Capa Sita White Paper

8/8/2019 Capa Sita White Paper

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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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23


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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24


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

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