviation.................................................................................15
CHAPTER3:TheFutureofIndianAviation...........................................................................................22
CHAPTER4:TheRoleofITinAviationAGlobalPerspective.............................................................26
CHAPTER5:ITInfrastructureinIndia MarketSurvey.........................................................................32
CHAPTER6: IT ACriticalBusinessComponentfortheFuture...........................................................49
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FOREWORD
FRANCESCOVIOLANTE,CEO,SITA
SITAhas
been
actively
involved
with
the
Air
Transport
community
in
India
forover50yearsasatrustedpartnertoairlines,airportsandthemany
relatedairtransportorganisations. Ithassupportedthedevelopmentof
AirIndiaalmostfromitsinception,andtodayisinvolvedinallaspectsof
airtransportinthecountryfromthecockpittothebaggagecarousel,fromairlineoperationsto
airportmanagementandmuchelseinbetween.
Ontheairportfront,SITAhaspioneeredairportITsystemautomationinIndiaincludingthe
introductionofcheckinsystemsformultiairlineusesuchasCommonUserTerminalEquipment
(CUTE)andmorerecentlyCommonUseSelfService(CUSS)Kiosks.IthasalsointroducedaBaggage
ReconciliationSystem(BRS)inBangaloreandthecountrysfirstmodernAirportManagement
System(AMS)
at
Mumbai
International
Airport.
ItalsosupportsthecountrysbordermanagementbyprovidingAdvancePassengerInformation
System(APIS)servicestomorethan50internationalanddomesticairlinesoperatinginIndiato
ensuretheircompliancetotheIndiangovernmentAPISrequirement.
Aftertwodecadesofalternatingstagnationandunprecedentedgrowth,civilaviationinIndiais
enteringanewphaseofdevelopmentandSITAispleasedtobepartofthisexcitingnewera.
Passengernumbersareagainstartingtorisefollowing12monthsofdecline,newairlines,including
lowcostcarriers,haveintroducednewlevelsofcompetition,andairports,whichexpecttobenefit
fromUS$20billionofinvestmentoverthenext10years.
TheIndian
aviation
market
is
poised
for
growth,
and
with
less
than
2%
of
Indians
currently
travelling
byairinanygivenyear,theopportunityistremendous. However,rapidgrowthposesnew
challenges.
Today,IThasbecomeafacilitatorfortransformationinanincreasinglydigitalpassenger
environment.TheIndianaviationindustryisalreadyusingtechnologytoautomateandspeedup
processes,toreducecosts,toimproveoperationalefficienciesandtocreatedistinctcompetitive
advantages.MorecanbedoneandwehaveseenfromlastyearsglobalSITAPassengerSelfService
surveythatpassengersatMumbaiInternationalAirportareeagertoembracenewtechnologyand
theconveniencewhichitoffers.
Thisimportantreportshedsfurtherlightonhowtheindustrycanprogressandtransformitself
throughthe
power
of
IT
with
its
focus
on
IT
investment
and
management
issues,
key
technology
projectsandtrends.
AstheworldsleadingspecialistinairtransportcommunicationsandITsolutions,welookforwardto
continuingtoworkwiththeIndianaviationindustryduringthisexcitingperiodoftransformation
andchangeandweareproudtobeassociatedwithCAPAindeliveringthisreporttotheindustry.
FrancescoViolante
CEO,SITA
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FOREWORD
PETERHARBISON,CHAIRMAN,CAPA
CAPAIndiaiscommittedtobringingglobalknowledgetoIndianaviation,
byprovidinghighlevelresearchandmarketanalysisalongsideourreputed
advisoryservices.Thisreportoninformationtechnology,isthelatestina
seriesofregularfeatureswhichwehavereleasedonkeyindustryissues.
Technologyhasalwaysbeenanintegralpartofaviation.Thismostglobalofindustrieswhichbrings
togethersomanystakeholdersaroundtheworld,isdependentuponinformation,dataand
communication.Butinrecentyears,technology'srolehasbecomefarmorepervasive.Fromplaying
asupportandenablingfunction,technologynowhasthepotentialtotransformtheoperationsof
airlines,airports,
service
providers
and
border
control,
delivering
not
only
cost
efficiencies,
but
enhancedpassengerexperiences,newcommercialopportunitiesandimprovedsecurity.
AsIndianaviationentersitsnextgrowthphase,wefeltthatitwasimportanttounderstandhowthe
industryviewstechnology.Wethereforeconductedanextensiveseriesofinterviewswithsenior
managementandtechnologyexecutivesacrossairlines,airportsandgovernment,toenquireabout
currentdeployment,resultstodate,challengestogreaterimplementationandtheoverallstrategic
roleoftechnology.Thisreportpresentsthefindingsofthisstudy.
CAPAisdelightedtohaveestablishedaknowledgepartnershipwithSITAforthisreport.SITAisthe
world'sleading
air
transport
communications
and
information
technology
specialist.
The
organisationhasbeensynonymouswithaviationtechnologysolutionsforthelast60yearsandisthe
idealpartnertosupportastudyofthisnature.
Theadvanceoftechnologyanditspotentialapplicationcontinuestoaccelerate.Howeverpreparing
andplanningforfuturedevelopmentsinsuchadynamicenvironmentbringsitsownchallengesfor
seniormanagement.Thefirststepistobeawareoftheissuesandtounderstandtheirimplications.
Wehopethatthisreportcontributestothisprocess.
PeterHarbison
Chairman
CentreforAsiaPacificAviation
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CAPASITAWhitePaperonTechnologyinIndianAviation
CHAPTER1:BackgroundonIndianAviation
CivilaviationinIndia isnowenteringanewphaseofdevelopmentaftertwodecadesduringwhich
thesectorhaswitnessedbothstagnationandunprecedentedgrowth.Theindustryhasexperienced
some
of
the
natural
growing
pains
of
a
sunrise
sector,
but
numerous
lessons
have
been
learned
and
arebeingactedupon.Despitetherecentgrowth, lessthan2%ofIndianstravelbyair inanygiven
year, highlighting that we have barely arrived at the threshold of the growth potential of Indian
aviation.
RecentHistoryofDomesticAviation
Pre1993: Aviation was traditionally viewed as an elite activity, and one in which socialist
governments could not be seen to allocate resources. The two government airlines Air India
(longhaulinternational)andIndianAirlines(domesticandshorthaulinternational)weretheonly
Indiancarriers.Bothcarriersoperatedwithrelativelyoldaircraftandinefficientworkpractices,
fromairportswhichwere functionalatbest.Therewasnofocusondevelopingtrafficandthe
marketgrewatuninspiringsingledigitrates.
19931995:Thefirststepsindomesticaviationderegulationweretakenallowingprivateairline
entry, first as air taxis and then as scheduled operators. However, the government was still
focused on protecting the stateowned carriers, and a slew of undercapitalised and
underpreparedstartupsenteredand thenmostlyexitedthemarket.Only JetAirwaysandAir
Saharasurvivedbeyondtheinitialcoupleofyears.
19952003:Afterthefailureofthederegulationexperiment,the industryfell intodormancy.
NonewcarriersenteredthemarketandAirIndiaandIndianAirlinescontinuedtobestarvedof
capital.Despitethefactthatthebroadereconomyperformedwellduringthisperiod,aviation
continued to show limited growth. Aviation was largely untouched by the economic reform
agendaofthegovernmentsinpowerastherewaslittlestrategicdirectionforthesector.
20032006: This was a period of unprecedented change. With the arrival of Ministers of Civil
Aviation on both sides of parliament that recognised the importance of aviation for the
developmentofbusiness,tradeandtourism,andwhohadavisionfordeliveringavibrantand
modern sector, the industry saw dramatic reforms across the aviation value chain.
Developmentsincluded:
Domesticopenskiespolicywhichsawmarketentrybyseveralcarriers;
The arrival of the low cost airline model in India with the launch of Air Deccan, and
subsequentlySpiceJet,IndiGoandGoAir;
Announcement of the airport modernisation plan, including the privatisation of Delhi
and Mumbai, upgradation of 35 nonmetros and encouragement of Greenfield
development;
Placementofordersfor111newaircraftforAirIndiaandIndianAirlines;
Liberalisationoftheinternationalsectorwithsomeprivatecarrierspermittedtooperate
overseas;greateraccessforforeigncarriersandopeningupof internationalroutesfor
nonmetro
airports;
Increasedforeigndirectinvestmentcapsincertainsectorsoftheindustry.
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Trafficstartedtoaccelerateatdoubledigitrates,bothdomesticand international,levelsnever
beforeseeninIndia,highlightingalatentdemandfortravel.
IndiaAnnualDomestic&InternationalPassengerNumbers96/9708/09
200607: During this period, traffic continued to accelerate further, to levels approaching
40%in2007.Howeveritwasatthisstagethattherealitieshithomealthoughtrafficwas
buoyant,yieldswerebeingslashedthroughovercapacityandfragmentationoftheindustry,
andcostswereincreasingbecauseofthepoorstateofairportinfrastructureandashortage
ofhumanresources.
Thebullish fleetordersplacedby Indiancarriers sawcapacitybeing introducedat
the rate of 6 to 6.5 aircraft a month, whereas the actual growth in demand was
closerto3aircraftequivalents;
Aside from the mismatch between supply and demand, the rate of growth was
simply too great for the industry to handle from a management and capital
perspective.
In a fragmented market, with multiple startups chasing market share, lossleader
pricingwaswidespreadandAirDeccaninparticularwasresponsibleforsettingfares
wellbelowcostasitfoughttoretainitsfirstmovermarketshare;
The rapid increase in capacity at a time when the airport modernisation program
was yet to deliver upgraded infrastructure, meant that airports and airways were
highlycongested,increasingairlineoperatingcosts;
Withtheinadequatesurfaceaccessandairport(andairways)infrastructure,airlines
were unable to secure a significant competitive edge over other means of travel,
therebyexcludinghugepartsofthestilluntappedleisuremarket;
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In a period of global boom, demand for skilled personnel such as pilots and
engineers also outstripped supply leading to a sharp escalation in wages, and in
somecasesgroundingofaircraftdueashortageofstaff;
Balancesheetswerestretchedasaresultoftheaggressivefleetinductionprograms,
combinedwiththemountingoperationallosses.
200809:Thefragilityofthesector whichhadoverextendeditselfbygrowingatratesthat
itcouldnotmanage,inanenvironmentthatwasnotconducivetoefficientoperationswas
exposedduringthefuelpricespikeofmid2008whenoilreachedclosetoUS$150/barrel.In
India,thissituationwasexacerbatedbythetaxationstructurewhich increasesthecostsof
fuel by up to 60% vis a vis international benchmarks. As costs spiralled upwards, carriers
wereforcedtoraisefares,andwithasimultaneousslowdownintheIndianeconomy,there
wasresultingdeclineintrafficofaround1012%yearonyear.
2009
10:
After
the
dramatic
changes
of
the
last
five
years,
we
are
starting
to
see
the
emergenceofamorefavourableenvironment.IndiasGDPgrowthslowedfromover9%in
2007/08to6.1%in2008/09.However,giventhecontractionglobally,thiswasarelativelya
goodresult.Theeconomyappearstoberecoveringearlierthanexpected,withGDPgrowth
of7.9%inthelastquarter,aheadofexpectations.
Domestictrafficisalsoshowingareturntogrowth.After12consecutivemonthsofyearon
year declines in domestic traffic, July 2009 saw a return to positive territory, which has
continued since then. This is partly due to the impact of a lower base resulting from last
years decline, however discussions with the industry indicate a discernible increase in
demandas
business
and
consumer
confidence
increases.
IndiaMonthlyDomesticPassengerNumbersLast12Months
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AIRLINES
The airline landscape in India has been transformed in recent years. In 2003 there werejust 4
carriersAirIndia,IndianAirlines,JetAirwaysandAirSahara alloperatingfullservicemodels.And
private
carriers
in
those
days
were
limited
to
operating
domestic
routes
only.
Today,
there
are
effectively7airlinesoperating11differentbrands.
AirIndia+AirIndiaExpress
JetAirways+JetKonnect+JetLite
KingfisherAirlines+KingfisherRed
IndiGo
SpiceJet
GoAir
Paramount
Onthe
domestic
front,
the
3large
airline
groups
Air
India,
Jet
Airways
(+
JetLite)
and
Kingfisher
Airlinescommanda65%marketshare.
DomesticMarketShareDecember2009
Inthe4yearstoMarch2010,itisestimatedthatIndiancarrierswillhaveaccumulatedoperational
lossesofinexcessofINR260billion,ofwhichthethreelargeairlinegroups(AirIndia,JetAirwaysand
KingfisherAirlines)accountforalmostINR230billion.CAPAestimatesthatthelossesforthecurrent
financial
year
will
be
in
the
order
of
INR65
70
billion.
ThemostsignificantrecentstrategicdevelopmentintheIndiandomesticmarketisthatitisrapidly
turning low cost. An operating model which did not exist in the Indian market until 6 years ago,
could account for almost 70% of domestic capacity by the end of this fiscal. This is due to the
decisiontakenbycarrierssuchasJetAirwaysandKingfisherAirlinestoreconfigurethemajorityof
theirdomesticaircraft tooperatealleconomy,nofrillsservice.Air India isalsoplanning to follow
suit. There has been a clear recognition that there is a limited market for full service travel,
particularlybusinessclass,beyondthekeymetroroutes.Fullservicemay infutureberestrictedto
justahandfulofservices.It isdrivenbyadecisivechange inthedemographicprofileoftheIndian
domestictraveller.
Whereas
5years
ago,
approximately
80%
of
air
travel
in
India
was
for
business,
todaythatfigureislessthanhalf.
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AIRPORTS
Indias airports have suffered from decades of neglect and underinvestment. When the Naresh
Chandra Committee presented its report to the Ministry of Civil Aviation in November 2003, it
remarked
frankly
that
the
countrys
passenger
airports
are
for
the
most
part
an
embarrassment.
The inadequacy of the state of airport infrastructure was exposed as air traffic expanded
dramatically from 2004 onwards, pushing several metro airports to well beyond their design
capacity. Congestion in the terminals, on the runways and in the air, resulted in a deteriorating
passenger experience and an increasingly inefficient (and costly) operating environment for the
airlines.Recognisingthepotentialforairportinfrastructureconstraintstostifletheaviationindustry,
in 2005 the Government of India announced a USD10 billion airport upgrade and modernisation
programmeover5yearsto2010.AfurtherUSD20billionofinvestmentisexpectedinthefollowing
10years.
Acknowledging that it possesses neither the expertise nor the capital to carry out such an
undertakingbyitself,thegovernmenthasinvitedprivatesectorparticipationintheprocess,withJV
operators now in place at Delhi, Mumbai, Bangalore, Hyderabad and Cochin. All other airports
remainunderthecontrolofthestateownedAirportsAuthorityofIndia(AAI).
Airports Authority of India: The Airports Authority of India, which until the late 1990s held
responsibilityforallairports inthecountry,has inrecentyearsexperiencedasignificantchange in
its role. Five of the largest airports in the country Delhi, Mumbai, Bangalore, Hyderabad and
Cochinaccountingformorethan60%oftraffichavebeentransferredtoaPPPmodelandareled
byprivateconsortia.ThishashadanegativeimpactontheAAIsrevenues,furthercompoundingthe
impactoftherecentdeclineintraffic.Ofthe89operationalairportswhichremainundertheAAIs
control,only7areprofitableandarehavingtosupporttheotherlossmakingfacilities.
This comes at a time when the government has committed to a very highly capital intensive
investmentprogramtoupgradeandmodernisethenonmetroairportsacrossthecountry. Infact,
INR124 billion has been allocated for spending in the 11th 5 Year Plan. There is consequently an
emerging shortfall between revenue and expenditure that is potentially a serious issue for the
airportoperator.
TheAAIhadplannedtoissuetaxfreebondsasacapitalraisingmeasure,howeverthisapproachhas
been rejected by the Ministry of Finance. The authority is therefore expected to turn to debt
instrumentsandwillapproachbankstoraiseapproximatelyINR6billionoverthenextfewmonths.
As the AAI is a AAA rated entity with cash reserves of around INR50 billion this should be
achievable.
However,beyond the immediate fundinggap, theAAIneeds to lookmorecloselyatdevelopinga
strategy to reinvent itself in light of the change environment. At acorporate level, the authority
needstoberestructuredtodevelopamorecommercialapproach,competingmoreeffectivelyfor
trafficvis
avis
the
private
airports.
Not
only
will
this
be
beneficial
for
the
AAIs
financial
position,
but
itisalsoconsistentwiththepolicyobjectiveofdistributingtraffictosmallercitiesandreducingthe
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concentration on the key metros. The AAI should also focus on developing other commercial
opportunities. For example there is huge upside in the potential for growing nonaeronautical
revenue,suchasdutyfree,domesticretailandfoodandbeverage,forwhichtechnologybasedtools
areavailable. Furthermore,atthelevelofeachindividualairportthereneedstobeabusinessplan
preparedandfollowed.
Inaneffortto increasethecommercialfocusoftheAAI,corporatisationoftheauthorityhasbeen
discussed,howeverprogresshasbeenslow.More likely intheshortterm isahivingoffoftheair
trafficmanagementresponsibilitiesintoacorporatisedunit,separatefromtheairportoperator.Asa
first step towards this development, the AAI has appointed a new Board Member for Air Traffic
Control.
NonMetro Airports: The government had identified 35 nonmetro airports for upgrade and
modernisationwith initialplans tocompleteall workby2009.However, due to the slowdown in
trafficoverthe lastyearand issuesrelatedtofundraising,completionhasbeendelayed.It isnow
expectedthat
work
at
89airports
will
be
completed
by
March
2010,
and
at
afurther
45airports
by
theendof2010.Thetargetistohavemodernisationofall35airportscompletedby2012.
Itwasalsoearlierintendedthatprivatesectorparticipationwouldbeinvitedinterminaloperations
and landside commercial development. However, it has subsequently been decided that terminal
and cargo operations will be retained by the Airports Authority of India and only landside
developmentwillbeopenedtoexternalparties.
NonMetroAirportsIdentifiedforUpgradeandModernisation
Agartala Goa PortBlair
Agatti Guwahati Pune
Agra Imphal Raipur
Ahmedabad Indore Rajkot
Amritsar Jaipur Ranchi
Aurangabad Jammu Trichy
Bhopal Khajuraho Trivandrum
Bhubaneshwar Lucknow Udaipur
Chandigarh Madurai Vadodara
Coimbatore
Mangalore
Varanasi
Dehradun Nagpur Vizag
Dimapur Patna
GreenfieldAirports:TheGreenfieldairportprojectsmost likely toprogress to the tenderstage in
thenearfutureareNaviMumbaiandMopainGoa,withRequestforProposaldocumentsexpected
tobe issued inthefirsthalfof2010.NaviMumbai,whichwillbethesecondairport inMumbai, is
criticaltoensurethatsufficientcapacityisavailabletoserveIndiascommercialandfinancialcapital.
Thecurrentairportinthecitywillreachcapacitywithinthenext57years,withnoopportunityfor
furtherexpansionthereafterduetophysicalconstraints.
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Navi Mumbai airport is expected to be operational by 201415, although the City and Industrial
CorporationwhichisresponsibleforthedevelopmentofNaviMumbai,ispushingforcompletiona
year earlier. The airport will have a capacity of 10 million passengers per annum at the time of
opening, increasing to65millionby2030.Presently,57%of the required land for theairporthas
been acquired, with the balance in the process of being transferred. The process will involve the
resettlement of 3,000 families. A key obstacle to the development of the airport has been
environmentalconsiderationsduetothefactthattheproposedsitefallswithinacoastalprotection
zone.AnEnvironmentalImpactAssessmentistobecarriedoutbytheIndianInstituteofTechnology
Bombay.
Other Airports: In addition to the 35 nonmetro airports already identified, the AAI plans to
modernise a further 13 airports and operationalise another 32 facilities which are currently not
being utilised. Meanwhile, the upgrade of Kolkata and Chennai airport by the AAI continues,
althoughcostshaveexceededinitialbudgets.CAPAexpectsthatagreenfieldairportprojectmaybe
announcedfor
Chennai
during
the
next
financial
year.
Private Airports: The private operators of Delhi and Mumbai Airports are currently focused on
achievingtheirdeliverabletargetsforthePhase1oftheirupgradeprojects howevertheveryhigh
revenueshareswhichtheyhavecommittedtothegovernment(46%inthecaseofDelhiand37%in
Mumbai) is hurting their financial position, given the traffic slowdown at a time of high capital
expenditure.Thestructuralshift in the industrytowards lowcostairlineswillalsohavesignificant
implicationsforthebusinessmodelsandinfrastructurerequirementsfortheairportoperators.
ANCILLARYAVIATIONSERVICES
AirTrafficControl:TheAirportsAuthorityofIndiamanagesoneofthelargestairspacesintheworld,
includingalargeoceaniccomponent,foratotalof6millionsquarekilometres.Thedramaticgrowth
intrafficoverthelast5yearsledtoseriousaircongestion.TheAAIhasbeeninvestinginincreased
automationandimprovedgroundinfrastructure,althoughseveralhundredmilliondollarsoffurther
equipment is required to upgrade Indias CNS/ATC systems, a process which is linked to the
induction of the satellitebased system GAGAN, developed in collaboration with the Indian Space
ResearchOrganisation.
TheAAIhasmade importantstridestowardsaddressingthemanagementofrecentandprojected
growth. Its Future Indian Air Navigation System Masterplan consists of the following four key
elements:
Investinginmodernisingairportinfrastructure;
UpgradingCommunications,Navigation,Surveillance(CNS),AirTrafficManagement(ATM)
andmeteorologicalequipment;
Enhancingmanpowerandtraininginfrastructure.
HarmonisationwithotherglobalinitiativesinlinewiththeICAOGlobalandRegionalAir
Navigationplans.
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GeneralAviation: This has been a neglected sector of the aviation industry but one which could
have significant positive economic benefits. The general aviation industry in India is at a nascent
stage,howeverstrongGDPgrowthandrisingwealtharestimulatingdemand.Furthermore,thelong
distancesandpoorstateofsurface infrastructure in Indiamakethisan idealmarket forairtravel,
particularlytosmallerandmoreremotedestinationswherescheduledservicesdonotoperate.The
expansionofalleconomyservicesandgradualremovalofbusinessclasscouldfurtherdrivedemand
forprivateaviation fromtheseniorcorporatesegment.Nonscheduledpassengertraffichasmore
thandoubledinjustthelast4years.
Demand is largelyfromthecorporatesector,howeverthere is increasingtakeuprelatedto luxury
travel,anddemandforhelicoptersexistsforelections,touristandpilgrimagedestinations,offshore
oil and gas platforms, cityairport transfers, aerial surveying in the resources sector, washing of
powerlinesetc.
Strong
growth
has
been
witnessed
over
the
last
few
years,
in
fact
India
has
the
fourth
highest
numberoffirmbusinessjetorders(137)intheworld,morethanthesizeofthecurrentfleet(113).
Inthenext5years,Indiawillhaveoneofthetenlargestbusinessjetfleetsglobally.Industrysources
suggestthatthehelicopterfleetcouldtriplewithin5yearsfromjustover260rotorcrafttoday.Akey
driver will be the availability of helipads and landing facilities. The new greenfield airport policy
announced inApril2008, includedastreamlinedprocess forapprovalofnewprivateairportsand
helipads.
TrainingandEducation:Thecriticalroleofskilledhumanresourcesinsupportingthegrowthofthe
industry is often overlooked. Our research reveals great concern amongst both operators and
suppliersthat
skills
shortages
could
constrain
the
sector.
India
today
faces
not
only
insufficient
trainingcapacity,butthequalityofthatwhich iscurrentlyavailable is inmanycasesquestionable.
This not only has implications for the efficiency of operations and the quality of the customer
experience,butmoreimportantlyforsafety.
Thedemandfortrainingisderivednotonlyfromthegrowthoftheindustry,butalsofromtheneed
toenhancethecapabilitiesofexistingstaff.RegulatorychangeandgreaterharmonisationwithFAA
andEASAstandardswillalsogenerateaneedtoupgradeskills.
During the peak of the traffic boom, pilot shortages resulted in aircraft being grounded, whilst
salariesin
all
areas
increased
sharply.
The
current
slowdown
has
relieved
pressure
in
some
areas
but
thisisatemporaryphenomenon.Withtrafficreturning,itwillnotbelongbeforetheindustryagain
facesacrunchwithrespecttopilots,engineers,cabincrew,airtrafficcontrollersandmanagement.
Thereisalsoacriticalneedforqualifiedpeoplewithintheregulatorybodiesitwastheshortageof
aircraftinspectorswithintheDGCA,amongstotherissues,thatnearlycostIndiaitsCategory1status
withtheFAA.
GlobaltrainingprovidershaverecognisedtheneedintheIndianmarket,howevermanyhavefound
the regulatory environment to be unwelcoming or the difficulties of doing business in India too
challenging.
However,
we
detect
an
increasing
recognition
amongst
senior
government
officials
of
theimportanceoftrainingforthelongtermhealthoftheindustryandacommitmenttosupporting
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initiativesinthisarea.Developingincountrycapabilitiesandreducingrelianceonoffshoretraining
will not only be more cost effective, but can also contribute to the development of a globally
competitive ancillary support sector and a vibrant aerospace industry with potentially long term
economicbenefitstothenation.
MRO:IntheoryIndiahasthepotentialtobeahighlycompetitivegloballocationforMROservices.
Withoneoftheworlds largestpoolsofEnglishspeakingengineers,atcomparatively lowercostto
Western benchmarks, there is a clear opportunity here. The demographic dividend which India
enjoysofaveryyoungpopulationandwhichwillcontinuetofeedtheworkingagecohortforseveral
decadestocome,meansthatwagesare likelytostaycompetitive formuch longer intothefuture
thansayinthecaseofChina.
Numerous projects have been proposed by global companies if all had come to fruition there
wouldhavebeenovercapacity inthemarket,howeverthereality infact isthatvery littlehasseen
thelight
of
day.
The
sector
has
been
thwarted
in
part
by
an
unwelcoming
taxation
structure,
an
absence of high quality training institutions to develop the skills base and the global economic
slowdown.Projectswhichhavebeenannounced in the past (although severalof thesehavenow
beencancelledorareonhold)include:
Air India is planning four MROs 1) airframe JV with Boeing at Nagpur 2) airframe JV with
EADSatDelhi3)GEengineoverhaulatMumbai4)componentsMRO,possiblywithBoeing.
JetAirways/BangaloreInternationalAirport;
KingfisherAirlines/BangaloreInternationalAirport;
Lufthansa Technik / GMR (Lufthansa Technik has withdrawn but replaced by Malaysia
AirlinesEngineering);
HALTIMCOnarrowbodyairframeMRO;
ThalesavionicsmaintenancecentreatGurgaon;
TanejaAerospaceAviationLimitedatPune;
AirWorksfornarrowbodiesandturbopropsatHosur;
SabenaTechnics/TanejaAerospaceforcomponentsatHosur;
Airbus/HALforairframeatNashik;
Pratt&Whitney/HALforenginesattheoldBangaloreAirport;
IndameratMumbai;
CochinAirport;
HAMCO,Hyderabad(appearstohavebeenshelved);
DukeAviation,Nagpur.
Amongsttheabove, themost likelyones toproceedare theAir IndiaMROs (although there isno
haste observed with the construction of the Nagpur facility); the GMRMalaysia Airlines JV in
Hyderabad,whichmayenter intoanagreementtomaintainJetsB737 fleet,whichwouldprovide
thebase loaddemand; andtheHALTIMCOnarrowbodyaircraftMRO.Mostoftheothersappear
unlikelytogoaheadatthisstage.Majoropportunitiesexist intheMROsectorforgeneralaviation
which is currently significantly underserved, not only for maintenance, but also for interior
refurbishmentand
reconfigurations.
Currently,
most
aircraft
have
to
be
sent
overseas
for
such
services.
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CHAPTER2:ChallengesFacedbyIndianAviation
AIRLINES
FuelPrices
AviationturbinefuelisthelargestindividualinputcostforIndiancarriersandyetitisalsooneofthe
most volatile. In the last 18 months, the international oil price has ranged from US$40/barrel to
US$150/barrel creating significant headaches for airline management. Increases in fuel costs not
onlysqueezemargins,butbeyondapointtheynecessitatehigherfareswhichhaveacorresponding
negative impactondemand.Fuelhedgingisnowpermittedbyairlines inIndiatomitigatesomeof
this risk, although this strategy is also not without its pitfalls. A number of major global carriers
found themselves incurring major losses as they unwound forward fuel contracts that had been
struckatlevelsmuchhigherthantheeventualspotprice.
Fuel
remains
the
great
unknown
for
the
industry.
Despite
the
more
optimistic
outlook
that
currently
prevails, ifthereturnofglobaleconomicgrowthresults inhigheroilpricestheenvironmentcould
turnnegativefortheindustryonceagain.
Fuel price volatility is an issue for all global carriers. However, airlines in India face an additional
challenge,namelythefiscalregimewithrespecttoaviationturbinefuel,whichincreasesthecostby
upto60%aboveinternationalbenchmarks.
Thisisasaresultofthehightaxationstructure,comprising10%customsduty,8%excisedutyand
salestax.Thesalestaxissetonastatebystatebasisandcanrangefrom4%to30%.Examplesof
currentstatesalestaxratesonaviationturbinefuelarepresentedinthefollowingtable.
State SalesTaxonAviationTurbineFuel
AndhraPradesh 16%(recentlyincreasedfrom4%)
Kerala 4%(reducedfrom39%)
Maharashtra(exceptMumbai,Pune) 4%
DelhiNCR 20%
Maharashtra(MumbaiandPuneonly) 25%
WestBengal 25%
Karnataka 28%
TamilNadu 29%
Gujarat 30%
Airlineshavebeenlobbyingforaviationfueltobeclassifiedasadeclaredgood,whichwouldmeana
flat sales tax of 4%. This step alone could save the airlines INR25003000 crores per annum.
However,the
central
government
has
not
yet
been
able
to
secure
national
consensus
on
this
issue.
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FiscalRegime
Although the sales taxationon aviation turbine fuel is themost pressing issue for Indiancarriers,
thereareanumberofotherfiscalmattersthatalsogenerateasignificantimpostfortheindustry:
Withholdingtaxonaircraftleasescanincreaseratesbyupto10%;
ServicetaxonFirstandBusinessClassfaresimpactsthesaleofpremiumseats.
AirportInfrastructure
Congestionatairports,bothonthegroundandintheair,hasresultedinsignificantlyincreasedcosts
forIndiancarriers.Theinabilitytoschedulefasterturnarounds,theneedtocarryincreasedfueland
spend more time in holding patterns has resulted in inefficient operations. The airport
modernisation program that is underway is certainly delivering improvements, however in the
interim further inconvenience is incurred due to runway closures and terminal developments.
Furthermore,the
huge
capital
expenditure
programs
are
being
funded
through
increased
charges,
eitherleviedontheairlinesorthepassengersthemselves.Inthelattercase,thefactthattheticket
priceisincreasedthroughAirportDevelopmentorUserDevelopmentFeesmeansthatdemandmay
beaffected.However,overthenextcoupleofyears,astheupgradesarecompleted,thequalityof
infrastructureshouldlargelyceasetobeanissue.
HumanResources
The shortage of skilled resources is major challenge for the airline industry. India has very poor
infrastructure
for
aviation
education
and
training,
with
limited
high
quality
courses
either
for
management degrees programs or vocational activities such as pilot training, cabin crew,
engineeringetc.Studentsthatgraduatefromtheprogramsthatexistareoften illequippedforthe
roles forwhichtheyarehired. It isestimated thatthereareup to4,000CommercialPilotLicense
holdersthatareunemployableduetothepoorqualityoftrainingimparted,orbecausethetraining
academydidnotscreenapplicantspriortoenrollment.Forrecurrentorupgradetraining,airlinesare
facedwiththechoiceofeitherconductingcoursesinhouse,orsendingemployeesoverseas,neither
ofwhichareidealoptions.
In addition, Indian carriers are competing with airlines from the Gulf and Asia that have been
targetingthesamepoolofpersonnel,whilemanagementandmarketingexecutives,aswellascabin
crew have had alternative employment options in hospitality and service industries due to the
buoyant Indian economy. As a result, during the last boom, staff turnover and salaries climbed
sharply,andasimilarsituationislikelytoariseagainastheindustryresumesitsrapidgrowthpath.
GENERALAVIATION
General aviation has been a neglected sector of the industry, frequently in the shadow of the
commercialsector.WiththeIndianeconomysetforstrongandsustainedlongtermgrowth,wecan
expect to see thegeneralaviation sector in Indiaundergoinga dramatic transformation in avery
shortperiod
of
time,
however
some
key
challenges
remain:
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Absence of dedicated general aviation terminals, heliports and fixed based operations,
meansthatthequalityofthegeneralaviationproductisbelowwhatitcouldbe;
Restrictedtimingsatkeymetroairportsandlowerpriorityclearancerelativetocommercial
traffic (eg.noGAmovementspermittedatMumbaiAirportduringpeakhours), limits the
utilityofprivatetravel;
Limitednightlandingfacilitiesexistatsmallerairports;
Lack of hangar space and parking bays increases the need for ferry flights resulting in
increasedcosts;
Limited facilities for maintenance, refurbishment and reconfigurations, which results in
aircrafthavingtobesentoverseasatsignificantexpense;
Aircraft imported for private use are subject to an effective import tariff of 24.26%,
comprisingcustomsdutyof3%,countervailingdutyof16%andspecialadditionaldutyof
4%.
Obtainingpermissiontooperateatcivilenclavescanbea lengthyprocesswhich limitsthe
advantageof
private
transport
which
should
provide
greater
flexibility
and
spontaneity
in
travelscheduling;
Severeshortageofskilledpilotsandengineers,frequentlymoresothan inthecommercial
sectorduetothegreatervarietyofaircrafttypesinoperation.
Although there is increasing recognition of the role of the sector by the Ministry of Civil
Aviation, thedemandsof the scheduled sector mean that the general aviation industry is
likelytoreceivelessattentiontoitsspecificrequirements.
REGULATORYFRAMEWORK
AviationPolicy
Although therehasbeensignificant liberalisation in the last5years,airlinesstill faceanumberof
regulatorychallenges:
ForeignDirect Investment:Overseascarriersarestillprevented fromholdinganystake in
Indianairlines.Thispreventsthe industry fromgainingaccessto investorswithastrategic
interestandtheabilitytoimpartglobalexpertise.
RouteDispersalGuidelines:Domesticcarriersthatoperateontrunkroutesbetweenmetros
mustdeploytheequivalentof10%ofsuchcapacityondesignatedroutestoremoteareas.
Airlinesconsequently
find
themselves
operating
uneconomic
services
to
comply
with
this
regulation.Alternativemodelscouldbeconsideredwhichmaybetterachievetheobjectives
ofprovidingconnectivitytounderdevelopedregionsbutonacommerciallysoundbasis.
Bilaterals:Theliberalisationofbilateralsinrecentyears,whichprovidesincreasedaccessfor
foreigncarrierstoIndiancities,isgeneratingincreasedcompetitionforIndiancarriers.This
is particularly the case in nonmetro cities which are seeing increased services by foreign
airlines.Bytakingtrafficfromnonmetrostoanoffshorehubfromwherethepassengercan
connecttoaglobalnetwork,meansthatmetroIndianairportscanbebypassed.
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Thereisaneedtobetteralignpolicywithindustryrequirements.AtarecentCEOConclave
hostedbyCAPAakeyconcernwasthatpolicyisbasedonanoutdated1934AircraftActand
newmeasuresareintroducedwithlittleornoindustryconsultation.
There isaneed to restructure the frameworkso that there isan independentandexpert
regulatorthat
keeps
in
mind
industry
viability
in
its
thinking.
Financial incentivescouldalsobeconsidered forstimulatingairtaxisandgeneralaviation.
These are ultimately the building block of a comprehensive aviation system with greater
reach.
Restructuringof theMinistryandDGCA:Asaviationbecomesan increasingly importantsectorof
the Indianeconomy,considerationmustbegiventodevelopinganaviationpolicyandgovernance
framework that is aligned with the needs of the industry. The focus should be on creating an
environmentthatisequitable,efficient,transparentandinthenationalinterest,andstrengthening
thetechnical
and
policy
framework.
The
institutional
and
regulatory
environment
needs
to
be
sculptedtosupportthegrowthoftheindustryfrom2010onwards.ThecurrentDirectorGeneralis
indeed proceeding strategically and quickly to bring Indian regulations in line with international
standards,withakeyfocusonsafety.
AtpresenttheMinistryofCivilAviationisresponsibleforbothpolicyformulationandregulation.A
possiblealternativemodeltofollowwouldbetheUKCivilAviationAuthoritywhichisfundedbythe
key stakeholders in the industry, is responsible for both technical and economic regulation, and
ratherthanbeingacivilservicedepartment,isrunindependentlybytheleadingspecialistsintheir
field.SuchanapproachwouldrelievetheMinistryofCivilAviationofitsregulatoryresponsibilities,
allowingittofocusonpolicydevelopmenttofacilitatelongtermgrowth,andsettingavisionforthe
sectorwitha1015yearMasterplan.Aconsultanthasbeenappointedtostudytheavailableoptions
andisduetosubmititsreportshortly.
RenewedFocusonSafety:ThereisacleardesirebytheDGCAtomoderniseitselfandoverhaulthe
regulatoryframeworktosupporttheIndianaviationsectoroftoday.Significantstepshavealready
been taken in fact, themeasures implementedwhich resulted in Indiaclearing theFAAaudit in
Sep09,wereremarkableandarerecognisedgloballyasaclearindicationofacommittedandhighly
capable regulator.However,CAPAbelieves thatmoreattentionandresourcesarestill required in
orderto
build
arobust
safety
network
and
more
importantly
asafety
culture.
TheDirectorateGeneralofCivilAviationneedstobeadequatelyresourcedandtrainedtofocuson
technicalregulation,withastrengthenedcapability inmanagingsafetyandairworthiness,andthe
ability to act in an independent and transparent manner. Indian aviation must have safety as a
paramount objective. Apart from being an ideal in its own right, it is essential for the long term
growthandreputationoftheindustry,thecountrycanillaffordamishapatthisnascentstageofits
development.
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CHALLENGESFORAIRPORTS
AirportsAuthorityofIndia
AAI iscurrently focusedoncapexandneedstobecomeamorecommercial,management
drivencompany.
It
is
also
ahighly
complex
organisation,
with
over
100
airports
to
manage,
which mayneed to bebrokenup into smallergroups thatare moreviableeg. during the
commericalisationprocess in Mexico, 35airportswere grouped into4geographical zones
withindependentmanagement.
Someairportswhichare lossmakingmaybebetterhandedover tostategovernmentsas
the economic benefits of the airport to the state may outweigh the operational losses.
However,thisapproachmayleadtogreaterconflictbetweenthestateandthecentre.
A fundamental driver of airport viability is traffic volumes. If a greater number of Indian
airportsaretobesuccessful,thepolicyframeworkmustencourageredistributionoftraffic
beyondthe
10
largest
airports
consisting
of
the
metros,
non
metros
and
Kerala.
The
regional
airlinepolicywasdesignedtodothisbuthasnotsucceededsofarasaresultofwhichitmay
need to be revisited to make it more relevant. In addition, the landing and parking
concessionsforaircraftwithlessthan80seatsarearevenueissueforairports;
PrivateAirportConcessions
The concession models at Delhi and Mumbai have resulted in very high bids for revenue
sharetotheAAIat46%and37%.Thesecommitmentspotentiallyjeopardisetheviabilityof
theairportsandcouldforceadramaticincreaseinchargesforstakeholders,unlessthereisa
profitable real estate component. The burden could fall on airlines and ultimately
consumers.
Amoreappropriatemodelmighthavebeenonethatincentivisedworldclassinfrastructure
butonacosteffectivebasis.IATAhas longralliedagainstgoldplatedairports,callingfor
fitforpurposefacilitiesthatarereasonablypriced.ThemodernisationofTorontoAirportfor
example came in for significant criticismdue to the significanthike incharges.The global
trendinrecentyearshasbeentowardslowercostairports.
Thegreater interestsof the industrymayhavebeenservedbynotnecessarilythehighest
revenuesharebid,oratleastalowerrateduringthefirst5yearswhencapexishigh.
Airports
cannot
be
built
in
a
vacuum.
There
needs
to
be
seamless
coordination
with
other
stateagenciestodevelopgroundtransportandlogisticstoprovidesurfaceconnectivity.The
delays inbuilding theroad to theNewBangaloreAirport forexample resulted innegative
implicationsforthefacilitybasedonanissuethatwasbeyondthecontroloftheoperator.A
similarsituationcouldariseatNaviMumbai,whichgivenitsdistancefromthecitycouldbe
adisasterwithouttheSeaLinkandhighspeedrail.
Airport planning needs to take greater responsibility for coordination and viability of
differentairportprojectswithinsimilarcatchments.
We must ensure that in the next stage of modernisation the objectives of airport
developmentare
clearer,
to
ensure
that
the
outcome
is
better
aligned
with
requirements.
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AirportsEconomicRegulatoryAuthority: Inordertobuildamodern,worldclassairportsystem in
India,almostUSD30billionofinvestmentwillneedtohavebeencommittedinthe15yearsthrough
to 2020. The government acknowledges the important role of the private sector, but in order to
attract itsparticipation,thefirstprerequisite isaneconomicregulatoryframeworkwhichprovides
clarityandcertaintyto investorsonthecommercialpotentialofanyspecificairportoperation.The
absenceofaclearsetofguidelinesforairportoperatorsensuresthattheirrevenuemodelsremain
subject to national debate and controversy. Resources are allocated inappropriately, further
reducinginvestorconfidenceinfutureprojects,denyingIndiaaccesstocriticalexpertiseandcapital.
Theendresultwouldbeunderconstructionand,ultimately,continuedsuppressionofeconomic
expansionandconsumerbenefits.
The government first stated its intention to establish the Airport Economic Regulatory Authority
(AERA)morethan3yearsago.AERAistoactasaneconomicregulatorforallairportswithtrafficof
more than 1.5 million passengers per annum. There are 11 airports in India which exceed this
threshold,representing
85%
of
passengers
handled
nationally.
AERAs
scope
is
to
set
aeronautical
chargesona5yearcycle,takingintoaccounttheeconomicviabilityofanairport,inlinewithICAO
principlesoftransparency,costrelatedness,nondiscriminationanduserconsultation.
Thiswillbebasedonadeterminationofthecostsofdeliveringaeronauticalservicesinanefficient
mannerandtoadesiredlevelofservice,includingbothcapitalexpenditureandoperatingactivities.
The regulator will also determine whether User Development and Airport Development Fees are
appropriateandwillmonitorserviceandqualitystandards.AERAhasbeenestablished,howeveritis
stillexpectedtobesometimebeforeitisfullyoperational.
MRO
Until recently, the relatively small fleetsof Indiancarriersdidnotprovide theeconomiesof scale
requiredtoestablish locallybasedheavymaintenancefacilities.Withthe largeaircraftordersthat
havebeenplacedbyIndiasairlines,thissituationcanbeexpectedtochangeoverthecomingyears.
Intheory,IndiabasedMROscouldprovidesignificantcostsavingsforlocalcarriers,notonlybecause
ofthereduced travel time,butalsothepotential toaccess lower labourcosts. In fact ithasbeen
suggested that a high quality, low cost MRO industry in India could competitively service airlines
fromotherregions,inthesamewaythatChinahassucceededinattractingoffshorework.
However,thecurrenttaxationstructurethatappliestothesectorisamajorhurdletodevelopinga
competitiveindustry.Aircraftmaintenance inIndiaissubjecttoaservicetaxof12.36%andVATof
12.5%,whichairlinesdonotpaytooverseasMROs.Inaddition,importedsparepartsaresubjectto
acustomsdutyof3%,countervailingdutyof16%andspecialadditionaldutyof4%resulting inan
effectiveimporttariffof24.26%.IncertainstatessuchasMaharashtra,anoctroitaxof4%maystill
applyinsomemunicipalities,howeverthistaxisexpectedtobephasedoutinduecourse.
Furthermore, despite the fact that India has a large pool of skilled engineers that graduate each
year,demand
currently
exceeds
supply
and
salaries
have
been
increasing
quite
sharply,
diminishing
thecostadvantage.
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THEENVIRONMENT
There isnowunanimitythatcarbonemissionsarearealthreattohumanitythedebateislargely
on the timeframe and intensity of impacts. Irreversible thresholds risk being passed if immediate
actionisnottaken.Theproblemisrealandmustbeaddressed.
Aviationcontributes23%ofglobalcarbonemissions,butgiventhe importanceofthis issue,every
industry must take responsibility for reducing emissions. Management and employees of all
organisationsmustunderstandtheclimatechangeimplicationsoftheiractivities,andhowtheycan
contributepositively.
Theaviation industrymust be proactive, otherwise there isa risk thatgovernments may impose
irrationalrestrictions. SomeofthekeychallengesfortheindustrywillbetoincorporateIATAsFour
PillarsStrategy:
TechnologySolutions:whichareexpectedtohavethegreatestimpactandinvolvesaircraft
design;use
of
composite
materials;
innovation
in
engine
types;
alternative
jet
fuels;
use
of
winglets;inductionofnewermorefuelefficientaircraft;
Infrastructure: consisting of improved coordination between air navigation service
providers; greater coordination between civil and military airspace; implementation of
continuousdescentandgatetogatemanagementprocedures;
Operations: fuel conservation through weight reduction strategies and optimisation of
aircrafttakeoffandlandingprocedures;
Economics:emissionstradingschemesbasedonindustryquotas,providedthatitisaglobal
andopensystemthatcantradewithotherindustries.
Addressinggreenhouse
gas
emissions
will
require
an
integrated
approach
by
airlines,
airports,
aircraftandenginemanufacturers,ANSPsand fuelcompanies. IATAhas set the following targets,
whichIndianaviationmustalsoaimtocomplywith:
Annualfuelefficiencyimprovementof1.5%perannum;
Carbonneutralgrowthfrom2020onwards;
Aspirationalgoaltoreduceemissionsby2050by50%from2005.
CarbonneutralgrowthmeansthatCO2emissionswouldpeakin2020andwouldstabiliseor
declineafterthaneventhoughtrafficwouldcontinuetogrow.
AIRTRAFFICMANAGEMENT
We can have the best airports in the world, however this is only half the story with respect to
achievingsafeandefficientoperations.Theotherkey issue isairspace.Asnoted inChapter1,the
AAIhasdeveloped a Future Indian AirNavigation System Masterplan, however the need to build
seamlessairspacewithaugmentedcapacitywhilstaddressingchallengessuchastheenvironment,
implementingasafetycultureandcivilmilitarycooperation,willrequiresignificantandcontinuous
investment. This may require an entirely new way of thinking with a fresh approach and an
organisation that is focusednotonlyon technologyandequipment,butalsopeopleand training.
Basedon internationalexperience,corporatisationoftheAirTrafficManagementdivisioncouldbe
theway
forward.
However,
it
is
also
the
case
the
process
of
change
is
neither
easy
nor
rapid
and
requirescommitmentfromthehighestlevelsofgovernmentandtenaciousfocusbytheleadership.
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CHAPTER3:TheFutureofIndianAviation
Afteraturbulentcoupleofyears,2010shouldbeamorepositiveyearforIndianaviation,provided
thattheairlinescanremaindisciplinedoncosts,capacityandpricing. Weprojectthefollowingkey
themesfor
the
year
ahead:
DomesticTraffic:Domestictrafficisexpectedtopostexpansionof15%ormorein2010/11
asthe industryreturnsto its longtermgrowthtrajectory.This ishigherthantheexpected
increaseincapacityofjustunder10%,whichshouldassistcarriersinachievinghigherload
factorsand improvedyields.Itwillbe importantforairlinestomaintaincapacitydiscipline
and to keep control of costs, especially since fuel prices remain the great unknown and
whichcontinuetoremainaconstantthreattotheindustry.Airlinesshouldnotallowgrowth
todistractthemfromfocusingonrestructuringtheiroperationsandprofitability;
LCCs:
The
domestic
market
may
become
almost
entirely
low
cost,
as
Jet
Airways
and
KingfisherAirlinestransitiontoa largelyalleconomymodelJetandKingfishercouldend
upthelargestLCCsinthemarket.However,theleadperformerinthemarketisexpectedto
beIndiGowhichhasmaintainedthebestfocusonoperationalperformanceandcosts;
International Traffic: International traffic (which has remained positive even during the
downturn, particularly outbound travel) is expected to grow at 1012%. Yield in both
economyandpremiumclassesareexpected tobe firmer.Premiumvolumesand revenue
overallarelikelytorecoverfasterexIndiaasopposedtoinbound.
FinancialPerformance: The airline industry will return to profitability, although it will be
sometime
before
the
accumulated
losses
of
recent
years
are
reversed.
The
private
carriers
(ie.excludingAirIndia)areexpectedtoachieveacombinedprofitofUS$250300millionin
2010/11;
Debt: The 3 large airline groups Air India, Jet Airways and Kingfisher Airlines have a
combined debt of approximately USD10 billion. Deleveraging their balance sheets is a
primary objective. They will require capital raising of a further USD1012 billion over the
next23yearstofinanceaircraftdeliveries.
Yields:CAPAexpectsthatdomesticyieldswill increaseby57% in2010/11andpossiblyby
asmuchas10%inQ3ofnextyear,whichwillbethemostprofitable.Maintainingyieldswill
bekey
and
it
was
the
loss
of
focus
on
this
parameter
that
has
contributed
to
the
industrys
currentdifficulties.
Consolidation: Consolidation of airline operators is both desirable and inevitable, and
marketexit isalsopossible.SpiceJetwillbeakeyplayerand is likelytobe involved inany
developments.JetAirwayswillbeopentoopportunitieswhichwouldallowittoonceagain
dominatethedomesticmarket.
Cooperation:Theairlinesmustcontinuetolobbythestateandcentralgovernmentstohave
ATFdesignatedasadeclaredgood inordertoreducethesalestax.Thismajor impost isa
significantbarriertoindustryviabilityandgrowth.TheFederationofIndianAirlinesandthe
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IndianAssociationofPrivateAirportOperatorsmustcooperatetoreducethehighstructural
costsfacedbytheindustry.
Vision2020
Looking
forward
to
2020,
the
upside
potential
in
Indian
aviation
is
massive.
India
has
barely
embarkeduponitsgrowthpath.Despitetherecentexpansion,thefactremainsthatlessthan2%of
Indiansfly inanygivenyear. Thenumberoftripspercapita is lowevenbythestandardsofother
developingcountries.Forexample,Indiasdomesticmarketisabout1/5ththesizeofChinasdespite
havingapopulationthatisonly10%less.
TripsPerCapitainGlobalMarkets
DomesticTrafficDatafor2008/09inSelectedMarkets
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Inlightofthelowbasefromwhichitisdeveloping,severalindustryforecastsexpectIndiatobethe
fastestgrowingmarketintheworldoverthenext20years,withAirbus,BoeingandAirportsCouncil
International projecting average market growth of 10% per annum over the this period. Airbus
forecaststhattheIndiandomesticmarketwillgrow7xinthenext20years.
Meanwhile,basedonAirportsCouncil International forecasts, Indiawillbe the3rd largestaviation
market in the world by 2027. CAPA projects that the growth rate could be much higher than
anticipatedintheearlypartofthisperiod,particularlythroughto2020.
So,whatwillIndianaviationlooklikein2020?
CAPAestimatesthatby2020domestictrafficwillreach160180millionpaxperannumand
international traffic will exceed 80 million. This will require investment of up to US$120
billionin
aircraft
(commercial
fleet
size
expected
to
reach
1,000
from
380
today),
airport
development and ancillary services such as ground handling, ATC, MRO, catering and
training;
Thereisikelytobeamarketforupto1,000generalaviationaircraftby2020,includingfleet
renewal,withanestimatedinvestmentofUS$4billion;
AtotalofUS$20bninvestmentwillberequiredintheairportsectoroverthenextdecade,in
additiontotheUS$10billionalreadycommittedinthelast5years.Inadditiontoupgrades,
greenfield secondairportswill likelybedevelopedatvariousmetro andnonmetrocities.
Theairportssystemmaybehandlingover400millionpassengersperannumby2020;
Investment of up to US$5bn will be required in developing world class ground handling,
cargoandlogisticsfacilities,includinghighoutputdistributioncentresatmajorairports;
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Therewillbesignificant investmentopportunities intheMROsectorwith thepotential to
serviceafleetof1000commercialand500generalaviationaircraft,aswellascompetingfor
offshorework;
Major additional investment opportunities will also arise in training, safety, security and
ATC.
ThepotentialfortheIndianaviationindustryisveryexciting.However,thepressuresonthesystem
will alsobe immensewhether theother98% of Indian start to fly.Governmentand industry will
needtoworktogethertoaddressissuessuchas:
Creatingatransparentandsupportiveregulatoryregime;
Developinganequitablefiscalenvironment(eg.taxonfuel);
Investinginappropriateairportinfrastructure;
Building
an
efficient
airspace
and
air
traffic
management
system;
Trainingtheworkforcethatwilldrivetheindustry;
ANDpursuitofanenvironmentallysustainablegrowthpath.
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CHAPTER4:TheRoleofITinAviationAGlobalPerspective
Introduction
Technologyhasbeen linkedtotheaviation industryeversincethefirstflightasakeyenablerfor
communications,business
innovation
and
even
business
models.
For
example,
in
the
1940s,
there
wereno internationaltelecommunicationsnetworks inmanypartsof theworld,soairlinessetup
their own private High Frequency radio networks. In the 1950s, the air transport industry began
usingteletypestohandlemessagesusinganinternationalstandardcode(TypeB).Andinthe1960s,
theindustryintroducedthefirstfullyautomatedreservationsystem,alongwithacorehigh/medium
speedcomputerisedswitchingcentre,whichwouldformthebackboneofthenewSITAnetwork.
Thissetthestagefortheworldwide integrationofcomputersandtelecommunications intotheair
transport industryand laidthegroundworkfortheessentialrolethat informationtechnology(IT)
continuestoplayintheindustrytoday.
Apowerfulforceforchange,innovationandgrowth
Withthe introductionofaffordable,portablepersonalcomputersandthewidespreadadoptionof
the Internet, IT has ushered in a new information age in aviation. And it continues to serve as a
powerfulforceforchange,innovationandgrowth.
For example, through technology such as flight operations solutions, which can help airlines plan
flights,managecrews,andaccess realtimeweather informationaswellassolutions likeaircraft
emissionsmanager,whichaddressescompliancewithemissionstradingschemesITcanhelpthe
Air Transport Industry (ATI) adapt to todays constantly changing environment. This includes
everything from economic upturns and downturns to changes in routes, capacity and passenger
numberstomountingpressuretoreducetheindustryscarbonfootprint.
In fact, in recent years, IT has gone well beyond its traditional role as an infrastructure cost to
becomeastrategictoolthatcanhelpbothairlinesandairportsreduceoperationalcosts.
Passengerselfserviceisplayinganincreasinglystrategicroleacrosstheindustryandismovingfrom
beinganalternativetoaprimarychannel.Airlinekiosksarenowofferingthetravellersavarietyof
functionsincludingticketing,flightcheckinandprintingboardingpassesandholdgreatpromise in
future.InternetholdsgreatopportunityforAirportstodriveefficiencyandcustomerfriendlyregime
with reduced cost structure. For example, a new Passenger Services System (PSS) ecommerce
platformhelpedMalaysiaAirlinesboost itsonline ticket sales from4% to30%of totalsales from
March 2008 to September 2009 alone. In addition, a global Internet Protocol (IP) Virtual Private
Network(VPN)solutionhashelpedAirChina,thecountrysbiggestairline,save35%ascomparedto
previousnetworkcosts.
Meanwhile,BaggageManagementSolutionsfromSITAalonecontinuetodecreasetransferbaggage
problemsby10percentandlocalbaggage issuesby15percenthelpingsavethe industryUS$100
permishandledbag.Withanaverageofnearly70millionmishandledbags forecastedannuallyby
2019,thesesavingsaresignificant.
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Technologyhaschangedthebalanceoftherelationshipbetweenairlineandpassengerinfavourof
thepassenger.Asaresult,airlinesneed to rethinktheirapproach toputtingthecustomeratthe
centreoftheirworld.AndthatmeansmasteringITinnewways.
Inrecentyears,bothpassengerprocessingandservices,andimprovingcustomerservice,havebeen
keyelements
highlighted
for
airline
investment.
However
reducing
costs
has
consistently
topped
customerserviceinthelistofdrivers.Nowthereisconcernthatcostmeasuresmayhavehindered
service improvementsthattakeadvantageofthenewtechnology lifestyleofpassengers. It isnow
possible forpassengers tohandleeverypartof theirpreflightjourneyautomaticallyusingnew
technology.
Theairlinesrelationshiptothepassengerandthepassengerstechnologyiscriticaltothesuccessof
any customer service strategy. The truth is that brandloyal travellers are rapidly disappearing as
theirabilitytodefinetheirowntravelplansthroughavarietyoftechnologydrivenmediaprovides
themwithgreaterchoiceandpower.Themindsethasreversedpassengersincreasinglyexpectthe
airlinetoshowloyaltytothembeforetheyarepreparedtoshowloyaltytotheairline.
Uptodate and accurate management information is critical to making sound business decisions.
Giventhecomplexityofeveryairportecosystemnotleastthenumberofsupportservicesprovided
by external contractors and the variety of airline customers it is of utmost importance to have
cohesivemanagementsystemsthatprovideacomprehensiveviewofthebusiness, IT facilitates it
andsupportairportsinachievingthisobjective.
Itwilltakeadvantageoftechnologytoensureaccurate,realtimesharingofdatabetweenAirTraffic
Control, the aircraft, the ground operations and the terminal activities. The end result will see
significantcost,
environmental,
safety
and
customer
service
benefits.
Aparadigmshiftfromcostsavingstogeneratingrevenues
Even beyond cost savings, IT is rapidly becoming a platform to generate new revenues. This
represents a major paradigm shift from the traditional role and definition of IT. For example,
Common Use Terminal Equipment (CUTE) solutions for checkin and baggage management are
attractingnewcarriersand foreign investments to theairports thatoffer themwhilegenerating
cost
savings
of
up
to
30%.
And
Airport
Communications
Solutions
include
innovative
mobile
technologyofferings,whichairportauthoritiescanprovidetoallgroundhandlersandairlines.
At the same time, as airports and airlines all around the world face stronger competition and
governments increasingly lookatairportsaspotentialrevenuegeneratingenterprises,the industry
continuestoseeatrendtowardprivatisation.AndthisisunleashingnewopportunitiesforITtohelp
cutcosts,boostefficiency,enhancethepassengerexperience,andhelpattractnewinvestment.
Forexample,since2004, Indiahas transformed itself fromanoverregulatedandundermanaged
sector, to a more open, liberal and investmentfriendly sector. This in turn has led to new
opportunities for suppliers who can help modernise the airports through advanced technology,
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provide solutions to current challenges such as insufficient infrastructure to handle growing
passengervolumes,andputinplacerevenuegeneratingITsolutions.
AstheATIcontinuestotransform itself, ITalsoremainsacriticalcomponent in itsabilitytomove
overtwobillionpeoplearoundtheworldsafelyandefficientlyeveryyear.
Drivingtransformation
The past decade was a digital decade for the ATIduring which the industry experienced three
hugetransformationalITwaves:
1. The impact of the Internet and its 1.9 billion users. The ATI is the first truly webenabled
industry in the worldwith online ticketing, checkin and other applications. By 2011,
estimatesshowthatcustomerswillspendUS$128billionontravelviaonlineapplicationsin
theUSalone.
2.
Secondly,an
effort
to
simplify.
This
is
asuccess
story
not
just
about
the
power
of
IT,
but
about
workingtogetherasacommunitytodeliverbenefitssuchaseticketing.
3. Thirdly, theriseofecommerce,whichhas revolutionisedtheATI. In Indiaalone,theonline
travelmarket isexpectedtogrowatanaverageof46%peryear from2007to2011.Thee
commerce potential for all airlines continues to be enormous, with each airlines website
servingas the firstdestination forpotential travellers.Today,airlinewebsitesaccount fora
substantialpercentageofticketssoldonline,accordingtoSITAsurveys.
TheATIisverydifferenttodayfromthewayitwasadecadeagoandIThasenabledmuchofthat
change.And
it
continues
to
drive
major,
lasting
improvements
that
benefit
all
industry
stakeholders.
ChangingthewaytheATIdoesbusiness
AsITcontinuestodelivervalue,efficiencyandinnovationtotheindustry,itsalsochangingtheway
theATIdoesbusiness.Infact,insomecases,airlinesarebuildingentirebusinessmodelsaroundIT
solutions.
For example, low cost carriers, such as Europes easyJet, are able to reduce overhead costs by
cuttingouttravelagentsandencouragingcustomerstobookticketsviaitswebsitewhichservesas
theprimaryplatformforinteractingwithcustomers.
Othercarriers,suchasAsiaPacificsVirginBlueandEuropesGermanwingsare increasinglytaking
oncharacteristicsofhybridcarriersbyusing technologysuchas revenuemanagementservices to
offermultiplefaresavailableatanytime,advancedticketingprocedures,multipleclassesofservice
andotheroptionsthataretypicallyonlyavailablethroughfullservicecarriers.
Inthemeantime,asairlinescontinuetoconsolidateandmergeinresponsetomountingcompetitive
pressures, they are using IT to bring different entities together to work as one. In this role,
technology is helping to unite newly merged companiesproviding a common platform to
communicate,sharecommonoperationalproceduresandbeginbuildinganewculture.
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ITisalsocontinuingtoforcechangebydeliveringnewcapabilities,whichcanhelp lowerunitcosts
and improve thebottom line.Among todaysemerging trends arecloudcomputing,virtualisation
andsoftwareasaservice(SaaS).
Cloud computing takes elements of a companys computer needsfrom software
applicationsto
processing
power
and
data
storageand
processes
them
over
the
network
asaservice,ratherthanthroughaninhouseITsystem.ThisenablescompaniesintheATIto
moreeasilydeploysoftwaretousers,scaleupordowntomeetdifferent ITserviceneeds,
lowertheircapitalcostsandaccessapplicationsandserviceswhileonthemove.
Virtualisationinvolvescreatingavirtual(ratherthanactual)versionofanoperatingsystem,
server,storagedeviceornetworkresource.Thishelpsreducecapitalcosts,betteroptimise
existing IT assets, decrease an organisations environmental footprint with lower CO2
emissionsandsimplifyITmanagement,amongotherbenefits.
SaaSisamodelfordeployingsoftwareinwhichsoftwareproviderslicenseanapplicationto
customersonanondemandbasis,disablingitafterthecontractexpires.Thishelpssaveon
operationalcostsbysharinglicenseswithinacompanyorwithanotherparty.
ITwillalsocontinuetoplayamajorrole inthewaybothairlinesandairportshandletheirgrowing
customer basebyhelping toprocess passengers in themostefficientandeffectiveway,enabling
bettercommunications,contributingtomoreeffectiveairportmanagementandmeetingchanging
communicationandinfrastructureneeds.
FacilitatingtheATIsevolvingneeds
Moving forward, IT will also help the industry meet evolving passenger needs and stakeholder
demands.
For
example,
in
todays
24x7,
passengerconnected
industry,
quality
service
will
increasinglyincludeprovidingaroundtheclockwebbookingandmodifying,boardingpassprinting,
selfbagtagging,kioskandmobilecheckinandmore.
As the world becomes more interconnected, governments will increasingly want to know more
aboutpassengersarriving intheircountriesbeforetheyhaveeven leftthedepartureairportand
willrelyonairlinestoensuretheygettheinformationtheyrequire,whentheyneedit.
In the meantime, as competitive pressures, regional harmonisation initiatives and market
liberalisationdriveAirNavigationServiceProviderstoimproveefficiencyandproductivity,thelatest
digitaltechnologies
will
redefine
air
traffic
management.
For
example,
the
production
and
exchange
of flightdatamessages,NOTAMs,aeronauticalmessages,weathermessagesandother important
solutionsareincreasinglybasedonmodernclient/serverorwebtechnologiesthatdemandefficient
IPcommunications.
OutsourcingandMasterSystem Integrationarequicklygainingground in theaviation industry,as
bothairlinesandairportsseektoreduceIToverheadandcutcosts.Forexample,theDublinAirport
Authority recentlyawardedamajorSystems Integrationcontract toprovide itsnewterminalwith
fully integrated IT systems with all applications running on a common infrastructure. The
implementationwillensurethehighest levelofcostandmanagementcontrolattheairport,while
providingastate
of
the
art
IT
infrastructure.
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Tunisair,thenationalcarrierofTunisia,completelyoutsourceditsITneedstointernationalandlocal
partnersfor10yearsbeginningin2008.InanincreasinglycomplexandchallengingITenvironment,
this enables the airline to focus on growing its core business, while working with a progressive
partnertoensureitisdeployingtheverylatestITtechnology.
Inthe
future,
IT
companies
will
continue
to
deliver
services
and
innovations
that
will
drive
majorandlastingimprovementsfortheglobalATI.
TheITservicesandinnovationsthatareemergingnowintheATI,willpositiontheindustryformajor
and lasting improvements.Forexample,wireless infrastructureandsystemswilldeliverubiquitous
wireless connectivity, bringing a step change in productivity in ground operations. Contextaware
systems will provide intelligence to airport employees with digital handheld devicesimproving
rampmanagement, linemaintenanceprocessesandbaggagemanagement.Andeenabledaircraft
willbelinkedtotheITecosystemasanothernodeonthenetwork,whichwillenhanceemployee
productivityandefficiencyandkeepcrewbetterconnectedtostaffonthegroundastheyfly.
Evenintheair,inflightbroadbandcommunicationswillallowdigitalpassengerstostayconnected
as iftheywereontheground.Forexample,emerging inflightmobiletelephonyservicesonsome
flightsenablepassengerstousetheirownmobiledevicestosendandreceiveemails,exchangetext
messagesandmakeandreceivevoicecallsastheyfly.
Atthesametime,theATIwillharnessnewtechnologytohelpmanageongoingchallengessuchas
securityandenvironmentalsustainability.
According to IATA, since 2001, airlines and their customers have paid more than $30 million for
securitymeasures.
The
fact
is
that
security
costs
are
now
anormal
part
of
doing
business,
and
we
canexpectthecosttotheindustrytoriseasmorecountriesputinplacestricterbordercontrols.
This will drive continued demand for new community solutions, such as border management
solutions, which help the industry achieve fast, efficient and secure compliance with new and
changing government mandatessuch as the complexities of passenger entry into the US and
baggage reconciliation requirements. Technology is significantly improving the flow of passengers
throughairports.Butbottlenecksremain.Thespotlightisnowfallingonsecurityprocessing,where
thereareopportunitiestousenewtechnologiesandautomationtostreamlinetheentirejourneyto
andfromtheaircraft.
Fromanenvironmentalstandpoint,newregulationsandtheATIscontinuedfocusonenvironmental
sustainability will also drive new innovation. In this context, IT will become a critical enabler for
global measuring systems, enabling more fuelefficient flight planning and making sure airlines,
airportsandairtrafficmanagementorganisationsinteractinthemosteffectiveway.
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Conclusion
IT has come a long way since its humble beginnings in the ATI. While it reduces costs, drives
efficiencies, creates value, generates new revenue opportunities and improves customer service,
mostimportantlyitremainsafundamentalforceforchange.
Longthoughtofasaninfrastructurecost,IThasnowgonewellbeyonditstraditionalroletobecome
astrategictoolthatcanhelpreduceoperationalcosts,takeadvantageofnewopportunitiessuchas
privatisationofairportsandairlinesandevengeneratenewrevenues.
Aswemoveforward,onethingisclearthemostadvancedITtechnologiesarealreadyhardcoded
intotheveryfabricoftheATI.
ITremainscriticaltomatchingtheindustrysneedstochangingmarketconditions,enablingairlines
and airports to scale up services in times of increasing demand and downsize quickly as demand
falls.ItalsohelpsdrivethechangesneededforamoreefficientandresponsiveglobalATI.
Atthesametime, it isclearthatthedrivingforcesfortomorrowstechnologywillno longercome
fromwithintheindustry,butfromcustomersandtheirdigitallifestyles.
Intodaysalwaysonenvironment,airtravelandIThavebecomesofusedtogetherthatcustomers
have no tolerance for disruption. Aroundtheclock service demands aroundtheclock technology,
basedonaroundtheworldstandards.Andthefuturewillbecentredonawholenewkindofuser
experienceinwhichtechnologiessuchasnewmobiledevicesandserviceswillplayakeyrole.
For theair transportation industry, the future isabout innovationusingpowerful IT solutionsas
keyenablers
to
improve
services
to
customers,
while
at
the
same
time
optimising
and
improving
theiroperations.
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CHAPTER5:ITInfrastructureinIndia MarketSurvey
Withtherapidgrowthinpassengerandcargotrafficinthelastfewyears,airportsandairlineshave
beenfacedwithunexpectedchallenges.ITsolutionsarebeingusedinIndiatoautomateandspeed
up
processes,
reduce
costs,
introduce
operational
efficiencies
and
create
distinct
points
ofcompetitive advantage. However, the survey revealed that the approach to IT, and the extent to
which it isembracedasacore strategicmatterasopposed toanoperational support tool,varies
considerably by organisation. The qualitative survey, which took place in December 2009 and
January 2010, encompassed Chief Executive Officers and Heads of IT across a crosssection of
operatorsintheaviationindustry.
Airlines Airports Others
3Fullservicecarriers
3Lowcostcarriers
2Foreign
airlines
2Cargoairlines
5Metroairports
5Nonmetroairports
Generalaviationop
MRO
Bureauof
Immigration
Traditionally, the aviation industry has viewed technology as an enabling function that was
ultimatelyacostcentre.Decisionson identificationand implementationofsolutionswereusually
delegatedtotherelevantoperationaldivision,beitdistributionorpassengerhandling,withlimited
coordinationbetweendepartments.
Airlines and airports have in the past taken a reactive approach to technology, rather than
identifying
opportunities
where
IT
can
add
value.
This
is
changing,
although
in
the
case
of
airlines,
fullservicecarriershavegenerallybeenlessnimbleinadoptingnewtechnologies.
There is,however,anemergingrecognitionthattechnologycanplayamuchmorepositiverole in
terms of increasing efficiencies, generating new commercial opportunities and improving the
passengerexperience.However,maximisingthevalueoftechnologydeployment,requiresamuch
moreholisticandstrategicviewattheveryseniorlevelsofmanagement.Onlyoncethisoccurscan
an organisation make decisions with regard to technology selection that take into account issues
suchasintegrationwithinternalandexternalsystems,scalabilityandadaptability.
Thesurvey
revealed
that
one
of
the
issues
that
airlines
and
airports
face
is
that
there
are
too
many
options available when it comes to technology products. Evaluation and identification of the
optimumsolutionisseenaschallenging.Thereisatendencyforthedivisionwherethesolutionisto
be deployed to select the most cost effective option, or the one that just meets current
requirements.However,thismaynotbethetechnologythatisbestalignedwiththeoverallstrategic
objectivesoftheorganisation.
Systemsshould ideallybeselectedwhichcansupportcompanygrowthaswellasadvances innew
technology. Replacing hardware and software because decisions were made on an ad hoc and
fragmentedbasis,andnotwithinalongtermcompanywideplan,canbeexpensiveanddisruptive.
However,our
survey
suggested
that
ahigh
level
strategic
IT
plan
is
more
the
exception
rather
than
theruleinIndianaviation.
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Whileexcitingnew frontendtechnologysuchasmobilesolutionsandbiometricsaregeneratinga
strongbuzz, there is perhaps less managementattention on ensuring that the organisation has a
robust backend IT structure. The ability to withstand traffic surges to the website, or to provide
redundancyintheeventthatthingsgowrong,isoftenoverlooked.Andwhenallfails,theremustbe
arecoveryplan,notonlytorestorefunctionality,butalsotoensurethatstaffaretrainedinmanual
systemstominimisedisruptiontopassengers.
There is also a critical need to ensure that policies and procedures are in place to ensure data
security and compliance with privacy laws, which may involve complex crossborder issues in the
caseofmatterssuchasAdvancePassengerInformationSystems.
RoleofTechnology
Whenlooking
at
the
result
across
all
of
the
respondents,
it
is
clear
that
the
primary
objective
of
technology is to support mission critical functions and to generate efficiencies.Thishas been the
traditional role. Softer functions such as improving the passenger experience or supporting
training for example, score lower. However, this may reflect a lowerawareness of thevalue that
technology can add in generating new commercial opportunities or saving costs. From an airport
perspective,selfservicekiosksnotonlyincreaseefficiencieswithrespecttostaffrequirements,but
also reduce the terminal space required toprocessagivennumberofpassengers.Thiscaneither
supportreducedcapitalexpenditureonterminalfloorarea,orallowexistingspacetobeconverted
forretailorothercommercialactivities.
HowImportant
aRole
does
Technology
play
for
Various
Functions
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ITPlanning
Theresponseswithregardtoexpenditureplanningoverthenext35yearsrangedfromminimal
tosignificant.Theoverallphilosophyappearedtobeonewheretechnologywasseenasasolution
to specific problems rather than as a core strategic issue. The focus tended to be on individual
projects, whether it related to introduction of CUSS, RFID or mobile checkin. Only one airline
respondedthattheywereplanningtoevolveintoanentirelyITdrivencarrier.Althoughitcouldalso
be argued that with most airlines having launched services in the last 5 years, they have made
investmentsinbasicsystemsrelativelyrecentlyandwillnotbereviewingtheseforsometime.
Airportsthatwereundergoingmajorupgradesweremorelikelytoseethisphaseasanopportunity
toreassesstheirITplans.Integrationofsystemsappearstobethekeyfocusatpresent,andinthe
case of the Airports Authority of India, creating a centrally controlled solution for resource
managementacrossitsmultipleairportswasapriority.
Challenges
One key finding though, was that the close interdependence of the various components of the
aviation value chain is the major obstacle to the implementation of individual corporate IT
strategies.Themultiplicityofplatformsinoperation,theglobalnatureoftheindustryandthehighly
regulatednatureofcertainsafetyandsecurityaspectsmeansthatdeploymentofnewsystemsand
processesisnotstraightforwardandrequirescooperationbetweenmultipleparties.Thiscomplexity
andinterdependencearetheprimarychallenges.
Budgetis
of
course
aperennial
issue
in
all
businesses
to
some
extent.
The
absence
of
skills
or
appropriatetechnologydoesnotseemtobeahurdle, ifanythingthe industryisstrugglingtokeep
upwiththepaceatwhichtechnologycandeliverratherthanviceversa.
KeyChallengestoImplementationofITStrategy
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With respect to the activities where investment is being directed, the key focus areas are safety,
security,processingandoperations,whichcorrespondswiththefindingthattheprimarydriversare
cost and compliance related. Technology spend in commercial areas, general infrastructure
upgrades,businesssupportandenvironmentalinitiativeshasalowerpriorityatpresent.
PriorityAreasforTechnologyInvestmentatAirports
The 3 leading trend which airports believe are likely to have the maximum impact on their IT
infrastructureoverthenext35ye